Boulder Ltd.is a Canadian corporation which plans to expand internationally.The company has decided to establish a wholly-owned foreign subsidiary corporation in another country.Which of the following statements is incorrect?
A)The subsidiary will be subject to taxes in the foreign country.
B)The subsidiary's profits will be included in the Canadian corporation's worldwide income.
C)Dividends received by the Canadian corporation from the foreign subsidiary are excluded from the Canadian corporation's taxable income.
D)Dividends received by the Canadian corporation from the foreign subsidiary are most often subject to a withholding tax in the foreign jurisdiction.

Question

Quizplus · Accepted Answer

The subsidiary's profits are not directly included in the Canadian corporation's worldwide income. Instead, dividends received from the subsidiary may be subject to tax, but the profits themselves are taxed in the country where the subsidiary operates.