# Branch vs. Subsidiary



## Spong3 (Jan 29, 2015)

What are the tax pro's and con's of a foreign corporation opening up a branch or subsidiary in Canada?


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## AltaRed (Jun 8, 2009)

Depends on how it is structured. Multi-national corps have teams of tax accountants to determine which structure works best for their type of business.

Given Canada's corporate tax rates are often lower than in USA, set up a Canadian corporation with 100% of the shares held by mother corp and then dividend the profits back to USA each year, subject only to a CDN withholding tax of 15%. OTOH, since the Cdn sub is likely to pay lower tax rates than mother corp, leave all profits in Canada and have the CDN sub make loans to other international affiliates and collect interest, or have the CDN sub actually fund/spawn international affiliates of its own. Generally the idea is to avoid repatriation of profits to the U.S. mother to keep US taxes to a minimum.

What question are you trying to solve? There is no singular answer.


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## Spong3 (Jan 29, 2015)

I have a US corp that is considering openings up a sales office in Ontario that's expected to do approx $500,000 net income each year. I wanted to know whether to open this office up as a branch or subsidiary.


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## balexis (Apr 4, 2009)

Just curious, what is the real difference between a branch and a subsidiary? I always thought both were exactly the same, ie a CND company with only one shareholder (moth


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## AltaRed (Jun 8, 2009)

A branch is not a separate legal entity whereas a subsidiary is. Most companies prefer the latter for obvious reasons such as corporate shield.


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## balexis (Apr 4, 2009)

Got it, thanks. In that case, I hardly see how a US corporation could have a branch in another country, at least for tax reasons.


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