The United States does not tax foreign subsidiaries on the income they earn abroad.

Question

Quizplus · Accepted Answer

The United States follows a system of territorial taxation, which means it only taxes income earned within the country's borders. Foreign subsidiaries of US companies are therefore not subject to US taxation on their foreign earnings. However, the US does have certain anti-abuse rules, such as the controlled foreign corporation (CFC) rules, which are designed to prevent US taxpayers from using foreign subsidiaries to avoid or defer US taxation.

The United States Does Not Tax Foreign Subsidiaries on the Income