S. parent corporation that receives a dividend from a wholly-owned foreign subsidiary that pays a 45% income tax to its home country typically does not owe any U.S. tax on the dividend.

Question

Quizplus · Accepted Answer

This is true due to the foreign tax credit system in the United States. The parent corporation can claim a credit on their U.S. tax return for the foreign income tax paid by the subsidiary, which eliminates any additional U.S. tax liability on the dividend.

S Parent Corporation That Receives a Dividend from a Wholly-Owned