Canadian corporation reports its worldwide income. Foreign tax credits are available against the taxes paid in U.S. Losses of the U.S. subsidiary corporation cannot be offset against the income of Canadian Parent. Some of the important tax considerations are as below:
Canadian Foreign Affiliate Rules and U.S. Transfer Pricing Rules are applicable.
Canadian dividend tax rules are applicable
Canadian Controlled Private Corporations lose Qualified Small Business Corporations (QSBC) status and U.S. source income is not eligible for Small Business Deduction.
Additional Reporting requirements in both U.S. and Canada for foreign assets