Establishing a U.S. Subsidiary – A Nordic Perspective
Many Nordic businesses will try to establish a U.S. presence at some point. Four basic solutions present themselves: joint ventures or a contract with an American distributor or agent, establishing a branch office, establishing a subsidiary or acquiring an existing entity.
This note only addresses subsidiaries of Nordic companies. Branch offices are rarely attractive for foreign companies because they result in direct exposure for the foreign company to liability in the U.S. and jurisdiction by U.S. courts. In addition, a foreign company doing business in the U.S. would be required to file U.S. federal and state tax returns and pay relevant taxes with respect to their U.S. based income and therefore be subject to U.S. federal tax jurisdiction and scrutiny. Normally the company would pay up to 35% corporate income tax and an additional 30% branch profit tax of the branch's profit, calculated after payment of corporate income tax, i.e. a total of up to 54.5% tax. Pursuant to the respective bilateral treaties between the U.S. and Denmark, Sweden, Iceland, Finland and Norway, the branch profit tax is reduced to 0-5% with respect to companies that meet relevant nexus criteria in the relevant Nordic country.