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What is the best way to allocate headquarter expenses to the subsidiaries outside the U.S.A.?

Expenses Foreign Subsidiaries Allocation of Expenses
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JEANIE PITNER
This is a really good question; first I want to say I am not an expert in foreign taxes, but I do understand cost allocation. One approach is based on percentage of gross income earned. For example Subsidiary A gross income = $100K Subsidiary B gross income = $100K and Headquarters C gross income = $200K Total income for Headquarters and its subsidiaries= $400K
This means in percentage terms A and B = 25% and C = 50%. You would then times the total amount of the headquarter expenses to be allocated by the appropriate percentage amount and then allocate that amount to the subsidiaries.
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