Subprojects are organizational units which divide a work breakdown structure (WBS), and hence the project, into different responsibility areas. They form the organizational base for localized project management.

You require subprojects for transfer price agreements and allocations when you use budgeting.

A subproject consists of WBS elements which are connected in the hierarchy, forming a subtree within the overall WBS. Each subproject receives its own identifier. It is not possible for two separate subprojects in a project definition to have the same subproject identifier. Every WBS element in a project can be a subproject.
If a WBS element is later divided into further WBS elements, the new WBS elements inherit the identifier.