Expanding your Corporate Presence through branches or subsidiaries

Expanding your business abroad


Your local requirements in a particular territory may become more complex than could appropriately be handled by an agent , distributor or other collaborator.

In such circumstances you may need to consider establishing a local operation of your own. From a marketing point of view, this can help to demonstrate local commitment and to improve your service to customers. From a tax and legal point of view there are various vehicles which may be more or less efficient.

Branch Office

These are easy to set up and close down, they retain the UK company name and are controlled by the UK company. Whilst local laws vary, the operation of a branch office normally involves local taxation of branch profits and on the income of its employees and requires careful consideration of the remission of profits to the UK. Establishment of a branch office will normally also involve registration with the local companies registry. It should be noted that some countries restrict the ownership of property by branch offices

Subsidiary or Joint Venture

This is a separate and distinct corporate entity which you may either set up in accordance alone or as a joint venture with local partners. In both cases, consideration will have to be given, to local regulatory and tax requirements including:

  • Accounting procedures;
  • restricting inter-company pricing of materials supplied to a subsidiary;
  • corporate and employee taxation;
  • employee protection legislation;
  • social security legislation;
  • and whether there are particular minimum capital requirements.

     

    European Economic Interest Group

    It may be that you require not so much a permanent presence but a resource-base shared between yourself and other businesses which deal in similar products but do not directly compete.

    In such a case a European Economic Interest Group (EEIG) may be the answer. An EEIG is a trans-member state combination between two or more businesses which pool research and marketing activities to manage a particular project. The EEIG will act as a local agent as well as advising on local conditions, law and language. EEIG meetings would normally be held. An EEIG cannot make profits in its own right and each participant will be taxed on its profit share.

    In all cases, legal and financial advice in the jurisdiction concerned is of prime importance in establishing any such entity.

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