Still don`t know which branch vs. subsidiary vs. representative office in Hong Kong – what kind of business presence is best for your overseas business? Do not hesitate to send us your questions by email for more useful tips! Company X, Inc. is a fast-growing technology company based in the United States. It sees a growing demand from Brazil and wants to set up a sales office there in order to acquire Brazilian customers more quickly. It was decided to open an office in Sao Paulo. You decide to create a subsidiary X, SA (an SA is the Brazilian equivalent of a company). Do you want to do business in Spain? There are many opportunities and several opportunities for foreign companies to do business in Spain. The most well-known opportunities for foreign companies to establish themselves in Spain are as a branch or subsidiary (plc or ltd).
In this post, however, we will talk about another alternative, which is the creation of a representative office. The accounting of a representative office is carried out by the foreign company. Not necessarily. As a legal entity, branches must also be registered in the Register of Local Government. Some annual business formalities may not be required, but other accounting and regulatory requirements usually still need to be applied. Branches are often used for very limited or temporary activities. A representative office can be opened in Spain by means of a public deed (or a document issued before a foreign notary and certified with the Hague Convention apostille or a similar legalization system). The content of this site is provided in part by Dezan Shira & Associates, a pan-Asian multidisciplinary services firm that advises international investors on legal, tax and operational matters. A representative office does not need to be deposited in the commercial register. A representative office is not treated as a legal entity because it is actually the office of its foreign parent company, which is temporarily set up for administrative tasks in another jurisdiction – take Hong Kong as an example.
It should be noted that a representative office in Hong Kong can only be used for charitable purposes. A representative office (RO) is the simplest but most limited form of setting up a business in a country. It is essentially a beachhead. ROs usually have to be registered with the local government and usually cannot generate revenue. However, you can usually have employees in the country. BRs can be used to assess a market before full market entry or to assist trading partners in the jurisdiction. ROs` tax obligations are generally limited to employee withholding tax and payroll tax. Similarly, compliance requirements do not require the submission of tax or annual returns to the relevant authorities. Note, however, that applying for a business registration certificate (including certificate renewal) is still a mandatory requirement for the representative office in Hong Kong. A representative office is an office established by a company or legal entity to conduct marketing and other non-transactional operations, usually in a foreign country where a branch or subsidiary is not warranted. Representative offices are generally easier to set up than a branch or subsidiary because they are not used for the actual “business” (e.g. sale) and therefore have fewer incentives to regulate them.
[ref. needed] The registration of representative offices and obtaining a registration certificate form the basis for issuing a residence permit for foreign employees of the representative office. The registration certificate allows the temporary duty- and VAT-free importation of real estate and equipment into Ukraine. Another obvious difference between these two types of companies is the requirement for the branch to purchase and hold a certain amount of government securities throughout the life of the branch in the Philippines. This is likely due to the fact that the branch is expected to generate revenue in the Philippine domestic market, while the representative office is not allowed to generate revenue and must be fully subsidized by its parent company. It should be noted that BRs are generally not allowed to engage in for-profit activities and can only be used to facilitate the foreign company`s activities in China, while branches are rarely used when foreign investors enter the Chinese market, except in limited cases such as foreign banks, foreign insurance companies, foreign oil exploration companies, etc. On the contrary, branches of Chinese subsidiaries could be established as the company expands throughout China. For foreign investors planning to do business in China, registering and setting up a limited liability company (subsidiary), WFOE or JV, is the most obvious option. However, an OB is not a separate legal entity from the parent company and does not offer the benefits of parental monetary liability protection.
BOs are often subject to a withholding tax of 20%. For violations related to their activities, ROs will be fined and their illegal income confiscated. As it is not a capitalized legal entity, they are not allowed to hire Chinese employees directly. Instead, they can employ local staff through a qualified employment agency such as Foreign Enterprise Service Company (FESCO). The agency sends employees to BR for a fee. ROs can hire up to four foreigners directly, and they do not have to go through the agency. While you know these benefits, it`s also important to understand the limitations of each type of office. RO is limited to marketing services, customer service and, of course, other business processes of the parent company.
BO, on the other hand, merely carries on the same activities as its parent company. The branch is also subject to the same taxes as for a domestic company, but only on Filipino income. Therefore, as you can see, there are many ways to set up a business in Spain. The choice you make depends on the purpose of your business in our country. It is possible to start with a representative office to carry out market research and analyze the feasibility of introducing your company to the Spanish market, and then open a subsidiary or branch.