Branches and subsidiaries 1. A branch is a branch or subsidiary directly engaged in business activities of the head office. It is not a real company, does not have the qualification of an enterprise legal person, does not have an independent legal status, and does not bear civil liability independently. 2. Subsidiaries are different: subsidiaries have legal personality and can independently bear civil liability. The control of a parent company over a subsidiary company is usually based on an ownership or control agreement. The parent company has the actual decision-making power over the subsidiaries, especially the composition of the board of directors of the subsidiaries. In addition to share control, the relationship between parent company and subsidiary company can also be formed by concluding some special contracts or agreements to make one company under the control of another company. Many companies often choose to set up subsidiaries or branches to expand themselves. So, what are the advantages of these two methods? Let me explain it to you. (1) The advantages of setting up a subsidiary are as follows: 1. The subsidiary is an independent legal person and bears limited debt liability; 2. The subsidiary's reporting of enterprise results to the parent company is limited to production and business activities; 3. The subsidiary is an independent legal person, and its income tax is levied independently. Subsidiaries can enjoy the preferential tax treatment provided by the host country to their resident companies, including tax exemption period; 4. When the applicable tax rate of the host country is lower than that of the country of residence, the accumulated profits of subsidiaries can benefit from deferred tax payment; In many countries, dividends paid by subsidiaries to parent companies can be exempted from withholding tax. (2) The advantages of setting up branches are as follows: 1. Branches are generally simple to operate, and the requirements of financial accounting system are relatively simple; 2. The cost borne by the branch company may be less than that of the subsidiary company; 3. If the branch is not an independent legal person, the turnover tax shall be paid at the place where it is located, and the profits shall be collected and paid by the head office. In the initial stage of operation, branches often suffer losses, but their losses can offset the profits of the head office and reduce the tax burden; 4. the transfer of funds between the branch and the head office does not involve the change of ownership, so there is no need to pay taxes.