Concept of Foreign Branches
As the business grows, the company may want to transition to a branch structure as branches are allowed to conduct a much broader range of activity than representative offices. Branches can buy and sell goods, sign contracts, build things, render services, and generally everything that a regular business can do. A company expands its business by opening up its branch offices in various parts of the country as well as in other countries.
As the business grows, the company may want to transition to a branch structure as branches are allowed to conduct a much broader range of activity than representative offices. Branches can buy and sell goods, sign contracts, build things, render services, and generally everything that a regular business can do. A company expands its business by opening up its branch offices in various parts of the country as well as in other countries.
A branch office refers to an establishment which carries on substantially the same business and activity as is carried out by its Head Office. Foreign Branch of a company refers to the branch of a company that operates in the foreign country. It is a branch of a company operating outside the country of its registration.
Some attributes of foreign branch offices are:
- Does not require opening a separate legal entity in the country of operations
- The branch is legally part of the company and is not a separate entity
- The range of the activities that can be undertaken, substantially increase as compared to a representative office
- Branches generally a constitute taxable presence in a foreign country and must account for and file prescribed returns with the local authorities
- Attributing the profits to the branch activities require arm’s length transaction
- Foreign branch is subject to special tax considerations.
- A subsidiary of a foreign corporation generally is taxed as any other domestic corporation, that is, as a separate taxable entity apart from its foreign parent. In contrast, a branch of a foreign corporation is not treated as a separate taxable entity; instead, the code and regulations employ a set of special rules to determine the tax liability of the branch both in domestic country and foreign country of operations.
Such branch offices help the company in:
- Spreading its business to diverse locations and thus increasing the customer base
- Expanding the size of the market for a company's product by attracting more customers
- Bringing its product closer to the customers by increasing their accessibility to it
- Making the distribution and marketing of its goods and services easier and more effective
- Widening the scope of its trading and manufacturing activities
- Bringing more opportunities and opening unexplored avenues
- Fuel the growth of the company
- Enhance its profitability
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