Concept of Foreign Branches

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

Related Links

Creation Date Thursday, 29 December 2022 Hits 750

You May Also Like

  • Example of Subsidiary Ledgers

    Example of Subsidiary Ledgers

    In this article, we explain some commonly used subsidiary ledgers like accounts receivable subsidiary ledger, accounts payable subsidiary ledger or creditors' subsidiary ledger, inventory subsidiary ledger, fixed assets subsidiary ledger, projects subsidiary ledger, work in progress subsidiary ledger, and cash receipts or payments subsidiary ledger. 

  • GAAP to STAT Adjustments

    GAAP to STAT Adjustments

    Understand what we mean by GAAP to STAT adjustments. This article discusses the different standards that are used for multiple representations of the financial results for global organizations. Understand the meaning of US GAAP, Local GAAP, STAT, IFRS, and STAT. Finally, understand why accounting differences arise and how they are adjusted for different financial representations.

  • The Accounting Cycle

    The Accounting Cycle

    Learn the typical accounting cycle that takes place in an automated accounting system. We will understand the perquisites for commencing the accounting cycle and the series of steps required to record transactions and convert them into financial reports. This accounting cycle is the standard repetitive process that is undertaken to record and report accounting.

  • Concept of Foreign Branches

    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.

  • GL - Review & Approve Journals

    GL - Review & Approve Journals

    Review and Approval mechanisms ensure that the accounting transaction is reasonable, necessary, and comply with applicable policies. Understand why we need review and approval processes, what are they, and how they are performed in automated general ledger systems. Learn the benefits of having journal approval mechanisms in place.

  • GL - Unearned / Deferred Revenue

    GL - Unearned / Deferred Revenue

    Unearned revenue is a liability to the entity until the revenue is earned. Learn the concept of unearned revenue, also known as deferred revenue. Gain an understanding of business scenarios in which organizations need to park their receipts as unearned. Look at some real-life examples and understand the accounting treatment for unearned revenue. Finally, look at how the concept is treated in the ERPs or automated systems.

  • Divisional Organizational Structures

    Divisional Organizational Structures

    The divisional structure or product structure consists of self-contained divisions. A division is a collection of functions which produce a product. It also utilizes a plan to compete and operate as a separate business or profit center. Divisional structure is based on external or internal parameters like product /customer segment/ geographical location etc.

  • GL - Accrued / Unbilled Revenue

    GL - Accrued / Unbilled Revenue

    Accrued revenues (also called accrued assets) are revenues already earned but not yet paid by the customer or posted to the general ledger. Understand what we mean by the terms accrued revenue, accrued assets, and unbilled revenue. Explore the business conditions that require recognition of accrued revenue in the books of accounts and some industries where this practice is prevalent. 

  • The Accounting Process

    The Accounting Process

    In this article we will focus on and understand the accounting process which enables the accounting system to provide the necessary information to business stakeholders. We will deep dive into each of the steps of accounting and will understand how to identify accounting transactions and the process for recording accounting information and transactions.

  • Record to Report Process

    Record to Report Process

    Record to report (R2R) is a finance and accounting management process that involves collecting, processing, analyzing, validating, organizing, and finally reporting accurate financial data. R2R process provides strategic, financial, and operational feedback on the performance of the organization to inform management and external stakeholders. R2R process also covers the steps involved in preparing and reporting on the overall accounts. 

Explore Our Free Training Articles or
Sign Up to Start With Our eLearning Courses

Subscribe to Our Newsletter


© 2023 TechnoFunc, All Rights Reserved