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 1644

You May Also Like

  • GL - Accrual Basis Accounting

    GL - Accrual Basis Accounting

    Period End Accruals, Receipt Accruals, Paid Time-Off Accruals, AP Accruals, Revenue Based Cost Accruals, Perpetual Accruals, Inventory Accruals, Accruals Write Off, PO Receipt Accrual, Cost Accrual, etc. are some of the most complex and generally misconstrued terms in the context of general ledger accounting. In this article, we will explore what is the concept of accrual and how it impacts general ledger accounting.

  • GL - Different Accounting Methods

    GL - Different Accounting Methods

    The accounting method refers to the rules a company follows in reporting revenues and expenses. Understand the two common systems of bookkeeping, single, and double-entry accounting systems. Learners will also understand the two most common accounting methods; cash and accrual methods of accounting and the advantages and disadvantages of using them.

  •  Network Organizational Structures

    Network Organizational Structures

    The newest, and most divergent, team structure is commonly known as a Network Structure (also called "lean" structure) has central, core functions that operate the strategic business. It outsources or subcontracts non-core functions. When an organization needs to control other organizations or agencies whose participation is essential to the success, a network structure is organized.

  • GL - Reversing Journal Entry

    GL - Reversing Journal Entry

    Reversing Journals are special journals that are automatically reversed after a specified date. A reversing entry is a journal entry to “undo” an adjusting entry. When you create a reversing journal entry it nullifies the accounting impact of the original entry. Reversing entries make it easier to record subsequent transactions by eliminating the need for certain compound entries. See an example of reversing journal entry!

  • The Subsidiary Ledgers

    The Subsidiary Ledgers

    For any company that has a large number of transactions, putting all the details in the general ledger is not feasible. Hence it needs to be supported by one or more subsidiary ledgers that provide details for accounts in the general ledger. Understand the concept of the subsidiary ledgers and control accounts. 

  • GL - Errors & Reversals

    GL - Errors & Reversals

    Explore the concept of journal reversals and understand the business scenarios in which users may need to reverse the accounting entries that have been already entered into the system. Understand the common sources of errors resulting in the reversal of entries and learn how to correct them. Discuss the reversal of adjustment entries and the reversal functionalities in ERPs.

  • Hierarchical Organization Structures

    Hierarchical Organization Structures

    Hierarchical structure is typical for larger businesses and organizations. It relies on having different levels of authority with a chain of command connecting multiple management levels within the organization. The decision-making process is typically formal and flows from the top down.

  • GL - Accrued Expenses

    GL - Accrued Expenses

    Accrued expenses, sometimes referred to as accrued liabilities, are expenses that have been incurred but have not been recorded in the accounts. Discuss the need to record accrued liabilities and why they require an adjustment entry. Understand the treatment for these entries once the accounting period is closed and learn to differentiate when the commitments become liabilities.

  • General Ledger - Advanced Features

    General Ledger - Advanced Features

    Modern automated general ledger systems provide detailed and powerful support for financial reporting and budgeting and can report against multiple legal entities from the single system. These systems offer many advanced functionalities right from journal capture to advanced reporting. This article will provide an overview of some advanced features available in today's General Ledgers.

  • GL - Recurring Journal Entries

    GL - Recurring Journal Entries

    A “Recurring Journal” is a journal that needs to be repeated and processed periodically.  Recurring Entries are business transactions that are repeated regularly, such as fixed rent or insurance to be paid every month. Learn the various methods that can be used to generate recurring journals. See some examples and explore the generic process to create recurring journals in any automated system.

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

Subscribe to Our Newsletter


© 2023 TechnoFunc, All Rights Reserved