Starting a Branch Office vs. a Subsidiary

The branch office and the subsidiary are common ways to start a business as a foreign company expanding on a new market. The branch office and the subsidiary are business entities that are available for registration in Europe, but these structures can also be set up in other foreign countries, such as the ones available on the Asian market. 

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Setting up a branch office or a subsidiary in Europe can be an attractive idea, considering that the member states of the European Union (EU) benefit from a harmonized legislation on the matter.

Since the branch office or the subsidiary are seen as secondary offices of the foreign company, investors must observe the tax considerations that are applicable for each structure, as there are certain differences between the two. 

For example, the branch office is not a separate legal entity from its parent company abroad, but it will still need to register for value added tax purposes and social security in the country where it is set up. Besides this, investors should also know that the parent company is fully responsible for the activities of the branch office on a foreign market, but an advantage of this structure is that it benefits from a simpler registration procedure compared to the subsidiary and it can be set up without a share capital (thus, having lower initial costs than the registration of a subsidiary).