Branch or subsidiary — which and why: where does doing it myself start to cost money?
Some of it, yes — and we will say so on the call if that is the honest answer. The parts that are worth paying for are the ones where a missed election, a missed deadline or an unverified threshold costs more than the fee: a branch is the same legal person, so its results consolidate with the head office and its losses may be usable there — at the cost of exposing the parent to the foreign system.
What if I have already filed and got it wrong?
That is a common starting point. We re-derive the position, identify whether an amendment or a disclosure route is the right vehicle, and tell you which one preserves the relief that is still available. The order matters more than the speed.
How long will it take?
It depends on the documents rather than on us. Once the pack is complete most filings turn around inside a fortnight; anything that needs a certificate from a tax authority runs on that authority's timetable, which we tell you at the start rather than at the end.
Should we open a branch or a subsidiary in a new country?
The answer rarely comes from comparing tax rates. Three questions decide it in practice. Where will the losses be in the early years, and can anyone use them? Who should bear the liability if something goes wrong in that market? And what will it cost, in tax and in administration, to get profits back to the parent? A branch is the same legal person as the head office, so results and losses flow together and the parent is exposed to the foreign system. A subsidiary separates the risk and creates withholding, transfer pricing and a second set of accounts. Answer the three questions first, then choose.
Can I use foreign branch losses against my head office profits?
Sometimes, and it is one of the main reasons a branch is chosen for a launch phase. Because a branch is not a separate legal person, its results form part of the head office's own, so early losses may reduce profits at home in the year they arise rather than sitting in a foreign company waiting for profits to appear. Whether that works depends on your home country's rules, which often restrict such relief or recapture it later, and on the foreign country's treatment of the same loss. Check both sides before relying on it.
Does a branch expose my parent company to foreign tax?
Yes, and that is the trade for the loss position. A branch is the head office operating in another country, so the parent itself is the taxpayer there: filing, assessable, and reachable for the branch's liabilities. It also exposes the parent to that country's audits and, commercially, to claims arising from the branch's activity. A subsidiary puts a separate legal person between the parent and all of that. Where the market carries real operational or contractual risk, that separation is usually worth more than the loss relief a branch would have offered.
Can we start as a branch and convert to a subsidiary later?
It is a common plan and it is not free. Converting means transferring the branch's assets, contracts and often its employees into a new company, and each of those can be a taxable event in the host country, at home, or both. Customer contracts may need consent to assign, licences may not transfer, and losses already relieved may be brought back into charge. The conversion is much easier to do well if it was contemplated when the branch was set up, in how assets were held and how contracts were written, than if it is decided once the branch is profitable.
What will it cost to get profits out of a foreign subsidiary?
That is the question most often left until last, and it belongs at the start. Profits leave a subsidiary as dividends, interest, royalties or service fees, and each route carries its own withholding in the source country, its own treaty rate if the treaty applies, and its own treatment when it arrives. Whether the treaty applies at all depends on eligibility rules that a holding structure can fail. Model the round trip, from profit earned through local tax, tax on extraction and tax on receipt, before choosing the structure rather than after the cash has accumulated.
Do we need transfer pricing if we only have a branch?
Usually yes, in substance if not always under the same label. A branch and its head office are one legal person and cannot contract with each other, so there is no invoice to test, but profit still has to be attributed between them. That attribution is done by examining the functions performed, the assets used and the risks taken in each place, which is transfer pricing reasoning under another name. Dealings between the branch and other group companies are ordinary related-party transactions and are tested as such. Document the attribution basis as you would a pricing policy.
Branch or subsidiary — which should we use to expand?
A branch keeps one taxpayer: results consolidate at home, losses are usable sooner, and the exposure is that the branch is a permanent establishment whose profit the host country taxes, sometimes with a branch tax on repatriation. A subsidiary is a separate taxpayer with limited liability and local rates, at the cost of withholding on dividends home and transfer pricing on everything between them. The deciding facts are usually expected losses, liability and exit plans. See branch against subsidiary.
How is a GILTI inclusion calculated, in outline?
Start at the foreign company: its tested income or loss for the year, computed under US principles. Aggregate those across all your controlled foreign corporations, net the losses, then reduce by a return on qualifying tangible business assets less certain interest expense. What remains is your inclusion, brought into your own return, where the deduction and any credit are applied. Every one of those percentages has been amended, so the mechanism is stable and the arithmetic is year-specific. See the GILTI inclusion and Form 8992.
