Branch and its structure

Non-resident entities may carry out transactions through a branch in a foreign country (see your local Business act).

A branch is an organisation depending on its head office situated abroad. This organisation is not a legal entity of its own and is submitted to the legislation in force of the country of origin when referring to its relations with third parties. A branch is a part of a company that is organised so as to conduct business on behalf of a company as opposed to carrying on business which is merely ancillary or incidental to the company's business as a whole. In other words a person will be able to deal direct with a branch of the foreign company rather than with that company in its country of incorporation.

A branch has to be set up through a public deed and entered in the Commercial Register. It has to operate within its "declared objects" i.e. the purposes for which the branch has been set up.

Furthermore, the branch must also have a permanent address and a representative resident in the country of operation. Founder of branch is Limited.

Generally speaking, the requirements, procedural formalities, accounting and initial costs for a branch are very similar to those for the constitution of a subsidiary.

The tax position of a branch is the same as for a local company (see "various" chapter) and it has the same rights and duties, with the following differences:

•The parent company may invoice the branch for specific costs incurred in respect of the branch (cost of management, management support and of general administration). These costs are deductible from the branch's income.

•There is not a tax on non-resident companies with permanent establishment (Branch Profits Tax). This guarantee non-discrimination clause in the model O.E.C.D. Treaty, to those countries with which UK has signed Double Tax Treaties on Income and Wealth. The tax does not apply to companies resident in an EU member state.