Subsidiaries must make independent accounting and declare and pay taxes independently. ? A branch is not an independent legal person, so independent accounting is not required, and income tax can be consolidated and settled in the head office.
Article 50 of the Enterprise Income Tax Law stipulates: "If a resident enterprise establishes a business institution without legal person status in China, it shall calculate and pay enterprise income tax on a consolidated basis." China began to implement the enterprise income tax system in 2008, emphasizing that corporate enterprises or organizations are taxpayers of enterprise income tax, and non-independent accounting branches will automatically collect and pay enterprise income tax at the company headquarters. Therefore, enterprises need to choose carefully when setting up branches.
Trade-offs between branches and subsidiaries
Article 14 of the Company Law stipulates: "A subsidiary has the status of a legal person and independently bears civil liability according to law; The branch does not have legal person status, and its civil liability shall be borne by the company. " If an enterprise establishes a branch, so that it does not have the qualification of a legal person and does not conduct independent accounting, the head office may pay enterprise income tax. In this way, the head office can adjust the profit and loss and reasonably reduce the burden of enterprise income tax.
Of course, the establishment of branches should consider three factors:
The first is the profit and loss of branches. When the head office is profitable and the newly established branch may lose money, the head office mode should be chosen. According to the provisions of the tax law, the branch is a dependent taxpayer, and its losses can be made up by the profits of the head office; If a subsidiary is established, and the subsidiary is an independent taxpayer, its losses can only be made up by the profits realized in the following years, and the head office cannot make up for the losses of the subsidiary, nor can it offset the investment cost of the investment in the subsidiary.
When the head office is losing money and the newly established branch may be profitable, the parent-subsidiary model should be chosen; Subsidiaries do not need to bear the losses of the parent company, but can accumulate development funds. The head office can transfer its good assets to its subsidiaries and dispose of non-performing assets.
Secondly, the situation of enjoying tax incentives. According to the provisions of the tax law, when the head office enjoys tax benefits but the branch office does not, the head office company model can be selected, so that the branch office can also enjoy tax benefits. If the branch company has preferential tax policies, when the branch company starts to make profits, it can change its registered branch company into a subsidiary company and enjoy the local preferential tax policies, which will receive better tax payment effect.
Third, it is the form of profit distribution and risk responsibility of branches. Because branches do not have independent legal personality, it is not conducive to independent profit distribution. At the same time, if the branch has risks and related legal responsibilities, it may implicate the head office, while the subsidiary does not have such concerns.
Select branches and subsidiaries
According to the Notice of State Taxation Administration of The People's Republic of China Municipality on Printing and Distributing the Interim Measures for the Collection and Management of Enterprise Income Tax for Cross-regional Business Summary (Guo Shui Fa [2008] No.28), enterprises implement the measures for the collection and management of enterprise income tax with unified calculation, hierarchical management, local prepayment, summary liquidation and financial transfer. That is, the head office of the enterprise uniformly calculates all taxable income and taxable amount, including all business institutions and places that the enterprise belongs to without legal person qualification. However, the competent tax authorities where the head office and branches are located have the responsibility to manage the enterprise income tax of local institutions, and the head office and branches shall be subject to the management of the competent tax authorities where the institutions are located. During each tax period, the head office and branches shall report the advance payment of enterprise income tax to the local competent tax authorities on a monthly or quarterly basis. After the end of the year, the head office shall be responsible for the annual settlement and payment of enterprise income tax, uniformly calculate the annual income tax payable by the enterprise, and deduct the enterprise income tax paid in advance by the head office and branches in the current year, and refund more and pay less taxes. This provides a policy basis and guarantee for branches to save taxes reasonably.
When an enterprise sets up a branch, it is usually more appropriate to adopt the form of a branch because of the high cost and high probability of loss in the initial stage of establishment, and it can enjoy the benefits of the headquarters breaking even. After two or three years of operation, when the branch begins to turn losses into profits, it can be registered as a subsidiary again, which can reduce the legal influence of the branch on the head office.
Eight branches do not need to pay income tax in advance on the spot.
According to the Notice of the Ministry of Finance, the People's Bank of China, State Taxation Administration of The People's Republic of China and the People's Bank of China on Printing and Distributing the Interim Measures for Enterprise Income Tax Distribution and Budget Management of Head Offices across Provinces and Cities (FB [2008] 10) and other related documents, the following eight branches do not need to prepay enterprise income tax on the spot, which provides more favorable conditions for the consolidated tax payment of the headquarters and branches, and can better enjoy the consolidated tax policies of the headquarters and branches.
1. vertically managed branches of central enterprises do not need to pay enterprise income tax in advance. For example, China Bank Co., Ltd., China Development Bank, central huijin Investment Co., Ltd., China Oil and Gas Co., Ltd. and other enterprises whose income tax is not included in the scope of sharing between the central and local governments.
2. Branches at level 3 and below do not prepay enterprise income tax locally, and their operating income, employees' salaries and total assets are uniformly included in the secondary branches.
3. When the branch does not have a functional department with independent production and operation, the functional department without independent production and operation will not prepay the enterprise income tax on the spot. If a branch has an independent production and operation functional department, but its operating income, employees' salaries and total assets cannot be accounted for separately from the management functional department, the independent production and operation department shall not be regarded as a branch, and its enterprise income tax is allowed to be paid in summary with the headquarters, and it is not necessary to prepay the enterprise income tax on the spot.
4. Secondary and below branches of enterprises that do not have the main production and operation functions and do not pay value-added tax and business tax locally, such as product after-sales service, internal research and development, warehousing, etc. , do not prepay enterprise income tax locally.
5. In the last year, it was recognized as a small and meager profit enterprise, and its branches did not pay enterprise income tax in advance.
6. Newly established branches do not pay enterprise income tax in advance in the year of establishment.
7. For the cancelled branch, the enterprise income tax payable during the remaining period of the current year shall be paid into the central treasury by the head office.
8. A business institution established outside China by an enterprise without legal person status may not prepay enterprise income tax on the spot.
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