(1) branch
Branch is a concept corresponding to the head office or company. The businesses of many large enterprises are distributed all over the country and even in many countries, and the branches or subsidiaries established by the company directly engage in these businesses. These branches or subsidiaries are called branches. The company itself is called the head office or company.
Although the relationship between the branch and the head office is somewhat similar to that between the subsidiary and the parent company. However, the legal status of a branch company is completely different from that of a subsidiary company, and it has no independent legal status.
A branch is a branch or subsidiary directly engaged in business activities of the head office. Although a branch has the word company, it is not a real company. Because the branch does not have the qualification of an enterprise legal person, does not have an independent legal status, and does not bear civil liability independently.
The characteristics of the branch are as follows: ① The branch does not have its own independent property, and the property actually occupied and used is part of the property of the head office and listed in the balance sheet of the head office. (2) The branch does not bear civil liability independently. (3) A branch is not a company, and its establishment does not need to follow the company establishment procedures, as long as it can be established through simple registration and industrial and commercial procedures. (4) The branch does not have its own articles of association, and there is no corporate decision-making and business executive body in the form of board of directors. (5) The name of the branch, as long as the words "branch" are added behind the name of the head office.
(2) subsidiaries
Subsidiary is a legal concept corresponding to parent company. A parent company refers to a company that owns more than a certain proportion of shares in another company or can actually control another company through an agreement. A subsidiary refers to a company whose shares are owned by another company or actually controlled by another company through an agreement. A subsidiary has the status of a legal person and can bear civil liability independently, which is an important difference between a subsidiary and a branch.
1. The subsidiary is actually controlled by the parent company. The so-called actual control means that the parent company has the actual decision-making power over all major matters of the subsidiary, especially the composition of the board of directors of the subsidiary. The parent company may appoint multiple directors of the board of directors by exercising its power without the consent of others. Although some trust institutions own a large number of shares in the company, they do not participate in the actual control of the company's affairs, so they do not belong to the parent company.
2. The control relationship between parent company and subsidiary company is based on the ownership of equity or control agreement. According to the majority voting principle of the shareholders' meeting, the more shares you own, the more you can get the decision-making power on the company's affairs. Therefore, if a company owns more than 50% of the shares of another company, it is bound to be able to control the company. But in fact, due to the dispersion of shares, as long as you own more than a certain proportion of shares, you can obtain the majority voting rights at the shareholders' meeting and obtain the controlling position. In addition to share control, the relationship between parent company and subsidiary company can also be formed by concluding some special contracts or agreements to make one company under the control of another company.
3. The parent company and subsidiaries are independent legal persons. Although the subsidiary is under the actual control of the parent company, many aspects should be managed by the parent company, and some of them are even similar to the branches of the parent company, legally speaking, the subsidiary is still an independent company with legal person status. Have its own company name and articles of association, and conduct business activities in its own name. Its property and the property of the parent company are independent of each other and each has its own balance sheet. In terms of property liability, subsidiaries and parent companies also bear their own property liabilities to the extent of all their property, and there is no correlation between them.
A company that controls other companies by holding more than a certain percentage of their shares is also called a holding company. Parent company and holding company are two common concepts. A subsidiary can also become a holding company by controlling a certain proportion of shares of other companies, and the controlled company becomes Sun Company. The parent company has become a huge company group by controlling many subsidiaries and Sun companies. As long as the parent company uses less capital, it can use the capital of its subsidiaries to acquire other companies, forming a pyramid-shaped company group model.
(3) Different
According to the Company Law, a company can set up branches, which do not have the qualification of enterprise legal person, and their civil liabilities shall be borne by the company. A company may establish subsidiaries, which have the status of enterprise legal persons and independently bear civil liabilities according to law. The differences between subsidiaries and branches are as follows:
(1) The subsidiary is an independent legal person with its own name, articles of association and organization, and conducts activities in its own name. Creditor's rights and debts incurred in the course of operation shall be borne independently by itself. The branch does not have the qualification of enterprise legal person and has no independent name. Its name should be preceded by the name of the affiliated company, which is established according to law and is only a branch of the company.
(2) The parent company's control over its subsidiaries must meet certain legal conditions. Generally, the parent company does not directly control its subsidiaries, but more indirectly controls them, that is, it affects the production and operation decisions of subsidiaries by appointing and dismissing board members and making investment decisions. However, branch offices are different. Its personnel, business and property are directly controlled by affiliated companies and engaged in business activities within the business scope of affiliated companies.
(3) Different ways to assume debts. As the largest shareholder of the subsidiary, the parent company is only responsible for the debts in the operating activities of the subsidiary to the extent of its capital contribution to the subsidiary; As an independent legal person, subsidiaries are liable for operating liabilities with all their property. Because the branch company does not have its own independent property, it is accounted for together with the affiliated company economically, so the liabilities in its business activities are paid off by the affiliated company, that is, the affiliated company is liable for the debts in the operation of the branch company to the extent of all its assets.
(d) From a tax perspective.
Subsidiaries and branches are important organizational forms of modern large companies. Why does a company arrange some subsidiaries as subsidiaries and others as constituent companies? I'm afraid this is mainly from the perspective of tax planning, because in the increasingly fierce market competition, all legal measures that are conducive to improving the economic benefits of enterprises are the focus of enterprises' consideration, and choosing the organization form that is conducive to tax incentives is one of the important ways to achieve this goal.
Countries all over the world (including China) have many different regulations on the tax treatment of subsidiaries and branches, which provides an option for enterprises or multinational companies to set up affiliated enterprises. Generally speaking, setting up a subsidiary has the following advantages:
1. It is also a limited liability in the host country (sometimes it needs the guarantee of the parent company);
2. The subsidiary only reports the enterprise results to the parent company on the production and operation activities, and the branch company reports the overall situation to the head office;
3. The subsidiary is an independent legal person, and its income tax is levied independently. Subsidiaries can enjoy the preferential tax treatment provided by the host country to their resident companies, including tax-free period, but most of the host countries are unwilling to provide more preferential treatment for subsidiaries because they are sent abroad as part of the enterprise;
4. When the applicable tax rate of the host country is lower than that of the country of residence, the accumulated profits of subsidiaries can benefit from deferred tax payment;
5. It is much more flexible for the profits of subsidiaries to be remitted back to the parent company, which means that the investment income and capital gains of the parent company can stay in the subsidiaries or be remitted back when the tax burden is light, thus obtaining additional tax benefits.
6. Many countries stipulate that withholding tax is reduced or exempted for dividends paid by subsidiaries to parent companies.
The advantages of setting up branches are usually:
1. Branches are generally simple to operate, and the requirements of financial accounting system are relatively simple;
2. The cost borne by the branch company may be less than that of the subsidiary company;
3. If the branch is not an independent legal person, the turnover tax shall be paid at the place where it is located, and the profits shall be collected and paid by the head office. In the initial stage of operation, branches often suffer losses, but their losses can offset the profits of the head office and reduce the tax burden;
4. The profits delivered by the branch company to the head office are usually not subject to withholding tax;
5. The transfer of funds between the branch and the head office does not involve the change of ownership, so there is no need to pay taxes.
As can be seen from the above, the tax preferences of subsidiaries and branches are quite different, so companies and enterprises should carefully compare, make overall consideration and plan correctly when choosing organizational forms. But in general, the most important difference between these two organizational forms is:
A subsidiary is an independent legal entity, which is regarded as a resident taxpayer in the country where it is established and usually bears the same comprehensive tax obligations as other companies in that country. Branches are not independent legal persons, and are regarded as non-resident taxpayer in the country where they are established, and they only bear limited tax obligations. The profit and loss of the branch company should be merged with the head office, that is, the "consolidated statement". China's tax law also stipulates that there are two forms of income paid by subsidiaries of the company: one is to declare and pay taxes independently; First, it is merged into the head office to collect taxes. The form of tax payment depends on the nature of the company's branches-whether they are independent taxpayers of enterprise income tax.
It must be pointed out here that the combined calculation of profits of overseas branches and head offices affects the tax burden of the host country. As for the host country where the branch is located, it is often necessary to tax the income belonging to the branch itself, which is the so-called income source tax jurisdiction. However, the establishment of domestic branches does not exist this problem, and enterprises should pay attention to this point in tax planning.
When a company sets up a subordinate branch, which is the most favorable form of enterprise organization should be adopted to obtain more tax benefits?
In the early stage, subordinate enterprises may lose money and set up branches. After the consolidated statements with the head office offset the profits of the head office, the taxable income and income tax can be reduced. And the establishment of a subsidiary will not get this benefit. However, if the subordinate enterprises are likely to make profits in a short time, or they can turn losses into profits quickly, it is more appropriate to set up subsidiaries, which can not only facilitate the operation of independent legal persons, but also enjoy the benefits of deferred tax payment of undistributed profits. In addition to carefully selecting the organizational form of subordinate enterprises in the initial stage of starting a business, with the business development and profit and loss changes of the whole group or subordinate enterprises, the head office also needs to adjust its subordinate branches through asset transfer and merger, so as to obtain more tax benefits in the process of enterprise operation. There is a big difference between setting up a branch and setting up a subsidiary through holding. Because the branch is not an independent legal person, its profits and losses should be combined with the head office to calculate and pay taxes, while the subsidiary is an independent legal person, and the parent and subsidiary companies should pay taxes separately. The subsidiary can only pay dividends on the shares held by shareholders in the after-tax profits. Generally speaking, if the company is profitable from the beginning, it is more advantageous to set up a subsidiary. When the subsidiary is profitable, it can enjoy various tax benefits and other business benefits provided by the local government. If the established company loses money at the initial stage of operation, it is more advantageous to set up a branch, which can reduce the tax burden of the head office.
For example, at the beginning of the company's operation, the subordinate branches suffered losses, and the losses of the branches could be combined with those of the head office, so the company headquarters chose to establish the organizational form of the branches from the beginning. After several years of operation, the branch turned losses into profits. In order to enjoy the benefits of tax deferral, we decided to gradually transfer the production and operation of the branch.
Go to another subsidiary, or simply merge the branch into a subsidiary. If the entire branch is transferred to a subsidiary, you must consider:
(1) Is the property transfer tax payable and is there any preferential tax provision?
② Comprehensively measure the advantages and disadvantages of subsidiaries, especially the comparison of total tax burden;
(3) Assuming that the transfer of property rights is not very favorable and the production scale of the subsidiary needs to be expanded, can the ownership of the assets of the subsidiary be taken over without transfer, just for the use of the subsidiary?
(4) Inventory can also be sold on a commission basis, so there is no need to pay taxes before selling on a commission basis;
⑤ For losses carried forward by branches and subsidiaries, it is particularly necessary to know the tax treatment of the country of residence and the country of source of income. Assuming that the loss of the branch can offset the profit of the head office, it is not appropriate to transfer it to the subsidiary before the branch has turned losses into profits.