Branch office vs subsidiary office
- A branch office has the parent company being responsible for its liabilities while a subsidiary company is responsible for all its liabilities. In as much as both are enjoying the same low tax rates, the main difference is that assessing the profits of a branch office is difficult than assessing the profits of a subsidiary. Hence there may be difficulties when it comes to what is to be taxed.
- There is no separate MAA (Memorandum and Articles of Association) for a branch office and is therefore not required for your foreign branch registration.
- In a branch office, the name and activities must be the same as that of the parent company.
- A subsidiary company is preferred by Small and Medium Enterprises (SMEs) while a branch office is preferred by large corporations.
A subsidiary company is more preferred by foreign investors in Hong Kong than a branch office because a subsidiary company is responsible for its liabilities and it enjoys several tax advantages. Hence it bears its own success or loss without it being extended to the parent company.
It is also faster to set up than a branch office as it takes 4-7 working days as compared to 14 working days of setting up a branch office.
A subsidiary office does not require the presence of local personnel while a Branch Office must have one local representative.
It is easier to open a corporate bank account as a foreign subsidiary company than as a foreign branch office.