The Branch Office is one of the more streamlined business structures a company has at its disposal when exploring the possibility of expanding its activities abroad. Businesses looking to expand and benefit from new markets need to decide wisely if they will open a subsidiary or a branch of their existing company based on the pros and cons of each type of entity.
Bearing in mind that each business type has its own advantages and disadvantages and the decision of opening one or another depends on the activities to be undertaken by the parent company.
There are many benefits to opening a branch office such as:
1. Greater Level of Control
A branch office is known as a dependent type of company, which mean that its activities are entirely managed by the parent company in terms of the decision-making process. There are many countries throughout Europe such as Malta, Italy, and Luxembourg in which a branch office offers a high level of control.
2. Cost Effective Locations
Cost is typically a big factor when considering which European country to operate a business. In many locations such as Malta and Italy when comparing the costs of opening a branch vs. a subsidiary, it will prove much more cost effective to set up a branch company, as there are no share capital requirements involved. Maintenance costs are also important to consider, for example when opening a branch office in the Netherlands, the Dutch branch office will benefit from simpler accounting requirements. This holds true for the majority of branch Companies registered in Europe.
3. Expanding Business Recognition
Expanding your business abroad can have great benefits from increasing the brand’s visibility to reducing business risk. Opening a branch company can offer visibility and brand exposer which can positively influence a company’s profits. A branch office can also reduce the risk of doing business in the host country by allowing the opportunity to test products in new markets.
There are countries in which Branch office have a great benefit in business recognition. In offshore jurisdictions, such as Seychelles, branch offices can be set up under very advantageous conditions. For instance, foreign banks can set up branches in Seychelles and benefit from the advantageous legislation governing the financial industry. Overseas businesses benefit from a strong market for products and services, as well as introducing and marketing new brands. The USA attracts businesses globally that are looking to partake in the open business environment and large, visible economy.
4. Access to a New Market
The European Union is one of the world’s largest and most sophisticated markets, with all member countries adhering to various business and immigration rules for reliability and ease of travel. Expanding a business in Europe with a branch office will allow a business to target new consumers when introducing products and services. The ability to reach a new group of prospects can generate revenue but entrepreneurs are also pleased to find that they are able to gain access to markets in adjoining countries as well. For Example; Poland shares borders with both EU and non-EU countries including Germany, the Czech Republic, Slovakia, Lithuania, Ukraine, Belarus and Russia.
5. Tax benefits
From a taxation point of view, a branch office is often a better choice when compared to a subsidiary company. A branch office will be covered by any double tax treaties signed by a country and additionally, there is no country in the world to have not signed at least one double tax agreement. Canada is one of the largest countries in the world that has a relatively extensive network of such conventions.