The tax difference between registering a branch or a subsidiary

The company has grown，Business expanded，May not be satisfied with the market in one region，Going to expand to other regions，So should I register a branch or a subsidiary at this time? today，Shanghai Yushanggang Xintong-In terms of taxation, is it a registered branch or a subsidiary?。First, let’s differentiate between branches and subsidiaries based on their definitions.。

one、Definition of Branches and Subsidiaries：

1. branch：Branches do not have independent legal personality，Nor can they bear civil liability independently，In fact, a branch is not a company in the true sense.，Because it is only a branch or affiliated institution engaged in business operations under the head office。
2. Subsidiaries：A subsidiary is the opposite of a branch，Subsidiaries have independent legal personality，Can also bear civil liability independently，Subsidiaries also own part of the equity，Also has the power to control，but，The parent company has actual decision-making power over its own company，Can determine the composition of the company’s board of directors。After briefly talking about the definitions of branches and subsidiaries,，Let’s talk about the differences between them in terms of taxation。

two、Tax Differences：

1. Payment of corporate income tax by branches，Usually, corporate income tax is paid in advance according to a certain proportion during the year.，Then, when the corporate income tax is settled and paid at the end of the year, it will be merged into the annual income of the head office to calculate and pay corporate income tax.；
2. Subsidiaries are different，The subsidiary is a full taxpayer of corporate income tax，Pay corporate income tax independently。

If the company operates across regions，Some branches make long-term profits，Some branches have no hope of making a profit，In this case，You can choose to register a branch，This can reduce the overall corporate income tax payment。VAT on，Whether establishing a branch or subsidiary，All need to pay VAT at the location of the institution。

Other taxes，Such as property tax、land use tax，According to current policy provisions，real estate、Land is subject to tax at the location of the asset：Personal income tax should also be paid where the enterprise produces and operates.。therefore，Whether establishing a subsidiary or a branch，There will be basically no impact on local taxes in the project location.。three、What are the benefits of setting up subsidiaries and branches?

A. Benefits of establishing a subsidiary：

1. Subsidiaries reporting corporate results to the parent company are limited to production and business activities.，Branch offices must report comprehensive information to the head office；
2. A subsidiary is an independent legal person，Its income tax calculation and collection are carried out independently；
3. The accumulated profits of subsidiaries can enjoy the benefit of tax deferral.；
4. The repatriation of subsidiary profits to the parent company should be more flexible than that of branches，In other words, the investment income of the parent company、Capital gains can be retained in subsidiaries，Or you can choose to remit it when the tax burden is lighter.，Get extra tax profits；
5. Many countries provide for reduced or exempted withholding tax on dividends paid by subsidiaries to parent companies.。

B. Benefits of establishing a branch：1.Branch offices are generally easy to operate，financial accounting system

Require

also simpler；2.Branch bears costs

cost

May be less expensive than subsidiaries；

1. The branch is not an independent legal person，Pay turnover tax at the location，Profits are consolidated and taxed by the head office；
2. Profits delivered by the branch to the head office are usually not subject to withholding tax；
3. Capital transfer between branch and head office，Because there is no ownership change involved，No need to bear taxes。

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