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A subsidiary is a company whose shares of a certain amount are controlled by another company or are actually controlled or controlled by another company according to the agreement. A subsidiary owns all its own property, its own company name, articles of association and board of directors, conducts business activities and civil activities in its own name, and independently bears all consequences and responsibilities caused by the company's actions.
1.What are the main ways of setting up subsidiaries?
The type of subsidiary divides according to holding how many cent to be wholly owned subsidiary, holding subsidiary, joint-stock subsidiary, affiliated subsidiary 4 kinds, you this is holding subsidiary for certain.
2.The advantages of setting up a subsidiary are as follows:
a. The subsidiary is an independent legal person with limited liability.
b. The results reported by the subsidiary to the parent company are limited to production and operation activities.
c. The subsidiary is an independent legal person, and its income tax shall be collected independently. A subsidiary may enjoy preferential tax treatment, including tax exemption period, provided by the host country to its resident company.
d. When the tax rate of the host country is lower than that of the host country, the accumulated profits of the subsidiary can get the benefit of deferred tax.
e. Many countries have reduced or exempted withholding tax on dividends paid by subsidiaries to the parent company.
3.Setting up branch or subsidiary, it is general to consider from business and tax two respects above all.
a. If the business homogeneity between the branch company and the parent company is serious, there will be consideration of asset allocation or large amount of capital transfer in the future, and the operation risk is low, the branch company may be considered.
b. Since the income tax can be calculated jointly between the branch company and the parent company, if the parent company and the branch company have profits and losses for a long time, the branch company will also be considered for the purpose of combining tax payment.c. If there are local tax preferential policies, how to use them effectively should also be considered.
Generally, it is more flexible to set up as a subsidiary.Many listed companies, for example, register sales in tax depressions for tax planning purposes rather than business expansion.
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