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Corporate Centre
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UTILIZATION
Application of Limited Company
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Limited is doing business, for which it was formed. Trade may be carried out direkt from Limited or through a branch. |
Limited hold rights of possession only and enable taking advance of it to other company. Assets are not involved in business plan and therefore out of risk. |
Limited is shareholder in another company in your country. Due to easy 2 days share transfer of Limited you may change partner in your home company without difficulties with your Register. |
| COMBINATION | ||
If you decide to trade through a branch only and the British mother company does not trade the only requirement you have to deal with is to submit Annual Report to the Companies House (we offer). You need not prepare accounts!
Limited company trading in a foreign country
- Branch
- Place of business / Comparison of the Two Regimes
- Not everyone has to register
- What is the sense of a branch?
Branch
Non-resident entities may carry out transactions through a branch in a foreign country (see your local Business act).
A branch is an organisation depending on its head office situated abroad. This organisation is not a legal entity of its own and is submitted to the legislation in force of the country of origin when referring to its relations with third parties. A branch is a part of a company that is organised so as to conduct business on behalf of a company as opposed to carrying on business which is merely ancillary or incidental to the company's business as a whole. In other words a person will be able to deal direct with a branch of the foreign company rather than with that company in its country of incorporation.
A branch has to be set up through a public deed and entered in the Commercial Register. It has to operate within its "declared objects" i.e. the purposes for which the branch has been set up.
Furthermore, the branch must also have a permanent address and a representative resident in the country of operation.
Since the Limited is already formed the registration regime of a branch removes the need for facing complex of incorporation questions on initial registration. It simplifies the registration system is compatible with the law.
Generally speaking, the requirements, procedural formalities, accounting and initial costs for a branch are very similar to those for the constitution of a subsidiary.
The tax position of a branch is the same as for a local company (see "various" chapter) and it has the same rights and duties, with the following differences:
- The parent company may invoice the branch for specific costs incurred in respect of the branch (cost of management, management support and of general administration). These costs are deductible from the branch's income.
- There is not a tax on non-resident companies with permanent establishment (Branch Profits Tax). This guarantee non-discrimination clause in the model O.E.C.D. Treaty, to those countries with which UK has signed Double Tax Treaties on Income and Wealth. The tax does not apply to companies resident in an EU member state.
Place of business
In some countries there are two regimes for registration. In addition to a branch there is a place of business.
A 'place of business' is for companies their activities in the foreign country are not sufficient to define it as a branch. Such activities might include internal computer processing, warehousing, or simply a representative office.
Comparison of the Two Regimes
The two regimes overlap to a certain extent and it is intended that if the operation set up by the overseas company satisfies both sets of criteria then a branch would be set up without the need for a separate place of business registration.
However the decision whether to set up a branch OR a place of business is usually based upon how the overseas company intends to trade in a foreign country. If it is the intention that the company will actively trade in there, eg make sales and generally trade, then a branch would be the appropriate vehicle. Alternatively, if the overseas company simply wishes to establish a presence, for example to establish business connections or deal with internal administration but not actively make sales or trade, then a place of business may be the appropriate vehicle.
Not everyone has to register
The fact that an overseas company is carrying on business in the other country does not automatically mean that the company has to register.
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According to international agreements between UK and most O.E.C.D. countries "permanent establishment" shall be deemed not to include
For other activities an enterprise of a Contracting State shall not be deemed to have a permanent establishment in the other Contracting State merely because it carries on business in that other State through a broker, general commission agent or any other agent of an independent status, where such persons are acting in the ordinary course of their business. All other transactions or other countries without international agreements require registration in that country where trading is expected. |
What is permanent establishment?
"Permanent establishment" means a fixed place of business through which the business of an enterprise is wholly or partly carried on.
The term "Permanent establishment" includes especially:
- a place of management;
- a branch;
- an office;
- a factory;
- a workshop;
- a mine, an oil or gas well, a quarry or any other place of extraction of natural resources;
- an installation or structure used for the exploration or exploitation of natural resources; and
- abuilding site or construction or installation or assembly project which exists for more than twelve months.
Pick up your country:
A B C D E F G H I J K L M N O P R S T U V X Y Z
Typical example
What is the sense of a branch?
- it allows you to trade in your country without being obligated to operate Limited company, to make accounts and pay taxes in UK,
- if you wish to form corporation you may benefit from competition between corporation legal systems in different EU states,
- single states may regulate players on domestic market and protect themselves from simple profit export.
Most common sample of Limited - Branch operations
Subject A and subject B form a British Limited Company and its branch in that country where they operate their business.
The branch makes profit.
The parent company may invoice the branch for specific costs incurred in respect of the branch (cost of management, management support and of general administration). These costs are deductible from the branch's income.
1. Transfered profit is taxed with 19 per cent rate or
2. transfered to zero rate destination.
Providing Limited pay out dividents there will be 19 per cent tax rate on entire taxable profit but recipients have not to pay tax on dividents This guarantee non-discrimination clause in the model O.E.C.D.Treaty, to those countries with which UK has signed Double Tax Treaties on Income and Wealth. The tax does not apply to companies resident in an EU member state.
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| Gross profit | 30,000 |
| 19% tax on profit | 5,700 |
| Nett profit | 25,300 |
| Option 2: Furter transfer to 0 rated area | |
| 19% Tax on part profit | 570 |
| Nett profit | 29,430 |
* Before deducting specific costs of £10,000
Costs for Limited returns after on year of trading.
Why there are such differences?
In spite of world globalization, integration and harmonization process within certain world grouping (EU, ASEAN, NAFTA, FTAA, CAFTA, EMFTA…) all participating countries keep their corporate and tax policy as an influence instrument of domestic public wealth. Therefore, there is not interest in further integration and unification of such rules.
World Trade Organization member states do their best to deal with the rules of trade between nations. They work on trading simplification rules with the goal to help producers of goods and services, exporters, and importers in conducting their business. At its heart are the WTO agreements, negotiated and signed by the bulk of the world's trading nations and ratified in their parliaments.
Several countries sign separate trading agreements in order to improve bilateral business conditions. A list of UK's treaties is added in the chapter "How to use it".
Once you ordered our services we can provide you with a basic overview and full text of Acts and paragraphs of Agreements that affect your supposed trading.
What sorts of documents you need
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| Trading in UK | Office, secretary | Standard |
| Trading from UK (into Contraction State) | Office, secretary document legalization (Apostille), translation | Standard + |
| Trading through a branch | Office, secretary document legalization (Apostille) translation, documents for local branch | Komplet |
| Limited is shareholder in another company overseas | Office, secretary document legalization (Apostille) translation, documents for local company | Komplet |