There are pros and cons to using either a subsidiary company or a branch, and the tax implications of both options will often be an important aspect of the wider commercial decision.
The initial administration involved in setting up a company can be greater than if a branch is established, though a company does offer a greater foothold in the UK and is often advantageous when looking to trade with local businesses.
A UK company is required to prepare and file annual accounts with Companies House and, as the company grows in size, an audit may be required. Although a branch is not required to prepare statutory accounts in the UK, in most cases the business will need to publish the parent company accounts on Companies House.
Profits of the UK subsidiary or allocable to the UK branch should be subject to corporation tax and the amount of UK tax due is likely to be similar in either case. There may, however, be local tax considerations: for example, in relation to the use of losses and cash repatriation. In particular, your business may need to confirm whether or not double tax relief is available on branch profits taxed in both the UK and the resident territory. The UK does not impose withholding tax on dividends paid by a UK company and therefore profit extraction for a UK subsidiary is rarely an issue.
Whichever route is taken, your business will still be required to register with Companies House in the UK, as well as with HMRC for tax purposes.
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