Opening a Branch or Subsidiary in Europe

One of the most crucial decisions you must make when trying to grow your business internationally is where to open your new branch or subsidiary. Your decision will rely on several variables, including the potential you see in the new market and any legal or cultural obstacles you might need to overcome in your new region or nation. 

Due to the abundance of prospects and simple business setup procedures, Europe has long been the preferred location for entrepreneurs wishing to grow their operations. Every lawfully operating business may establish an additional presence in Europe, such as an office, agency, subsidiary, or branch. 

Let’s examine the benefits and prerequisites of establishing a branch or subsidiary in Europe.

Opening a Branch or Subsidiary in Europe

A branch is a more autonomous unit that runs its own business while still representing the corporation. It is governed by the same local regulations that apply to the foreign parent business because it is not legally distinct from it.

The branch operates autonomously even though it is not autonomous; hence, it must be registered in the nation’s commercial registry. It is a necessity that the business name of a branch includes the business name of the overseas parent company for recognition.

 Branches are obligated to follow the rules stated below in all European countries: 

• The business must be registered with the appropriate tax and VAT authorities and the social security offices.
• The details must be published on the controlling company’s operations. This is applicable in all EU nations.

It is crucial to remember that EU banks dislike offshore companies. Therefore if your firm is established in an offshore zone, it is best to take control of the bank account right away. 

Before choosing to establish your business unit in a particular country that is crucial to your ambitions for collaboration with Europe, you should research the legislation of that country specifically.

A subsidiary is an organisation that has been incorporated and is based on one of the national business legal structures used in the host EU country.

Either the foreign parent business owns the entire capital of the subsidiary, or a corporation is in charge of the subsidiary together with certain minor local partners. The applicable statutory provisions, such as requirements for minimum investment and business registration, an entrance into the commercial register, and others, must be followed according to the legal framework that the subsidiary chooses. 

Incorporating under the subsidiary structure is more common in Europe. A subsidiary or LLC typically lends a firm more trust with third parties, like banks, network operators, and partners, and it is considerably simpler to conduct transactions through a separate legal organisation.

Subsidiaries must follow the same legal registration requirements as a typical LLC in their host nation. 

Benefits of Opening a Branch and Subsidiary in Europe 

Expanding a firm in Europe has many benefits, such as lower taxes, qualified labour, a varied market, and robust national economies. Regulations from the European Union also frequently safeguard employee and consumer protection laws. Because of this, companies established in Europe typically have a longer lifespan and are more successful. Some major benefits are listed below: 

Cost Effective 

Expense is frequently a major consideration when choosing which European country to run a business in. In several areas like Italy and Malta, when comparing the expenses of forming a branch vs. a subsidiary, a branch will be more cost-effective given there is no share capital needed.  

For instance, when creating a branch office in the Netherlands, the Dutch branch will profit from simplified accounting regulations. Infrastructure costs are another key factor to take into mind. This applies to most branches registered in Europe.

Unlocking a New Market

The European Union is one of the world’s biggest and most developed markets, and all its members abide by various commercial and immigration regulations for consistency and travel convenience. 

By opening a branch office in Europe, a company can target new customers to introduce new goods and services. Entrepreneurs may also obtain access to marketplaces in neighbouring nations. Reaching a new group of possibilities can help them make money. 

For instance, Poland shares its borders with EU and non-EU nations, such as Slovakia, Ukraine, Germany, Russia, the Czech Republic, Lithuania, and Belarus.

Favourable Business Environment

Some European countries offer favourable tax rates, business regulations, and incentives that can make it easier and more cost-effective for businesses to operate. For instance, Cyprus is one of the EU’s low-tax nations with reputable banking services and a strong economy. Thus, it is ideal for the growth of your global business

Access to Skilled Talent 

Europe is home to many highly educated and skilled professionals, which can be valuable for businesses looking to expand their operations or develop new products.

Diversification of Revenue Streams: 

Opening a branch or subsidiary in Europe can help businesses reduce their reliance on a single market or region, improving their resilience to economic shocks.

Which European Nation Should You Choose to Expand Your Business? 

There are different options for foreign businesses looking to launch or expand operations in Europe:

• Create a new legal entity, establish a bank account, and travel abroad.
• Construct a branch or regional office for the business in the European Union or the Eurozone.

Some European nations where opening a branch or subsidiary is simple are mentioned below: 

The Czech Republic 

The Czech Republic is a good option where one can create an account in a payment service, including accounts for conventional offshore firms. In addition, there are chances to register European businesses, make investments, and get Golden visas.

The Czech Republic promotes international investment into the nation and treats overseas investors like companies with Czech domiciles. Branches may enjoy better tax benefits and a quicker formation and dissolution process. 

The Trade Licensing Act, Commercial Code, and the Act on International Private and Procedural Law govern the opening of branches in the Czech Republic.

France

In France, a significant economic hub of Europe, you can live comfortably among gorgeous surroundings and earn money by making investments in real estate and the national economy. Entrepreneurs from other nations are offered business opportunities in tourism and campgrounds, along with a common business registration here.

The economy of France is robust, and there are benefits for international businesses looking to open a branch there, like financial incentives. The procedure is quite straightforward, similar to setting up a business; however, branch formation takes longer because of the paperwork and applications needed.

The branch should file with the tax authorities to receive a VAT number for taxation purposes. Tax returns must be filed yearly, while VAT refunds should be filed every month. 

The parent firm is required to annually report to the Court of Commerce about the funds allocated to the branch. The branch must maintain its own records. Having a French bank account is recommended but not necessary because the French Tax Authorities charge for payments made from overseas.

Germany

Germany has a robust economy and top-notch banking services, which are well-known among exclusive business circles. 

With a German passport and nationality, it is possible to purchase residential as well as commercial estate, set up a business with the entitlement to a residency permit, establish a bank account for an offshore corporation, purchase a ready-made enterprise, and relocate for permanent residency.

There are various business types in Germany, and an executive can choose the one that best suits them. A foreign company may choose to establish a subsidiary or branch office in Germany by taking into account elements including the German taxation structure, the aim of the formation, and the costs associated with beginning operations in Germany. 

All business structures must register with the regional trade office in Germany. The German branch office will be a subsidiary of the parent corporation and will not be independent in terms of assets or accounting. 

A branch office in Germany is permitted to carry out the same kinds of operations as its main office but is not permitted to carry out additional, distinct activities. 

Final Thoughts 

In a nutshell, Europe is ideal for opening a branch or subsidiary to expand your business. It offers favourable tax incentives and has a talented workforce that will assist you in growing your brand.  Having a branch or subsidiary in Europe will give you access to a new market and improve the overall image of your firm. 

Start Company Formations is the ideal choice if you want help expanding your business in Europe. By offering specialised advice and information, we assist businesses in registering and establishing firms both domestically and internationally. 

All of our clients receive courteous and professional treatment, please do not hesitate to get in touch with us. With decades of expertise in enabling companies to grow, we have a wide range of offerings accessible, including international auditing and tax services, EMI banking solutions, business secretarial assistance, merchant processing solutions, payroll services, and you may even acquire a shelf company.