Both are legal forms with the objective of growing businesses internationally. Please find below the differences and where they stand for.
It´s a legal identity independent from the parent company i.e. an extension of the same business but in another country. The control the subsidiary company lies with the parent company, because it holds a major percentage of the shares and capital of the business. However the subsidiary company runs independently from the parent company taking its own risks, and taking into account the regulations and norms of the country it’s in.
The branch form is the secondary establishment of the parent company, located in another area. Given that it is only a part of the company, they carry out the same activities within the market and the branch is dependent on the parent company, they have a subordinate relationship because the branch cannot function without the parent company.
The subsidiaries, as mentioned above, are independent of the parent company, and therefore have their own legal personality and name, different from the main company. In this way they retain their autonomy, however fiscally, they are subject to the same regulation as the other commercial entities of the territory where they are established.On the contrary, branches are not a different company and aren´t independent from the parent company and they do not have a legal personality of their own, although they must register legally in the mercantile register. On the other hand, they can be created by individual entrepreneurs or by mercantile companies, but they will always depend on them.
Responsibilities and Management
With subsidiaries, liability is limited for the parent company. This is due to their autonomy, because they can carry out activities themselves which are different from the activities carried out by the parent company. For this reason, the subsidiary is liable to its own debts. Therefore, the main company is not affected. On the other hand, the General shareholders meeting will be responsible for the administration of the subsidiary.On the other hand, in the branches, there is unlimited liability. The possible debts will be compulsorily assumed by the parent company without limitation, since it depends on the activity of the branch. In this case, the manager of the branch office shall be the representative of the parent company in the territory where it is located.
Tax Accounting Issues
From the fiscal point of view, the subsidiaries are subject to the legislation of the state where they are, so they will pay their taxes in the place where they have their headquarters. Therefore, they have the obligation to display their accounts in the Commercial register and pay corporate tax just like tax payers. The branches will pay corporate tax for their activities in Greece and accumulate their financial information into the parent .The subsidiary can be formed as a limited liability company (IKE, EPE, AE) however the branch by the law has to be an LTD or SA therefore, the foreign entity has to be a limited liability company. In terms of accounting, both subsidiary company and branch keeps double entry accounting books.
|BASIS FOR COMPARISON||BRANCH||SUBSIDIARY|
|Meaning||Branch implies an establishment set up to by parent company, to perform the same business operations, at different location.||Subsidiary company is understood as the company whose full or partial controlling interest is held by another company.|
|Reports to||Head office||Parent company|
|Business||Branch conducts same business as parent organization.||Subsidiary may or may not conduct same business as parent organization.|
|Separate legal standing||No||Yes|
|Accounts maintenance||separately in Greece||Separately|
|Ownership interest||The parent organization has 100% ownership interest in the branch.||The parent organization has >50-100% ownership interest in the subsidiary.|
|Liabilities||Extends to the parent company.||Limited to the subsidiary.|