Deciding Between a Private Limited Company and a Branch in Ireland

By Sinéad Floody, 2nd February 2022

With the rising number of foreign companies that are seeking to develop a presence in Ireland, a common question is whether it would be more beneficial to register a subsidiary company, or an external company (“branch company”).

This short blog attempts to highlight some of the key differences between the two legal entities, as well as briefly address the registration processes which underpins them.

What is a Private Company (“Subsidiary Company”)?

It is important to understand that a subsidiary company is an independent legal entity, which is subject to tax legislation (and obligations) as well as the strict Annual Filing Requirements under the Companies Act 2014. A subsidiary is generally deemed to be more tax-efficient because it is subject to Irish tax on its worldwide income as opposed to just its local income in the case of a branch.

Subsidiary companies usually take the form of a Private Company Limited by Shares (LTD or limited company), these companies can choose their own names and are subject to the simplified digital incorporation process. Learn how to Register a Subsidiary Company.

The most important aspect of a limited company is that the shareholders’ exposure to risk is limited to the extent of the issued share capital whilst the entity itself is independently responsible for its obligations maximizing vast amounts of flexibility associated with an independent company.

What is an External Company (“Branch Company”)?

The Companies Act 2014, has abandoned the concept of ‘place of business’, which was present under older legislation, and has replaced this with the concept of a Branch Company. This concept extends to those foreign companies that have limited liability and wish to establish a presence in Ireland. These can be EEA (European Economic Area) or non-EEA companies.

The branch cannot choose its own name and will be registered in the exact same name as the foreign company (unless a business name registration is applied for). It should be noted that the process for registering a branch company is not as simple, it involves the submission of required forms along with supporting documents.

The following documents are required to register a Branch Company:

• Apostilled copies of the foreign companies’ constitution (or defining document – whatever it may be called)
• Certificate of incorporation
• Certificates of any name changes applicable to the company.

All of these documents must all be translated into English if they are not already.

Once the branch has been registered, the resulting entity constitutes a formal recognition of an external (foreign) company. There are no shareholders and no directors, only persons with authority to represent the branch and persons responsible for service and compliance of the branch. Learn how to Register a Branch Company.

What is the difference between using a Branch and a Subsidiary?

A branch can also register for tax (with incentives), bank account(s), and other services, with the key difference being that most of these will be territorially limited to the activities of the branch within the State. This difference results in a Branch Company having less flexibility than would be available to an independent subsidiary. The Branch remains entirely dependent on the continued existence of the foreign entity. Of course, there are other benefits to using a Branch company structure; the greatest benefit is found in the fact that a branch is only required to file yearly accounts – rather than adhere to any stricter filing requirements under the Companies Act 2014.

How to decide between a Branch vs a Subsidiary

As previously mentioned a subsidiary is generally deemed to be more tax-efficient as an Irish company because it is subject to Irish tax on its worldwide income as opposed to just its local income in the case of a branch. Another key aspect to consider between a subsidiary and a branch would be striking a balance between flexibility versus responsibility. A subsidiary provides substantially more flexibility (with increased responsibility), whereas a branch provides much less responsibility (at the cost of flexibility). Ultimately, the environment within which is operated will determine the balance that you need to strike.

If you require any assistance in trying to establish whether a subsidiary company or branch company is best suited to your needs, please contact us today and our team of experts will be happy to answer any of your questions.

 

Disclaimer This article is for guidance purposes only. It does not constitute legal or professional advice. No liability is accepted by Company Bureau for any action taken or not taken in reliance on the information set out in this article. Professional or legal advice should be obtained before taking or refraining from any action as a result of this article. Any and all information is subject to change.