Subsidiary Formation

A subsidiary is a company, corporation or limited liability company that is controlled by a parent company, through the ownership of more than 50% of the subsidiary’s voting stock.

For the purposes of taxation and regulation, the parent company and subsidiary are considered separate entities. The subsidiary, and consequently the parent company, must adhere to the laws of the country where the subsidiary resides.

The advantages of establishing a subsidiary in a foreign country includes the expansion of international presence, lower labour and production costs and potential benefits of tax and creditor protection. In addition, the legal liabilities of the parent company are limited to the capital contributions made to the subsidiary.

In the EU the Parents-Subsidiary Directive has recently been amended; this now means that the parent company has to hold only 10% of shares in a subsidiary to qualify for exemption of withholding tax, and double taxation is better eliminated with the parent company’s tax imputed against the subsidiary’s tax on profits.

Read our blog post on: The Advantages & Disadvantages of Foreign Owned Subsidiaries

For more information on opening a subsidiary in a specific country, please click below:

 

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The information and any commentary on the law contained on this website is provided for information and guidance purposes only. Every reasonable effort is made to make the information and commentary accurate and up to date, but no responsibility for its accuracy and correctness, or for any consequences of relying upon it is assumed by Open A European Company, its directors , employees or associated websites.

The information and commentary on Open A European Company’s site does not, and is not intended to amount to legal advice to any third party on a specific case or matter. You are strongly recommended to obtain specific, direct legal advice from professional advisers whether these be your own advisers or those that appear on the OpenAeuropeancompany.com site. You should consider taking advice both in the country in which you are domiciled and in the country in which you are seeking to open a company. and not to rely on the information or comments on this site.

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