Subsidiary vs. Branch in Liechtenstein - Update for 2021
Subsidiary vs. Branch in LiechtensteinUpdated on Wednesday 28th April 2021
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Foreign investors in Liechtenstein can choose from several alternatives for configuring a new commercial establishment in this country. Two of the most popular options are the creation of a subsidiary or that of opening a branch in Liechtenstein. These two configurations differ from each other in matters of liability and dependence on the parent company. Our law firm in Liechtenstein can help you with the legal aspects related to the opening of a new company in Liechtenstein.
The main differences and characteristics between a branch and a subsidiary are highlighted in the table below:
|Independence||The branch is not an independent legal entity, this means that the parent company abroad is liable for its debts and obligations. It is bound to perform the same activities as the foreign company.||The subsidiary is a fully independent legal entity, incorporated and registered as per the Liechtenstein laws. It can engage in different business activities if needed.|
|Ease of registration||The incorporation and registration of a branch in Liechtenstein is generally faster than in case of the subsidiary; this can be an important consideration for foreign investors.||The subsidiary follows all of the registration steps required of any resident company in Liechtenstein, from choosing the company name to drafting the Articles of Association and proper registration.|
|Taxation||The branch is subject to corporate taxation in Liechtenstein at the same corporate income tax rate; however, it can benefit from the provisions of a double tax treaty signed between the parent company’s country of residence and Liechtenstein.||The subsidiary is subject to the regular corporate tax regime in Liechtenstein, just like any resident company.|
|Accounting and reporting||The branch will generally have lighter accounting and reporting requirements as it is perceived as an extension of the parent company, including for tax assessment purposes.||The subsidiary will need to comply with the accounting and reporting requirements in Liechtenstein. The subsidiary’s financial statements are filed on an annual basis and the accounting principles are the Liechtenstein GAAP.|
How to establish a subsidiary in Liechtenstein in 2021
According to the Liechtenstein Company Law, the subsidiary is a company which has legal independence from the parent company. Its legal personality implies as well that the subsidiary is liable to tax payment. The connection with the parent company is preserved though and resides in the fact that the parent company owns shares in the Liechtenstein subsidiary. The most important characteristic of a subsidiary is that it represents a separated legal entity.
The incorporation procedure for a subsidiary in Liechtenstein implies its registration with the official Company Register in this country. There are several legal forms in which the subsidiary can be organized, but one of the most preferred types is the public or private limited liability company.
In order to complete the registration for a subsidiary in Liechtenstein in 2021 there are certain requirements which have to be met:
- The attribution of a distinct name to the subsidiary;
- The opening of a bank account allocated to the subsidiary;
- The filing of the initial capital;
- Gathering and elaborating the documents in view of the registration;
- If there is the case, application for VAT number.
Our attorneys in Liechtenstein remain at your disposal for further details regarding the differences between subsidiaries and branches in Liechtenstein in 2021.
We invite you to watch a video about the differences between the branch and the subsidiary in Liechtenstein:
The creation of a branch office in Liechtenstein
The process of creating a branch in Liechtenstein in 2021 is quick and it does not imply a complicated procedure. According to the Company Law in Liechtenstein, the documents which the parent company must provide on registration are:
- The articles of association of the parent company;
- A document certifying the fact that the decision to establish a branch in Liechtenstein has been taken with the approval of the board of the parent company;
- Name of the designated administrator of the new branch;
- Any other documents which can speak of the good standing of the parent company.
When the documents are not in German, you might need to provide as well a legalized translation to the originals. The registration of a branch in Liechtenstein can be as well accomplished through representation if the parent company employs a law firm in Liechtenstein in order to complete the establishment process in 2021.
Compared to the subsidiary, the branch in Liechtenstein depends much more on the parent company, although it can still benefit from some freedom of action in the administrative matters.
VAT registration in Liechtenstein may be required when the subsidiary/branch has an annual turnover over a certain amount.
Economic operators that engage in import/export activities in the EU via a branch or a subsidiary in Liechtenstein will need to register for EORI purposes.
Don’t hesitate to contact our Liechtenstein lawyers who can help you prepare in good order the registration of a branch or subsidiary in Liechtenstein.