Branch or Subsidiary

Australian branches of non-residents

This type of company is not a separate legal entity. A foreign company is registered with ASIC as a Recognised Foreign Corporation and given an Australian Registered Business Number (ARBN).

Australia's double tax agreements typically provide that where a non-resident entity carries on business in Australia through a permanent establishment (or branch) situated in Australia, then Australia has taxing rights over the business profits attributable to that permanent establishment as though it was an independent enterprise.

Generally, the permanent establishment is taxed on its worldwide income as a notional Australian resident company independent from its foreign head office. However, repatriations of profits from the Australian branch to the foreign head office would not be treated as dividends for Australian tax purposes.

The foreign company must lodge its financial reports, unless relieved from doing so under the Corporations Act generally, or on application. The branch must appoint a local agent who is a resident of Australia and authorised to accept on behalf of the foreign company, service of notices.

Subsidiary of Foreign parent company

This is a common form of structuring for foreign entities look at establishing business in Australia.  Most companies have the benefit of limited liability and separate legal status. There are various types of companies but the most common is a company limited by shares. This means that the company’s shareholders’ liability is limited to the face value of the shares fully paid.

A company has to be registered with the Australian Securities & Investments Commission (ASIC) and is given an Australian Company Number (ACN).   The subsidiary if private must have at least one director residing in Australia. If it is a public subsidiary then it must have at least three directors and one secretary, with two directors and one secretary residing in Australia.  Companies are governed by the Corporations Act.

The subsidiary is a resident for all Australian tax purposes and will be taxed on all world-wide income, wherever sourced from. If the entity is trading it must obtain an Australian Business Number (ABN). Liabilities remain with the subsidiary in the absence of guarantees and like arrangements or unless the subsidiary trades while insolvent. Rules will specify whether related company loans are treated as debt or equity for tax purposes. Thin capitalisation rules restrict deductibility of interest on loans – click here to find out more.

The company must lodge annual returns and usually financial reports with ASIC unless relieved from doing so under the Corporations Act.

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