Branch & Subsidiary

Branch Vs Subsidiary, Which one is the Best for me?

Many clients often ask us the above question and our answer to it is that “It all depends on the Business approach you want to take”. This is because in some instances, a Branch would be the most ideal entity while in other instances a Subsidiary would be the most ideal.

The major difference comes in when paying Taxes because a Branch will be taxed at 37.5 % Corporation Tax while a Subsidiary will be taxed at 30%.

However, having paid Tax at the higher rate, a branch may remit after tax profits to its head office without any further deduction of tax whereas a subsidiary company must then deduct a further 10% on dividends paid to its parent.

See below a Comparison of a Branch and a Subsidiary

Branch Subsidiary
legal  Status Not a separate legal entity but an extension of the Parent Company Separate legal Entity  distinct from its Parent Company
Liabilities Liabilities Extend to Parent Company Liabilities Limited to Subsidiary
Entity Name Must be the same as the Parent Company Can be the same or Different from Parent Company
Allowed Activities Must be the same as the Parent Company Can be the same or Different from Parent Company
Validity Period Registered forever until closed Registered forever until closed
Taxation Taxed as non-resident entity, local tax benefits not available Taxed as resident entity, local tax benefits available
Annual Filing Must file Branch Office as well as Parent Company’s Accounts Must file Accounts of the Kenyan Subsidiary
Bank Account Can open Bank Account in Kenya Can open Bank Account in Kenya

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