Question

b. What are the tax advantages of operating in the United States through an unincorporated branch

Answer 1

A branch is an unincorporated entity operating in another country or place with its parent company in other country or place and is simply a representative office. The important aspect is that this entity is an unincorporated entity and need not be incorporated again in some other country or place of business.

Benefits -

1. It prevents excessive costs by having local operations and access to market.

2. Ability to qualify as a domestic company as if it was incorporated in US.

3. No specific restrictions to US branches.

4. Branch profits in US are taxed at rates from 15-35% on a progressive basis.

5. Losses can be offset for last 2 years profits or can be carried further to 20 years.

6. The headquarters company is held liable.

Branch is subject to corporate tax rate of 35% and any remittance of profits to home country is subject to US remittance tax of 30%. A branch structure is suitable when we expect to incur losses and trading losses can be offset by home country's trading profits.