1. Parent Liability and Legal Status of Each Structure
Selecting a local operational structure affects how a foreign entity conducts business and bears legal obligations. A branch remains part of the foreign corporation rather than a separately incorporated entity, while a liaison office likewise does not create an independent corporate entity. Liability analysis therefore depends on the foreign corporation's obligations and the activities conducted through the local presence.
| Structural Dimension | Branch Office | Liaison (Representative) Office |
|---|---|---|
| Legal Status | Unincorporated branch of foreign parent | Non-sales liaison presence subordinated to headquarters |
| Commercial Authority | Authorized to generate local revenue | Restricted to non-sales support activities |
| Governing Law | Foreign Exchange Transactions Act | Foreign Exchange Transactions Act |
| Tax Filing Scope | Corporate tax on income attributable to the local business presence | Annual information reporting duties |
2. Revenue Activities and Liaison Office Restrictions
The operational framework for both structures is governed primarily by foreign-exchange rules rather than the Foreign Investment Promotion Act. A branch may conduct profit-generating business activities within the permitted scope of its foreign head office. Foreign entities registering operational presences should also examine Foreign Business Registration standards to review broader cross-border compliance requirements.
Operating Limits for a Liaison Office
A liaison office, often called a representative office, is limited to preparatory or auxiliary functions. Typical activities include market research, business contacts, advertising, quality control, and research and development for the foreign head office. Activities involving sales, revenue generation, or direct commercial contracting may exceed the permitted liaison-office scope.
When Local Activity May Create a Permanent Establishment
Tax obligations depend on both the legal structure and the activities actually performed. A branch generally constitutes a domestic permanent establishment and is taxed on income attributable to that presence. A liaison office that remains outside permanent-establishment status is not subject to corporate income tax on business profits, but separate reporting duties still apply under Article 94-2 of the Corporate Tax Act.
3. Registration, Staffing, and Operational Setup
Establishing either presence involves specific foreign-exchange notifications, business filings, and tax office registrations. Under Article 614 of the Commercial Act, a foreign company establishing a branch must complete commercial court registration within three weeks after establishing its local place of business. A liaison office does not undergo commercial court registration and instead receives a unique business identification number from the competent tax office.
Employment and Payroll Obligations
Branches and liaison offices may become subject to labor, payroll, and social-insurance requirements when they hire local workers or assign foreign personnel. Under the Employee Retirement Benefit Security Act, qualifying workers generally become covered after at least one year of continuous service, subject to statutory working-hour exceptions. Immigration status, payroll registration, social insurance, working hours, and retirement-benefit obligations should be reviewed according to the worker's status.
4. Tax Reporting and Annual Compliance
Tax compliance obligations vary substantially depending on whether the entity operates as a commercial branch or a liaison office. A branch carrying on taxable business activities generally must complete the applicable business registration and VAT reporting. Treaty provisions and branch-tax rules should be reviewed separately when profits are remitted to the foreign head office.
Branch Tax Filing and Liaison Office Reporting
A branch must register for value-added tax and file statutory returns for taxable business operations. A qualifying liaison office does not file regular corporate income tax returns, but Article 94-2 of the Corporate Tax Act requires prescribed annual information to be submitted to the competent tax office by February 10 of the following year.
5. Funding, Banking, and Profit Remittance
Capital deployment and cross-border transfers are subject to foreign-exchange reporting and banking procedures. Branches and liaison offices generally handle establishment-related notifications and transfers through a designated foreign-exchange bank. The required banking documents depend on the nature and purpose of the transfer.
Foreign Exchange and Head-Office Transfers
A branch may remit qualifying after-tax profits to its foreign head office through the applicable foreign-exchange banking process. The designated bank may require financial, tax-payment, and remittance documents supporting the transfer. Required documentation should be confirmed for the particular remittance and account structure.
6. Closure and Structural Changes
Closing a local presence requires completing administrative, banking, and tax deregistration procedures. Closing a liaison office generally involves terminating local agreements, settling employee claims, and filing final operational notices with the designated foreign-exchange bank and tax office.
Branch Closure, Liaison Office Deregistration, and Structural Change
Closing a branch may require deregistration, tax settlement, banking procedures, and arrangements for remaining assets and liabilities. Moving from a liaison-office structure to profit-generating branch operations usually requires ending or amending the existing liaison arrangement and completing the applicable branch-establishment procedures.
12 Aug, 2026
