Concept of Representative Office
A representative office is the easiest option for a company planning to start its operations in a foreign country. The company need not incorporate a separate legal entity nor trigger corporate income tax, as long as the activities are limited in nature.
A representative office is the easiest option for a company planning to start its operations in a foreign country. The company need not incorporate a separate legal entity nor trigger corporate income tax, as long as the activities are limited in nature. As its name says, a representative office represents its foreign parent in the country of operations.
A representative office is an office established by a company to conduct marketing and other non-transactional operations, generally in a foreign country where a branch office or subsidiary is not warranted. A representative office cannot regularly buy and sell goods or offer services. Representative offices are generally easier to establish than a branch or subsidiary, as they are not used for actual "business" (e.g. sales) and therefore there is less incentive for them to be regulated.
A representative office is a more tentative step into the foreign market, often used by investors to test the waters or for promotional purposes when the business distributes its goods by other means. A representative office is most appropriate in the early stages of corporation’s business presence in a foreign country. They have been used extensively by foreign investors in emerging markets such as China, India and Vietnam although they do have restrictions through not being able to invoice locally for goods or services.
Main Features:
- Representative office to engage only in activities which do not amount to, or form part of, the carrying on of the relevant business in foreign country.
- Having a nominated person employed by a local affiliate to handle enquiries could fall into this category.
- The representative office can contact customers and enter into contracts on behalf of its foreign parent, but can’t sell the goods itself.
- Representative Offices tend to be utilized by foreign investors in fields such as sourcing of products, quality control, and general liaison activities between the Head Office and the Representative Offices overseas.
- Corporations should periodically review the suitability of the structure and its activities to make sure that the company is not triggering a taxable presence in the foreign land by exceeding the permissible activities.
ICICI Bank, India's second largest bank, opened representatives offices in three east-Asian countries Thailand, Indonesia and Malaysia". The branches are expected to enable the bank to increase its participation in India's trade transactions in the region. It also has a representative office in the US.
Related Links
You May Also Like
-
Learn the typical accounting cycle that takes place in an automated accounting system. We will understand the perquisites for commencing the accounting cycle and the series of steps required to record transactions and convert them into financial reports. This accounting cycle is the standard repetitive process that is undertaken to record and report accounting.
-
When the quantum of business is expected to be moderate and the entrepreneur desires that the risk involved in the operation be shared, he or she may prefer a partnership. A partnership comes into existence when two or more persons agree to share the profits of a business, which they run together.
-
GL - Journal Posting and Balances
In this tutorial, we will explain what we mean by the posting process and what are the major differences between the posting process in the manual accounting system compared to the automated accounting systems and ERPs. This article also explains how posting also happens in subsidiary ledgers and subsequently that information is again posted to the general ledger.
-
There are five types of core accounts to capture any accounting transaction. Apart from these fundamental accounts, some other special-purpose accounts are used to ensure the integrity of financial transactions. Some examples of such accounts are clearing accounts, suspense accounts, contra accounts, and intercompany accounts. Understand the importance and usage of these accounts.
-
Network Organizational Structures
The newest, and most divergent, team structure is commonly known as a Network Structure (also called "lean" structure) has central, core functions that operate the strategic business. It outsources or subcontracts non-core functions. When an organization needs to control other organizations or agencies whose participation is essential to the success, a network structure is organized.
-
A Company (also called corporation) may be understood as an association of persons in which money is contributed by them, to carry on some business or undertaking. Persons who contribute the money are called the shareholders or the members of the company. A corporation is an artificial being, invisible, intangible and existing only in contemplation of law. Being the mere creature of law, it possesses only those properties which the charter of its creation confers upon it.
-
Five Core General Ledger Accounts
Typically, the accounts of the general ledger are sorted into five categories within a chart of accounts. Double-entry accounting uses five and only five account types to record all the transactions that can possibly be recorded in any accounting system. These five accounts are the basis for any accounting system, whether it is a manual or an automated accounting system. These five categories are assets, liabilities, owner's equity, revenue, and expenses.
-
As the business grows, the company may want to transition to a branch structure as branches are allowed to conduct a much broader range of activity than representative offices. Branches can buy and sell goods, sign contracts, build things, render services, and generally everything that a regular business can do. A company expands its business by opening up its branch offices in various parts of the country as well as in other countries.
-
Hierarchical Organization Structures
Hierarchical structure is typical for larger businesses and organizations. It relies on having different levels of authority with a chain of command connecting multiple management levels within the organization. The decision-making process is typically formal and flows from the top down.
-
Functional Organizational Structures
A functional organizational structure is a structure that consists of activities such as coordination, supervision and task allocation. The organizational structure determines how the organization performs or operates. The term organizational structure refers to how the people in an organization are grouped and to whom they report.
