A large percentage of US companies set up a subsidiary in Ireland because of language, corporate taxes
and skilled workforce. That does not mean that it is the best choice for your company. When making your selection you should consider your specific industry, the market, your situation and goals.
There are several steps involved in setting up a company in Europe:
First, whether setting up a subsidiary or a branch, you might want to go to a lawyer or a notary who will create and register the company for you. The articles of incorporation of the company will have to be registered in the public registry or mercantile register.
The company will also have to register both with the local tax authorities in the country selected and in the Inter-community VAT Registry to get a Tax ID Number.
Some of the annual filing are:
Filing of the annual accounts.
Branches and subsidiaries of foreign companies (non-European) usually must file a form with the authorities every time there is a transfer of capital between the foreign parent and the subsidiary.
Corporate tax filings.
The deadlines vary by country.
As far as choosing between a subsidiary and a branch:
A subsidiary is a separate entity and offers more protection in case of liability.
A subsidiary can take major decisions on its own. It can take loans, sign lease, legal contracts, file lawsuits. It is an almost independent entity.
A branch is not an independent entity. Officers of the branch need signed, notarized, and depending on the country apostilled resolutions of the board of directors from the US company to be able to take important and major decisions such as taking a loan, etc... A branch is an “extension" of the US company, therefore if the branch gets sued, the US company would also be responsible for the amounts due.
In terms of taxes, a branch is an extension of the US company and as such all income and expenses pass through to the US company. (i.e. they get on the US company's books for tax purposes).
A subsidiary is a different entity and its income and expenses do not pass through to the US company unless the parent company elects to do so.
When selecting a country and/or an entity form keep in mind the following items: corporate taxes, language, labor, laws and tax treaties.
Think about the following:
Look at tax treaties between the parent company's country and the new entity (branch or subsidiary).
Do you speak German or Spanish? Remember most official documents will be in the official language of the country.
Labor laws can affect your selection. In some countries, salary ranges, benefits and
other important matters are dictated by collective agreements already put in place by the government.
Does the country you selected have the skilled workforce to fill the positions at your company?
Do you want your company's financial statements to be public?
Are there any incentives offered by governments for you to set up the company there.
Setting up a business is a bit more bureaucratic and take a bit more time in Europe than in the US.
Find a good accounting/payroll/law firm that will help you comply with the VAT, labor, tax requirement so that you can focus on your core functions.