Branch or subsidiary: which structure to choose?
Published on 10 October 2026 · Updated on 10 October 2026
In short
Branch vs subsidiary in Luxembourg: a subsidiary is a separate Luxembourg company, most often a SARL or an SA, for which the parent company is liable only up to its contribution. A branch has no legal personality: it is an establishment of the foreign company, which remains bound without limit by its acts.
Branch vs subsidiary: the comparison
| Branch | Subsidiary | |
|---|---|---|
| Legal personality | None, not separate from the parent company | Its own, a Luxembourg company |
| Parent company liability | Bound without limit by the branch’s acts | Limited to subscribed capital, unless a guarantee is given |
| Capital | No capital of its own | Legal minimum: EUR 12,000 for a SARL, EUR 30,000 for an SA |
| Incorporation deed | Parent company decision, filing with the RCS | Articles of association, notarial deed for a SARL or an SA |
| Business permit | Required for a foreign parent company | Required in the subsidiary’s name |
| RCS registration fee | EUR 105.91 excl. VAT for a foreign company | EUR 105.91 excl. VAT for a SARL or an SA |
| Accounts | Filing of accounting documents at the RCS, except banks and insurers | Own accounts validated on eCDF and filed at the RCS |
| Taxation | Result attributed to the parent company | Own tax returns, group regimes possible |
| Local image | Foreign entity | Luxembourg company |
How to choose
- A branch suits testing a market, opening a sales office or a service outpost, when the parent company agrees to bear the risks directly.
- A subsidiary suits a lasting activity, hiring teams, welcoming local investors, or when customers and banks prefer a Luxembourg counterparty.
- In both cases , the establishment requires real premises in Luxembourg and a manager who meets the conditions of the business permit.
With a branch, the risk goes back entirely to the parent
According to Guichet.lu, the parent company is automatically bound at 100% by the acts of its branch. A dispute, or a tax or social security debt in Luxembourg, can therefore be pursued against the parent company’s assets. With a subsidiary, the risk is in principle ring-fenced, unless the parent company has granted guarantees.
Taxation: a choice to have calculated
A branch may constitute a permanent establishment in Luxembourg, taxable on the profits attributable to it, while the subsidiary is taxed like any resident company. How this interacts with the tax regime of the parent company’s country depends on the applicable tax treaty.
We do not give tax advice: an independent licensed accountant or a partner lawyer can model both options. For the detailed steps, see opening a branch in Luxembourg and setting up a subsidiary in Luxembourg.
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Frequently asked questions
What is the main difference between a branch and a subsidiary?
A subsidiary has its own legal personality: it is a Luxembourg company, and the parent company answers for its debts only up to the subscribed capital. A branch has none: it is part of the foreign company, which is bound without limit by its acts.
Must a branch be registered with the RCS?
Yes. The branch of a foreign-law company registers with the RCS; the LBR fee schedule consulted on 10 October 2026 sets the fee at EUR 105.91 excl. VAT. Luxembourg branches of foreign companies are also among the entities required to file accounting documents, except banks and insurers.
Is a business permit needed for a branch?
Yes when the parent company is established outside Luxembourg, in the European Union or elsewhere: it must apply for a business permit to open its branch. If the parent company is Luxembourg-based, opening a branch is simply notified to the Ministry of the Economy.
Can a branch be converted into a subsidiary?
Yes, but it is not a simple formality. You must set up a new company, transfer the activity, contracts and staff to it, obtain a permit in its name, then deregister the branch. The tax consequences of the transfer must be analysed beforehand.