Branch or subsidiary is usually asked when a company wants to employ someone abroad. It is a tax and liability question with an employment answer attached, and for one or two people the honest answer is often neither: an employer of record can employ them while the entity question waits.
A branch is the same company, a subsidiary is a new one
A branch is an extension of the parent operating in another country, so the parent is directly exposed to its obligations and liabilities. A subsidiary is a separate legal entity with its own governance and, ordinarily, liability confined to it. That distinction drives most of the practical differences that follow, including what a customer or a regulator can reach.
Registration, filing and closure differ in effort
Both require registration, local filings and usually local accounting. A subsidiary typically carries more formality at setup and ongoing governance; a branch can pull the parent's own accounts into local filing requirements, which some parents find unwelcome. Closure is the part nobody asks about and is frequently slower and more expensive than incorporation.
Either way you become a local employer
Once the entity exists you hold local employment obligations directly: contracts under local law, payroll registration, statutory benefits, notice and severance rules, and the local filing calendar. That is the operational cost that continues after the setup advice has been paid for, and it is the part that usually decides whether it was worth it.
EOR vs foreign subsidiary: when to use each
Use an employer of record when headcount in the country is one or two people, when the market is still a test you may leave, or when the hire is needed faster than any entity can be registered: the EOR's local entity employs the person and you pay a fee per employee per month. Use a foreign subsidiary when the team is going to grow, when you sign local customer contracts or need local licences, or when the accumulated EOR fees over two or three years pass what the entity costs to set up, run and eventually close. Run that comparison on your own projected headcount, and remember that the EOR route ends cleanly by moving the employees onto your entity once it exists.
Questions people ask about branch vs subsidiary
Which is faster to set up?
It varies by country. Neither is quick enough to solve an urgent hire, which is the usual reason employers look at an EOR first.
Does a branch create a taxable presence?
Generally yes, and that is often the point of the question. It is advice to take locally rather than a rule to apply from a page.
When is a subsidiary clearly right?
When headcount, contracts or regulation in that country justify a permanent local presence rather than one or two employees.
When should I use an EOR instead of a foreign subsidiary?
When you are hiring one or two people, testing a market, or need someone working before an entity could exist. Move to a subsidiary once headcount, local contracts or regulation make a permanent presence worth its setup, running and closure costs, usually by transferring the EOR's employees onto your own entity.