In today's society, the pressure of competition is increasing, and the risk of holding subsidiaries by the head office must be strengthened. In order to gain a firm foothold in the fierce market competition, enterprise managers must strengthen management in all aspects, especially in large enterprises with subsidiaries. Let's take a concrete look at the risks of holding subsidiaries by the head office.

Risks of holding subsidiaries by head office 1 1) Main risks involved in subsidiary management:

① Imperfect governance structure and organizational structure of subsidiaries and improper personnel selection may lead to decision-making mistakes, collusion and fraud, and low efficiency.

(2) A subsidiary engages in related transactions or events beyond its business scope or approval authority, which may lead to enterprise investment failure, legal proceedings and asset loss.

(3) Related parties violate related party transactions of the parent company, which may lead to untrue information disclosure or be punished by relevant regulatory authorities.

(4) Incorrect formulation and implementation of enterprise accounting methods and inaccurate information in consolidated financial statements may lead to decision-making mistakes of the enterprise itself, investors and related parties, or the enterprise may face legal proceedings.

(2) parent company's management and risk control of subsidiaries. The parent company should adhere to the principle of property right management, aim at investment safety, profitability and value-added, and embody the management mode of asset linkage; Abide by the principle of participation in decision-making, take participation in the management of corporate governance institutions of subsidiaries (shareholders' meeting, board of directors and board of supervisors) as the main channel, and reflect the management mode of parent-subsidiary companies; Following the principle of effective supervision, the group's collective management mode is embodied in the important form of supervision by various functional departments of the parent company.

The management scope and authority of the parent company to its subsidiaries are mainly as follows:

① Equity management. The so-called equity management refers to the management behavior that the parent company, as the controlling shareholder, participates in major decisions and chooses managers through the operation of the subsidiary governance institutions according to the articles of association.

② Collaborative management. Coordination management is mainly to implement coordination management behaviors such as complementary advantages, complementary resources and complementary production and operation among subsidiaries.

③ Development management. Development management is the management behavior of the development, long-term strategy formulation, major technological transformation, product development and investment direction of each subsidiary.

④ Financial statistics management.

⑤ Normal supervision In view of the above main risks, the parent company should at least strengthen the control of the following key aspects or links when establishing and implementing internal control over its subsidiaries.

Organization and personnel control of subsidiaries:

● The parent company shall formulate or participate in the establishment of the governance structure of its subsidiaries in accordance with the law, decide on the main provisions of the articles of association of the subsidiaries, and select and employ directors, managers, chief accountants and other senior management personnel representing the interests of the parent company.

● The parent company should establish and improve the director appointment system. The appointed directors shall regularly report to the parent company on matters related to the operation and management of subsidiaries. For major risk matters or major decision-making information, the appointed directors shall report to the board of directors of the parent company in a timely manner.

● The parent company may nominate the manager of the subsidiary to the board of directors of the subsidiary according to the articles of association. If the manager of the subsidiary company fails to perform his duties and causes great damage to the interests of the enterprise, the parent company has the right to put forward suggestions for dismissal to the board of directors of the subsidiary company.

● The parent company can implement the appointment system of chief accountant according to needs. The appointed chief accountant shall regularly report the asset operation and financial status of the subsidiary to the parent company. The appointed chief accountant shall implement a regular rotation system.

● The parent company may set up a special department (or post) to be responsible for the equity management of subsidiaries as required.

Risks of holding subsidiaries by head office. What are the advantages of wholly-owned subsidiaries?

Entering a country's market as a wholly-owned subsidiary has two main advantages:

1. Managers can completely control the daily business activities of subsidiaries in the target market and ensure that valuable technologies, processes and other intangible assets remain in the subsidiaries. This way of complete control can also reduce the opportunities for other competitors to gain competitive advantages.

This is especially important when the company takes technology as its competitive advantage. In addition, the manager can maintain complete control over the output and price of the subsidiary. Different from authorization and franchising, all profits created by subsidiaries must also be handed over to the parent company.

2. If the company wants to coordinate the activities of all its subsidiaries, wholly-owned subsidiaries will be a very good entry mode. From the perspective of global strategy, companies can regard each country's market as a part of the interconnected global market. Therefore, having complete control over wholly-owned subsidiaries is more attractive to company managers who pursue global strategy.

2. What are the disadvantages of a wholly-owned subsidiary?

The wholly-owned subsidiary also has two important defects:

1. This method may cost a lot of money, and the company must raise funds internally or in the financial market to obtain funds. However, for small and medium-sized enterprises, it is often difficult to obtain sufficient funds. Generally speaking, only large enterprises have the ability to establish international wholly-owned subsidiaries. However, citizens of a country who have settled overseas may find that their unique knowledge and ability are their important advantages (international subsidiaries established overseas are in great need of such talents).

2. As the establishment of a wholly-owned subsidiary needs to occupy a lot of resources of the company, the risks faced by the company may be high. One of the sources of risk is the uncertainty or instability of the target market. This kind of risk may threaten the company's material property and personal safety when it is serious. The owner of a wholly-owned subsidiary may also bear all the risks brought by consumers refusing to buy the company's products. Of course, as long as we fully understand the consumers in the target market before entering the target market, the parent company can reduce this risk.

Risks of holding subsidiaries of head office 3 Tax planning of parent company and subsidiaries

The expenses incurred by the parent company in providing various services to its subsidiaries (hereinafter referred to as subsidiaries) shall be determined in accordance with the principle of fair trade between independent enterprises and treated as normal labor expenses of enterprises for tax treatment. If the parent-subsidiary company fails to collect the price according to the business dealings between independent enterprises, the tax authorities have the right to make adjustments.

When the parent company provides various services to its subsidiaries, the two parties shall sign a service contract or agreement, clearly stipulating the content, charging standard and amount of the services provided. All service fees incurred under the above contract or agreement shall be declared and taxed by the parent company as operating income and deducted by the subsidiary company as cost before tax.

The parent company provides similar services to its subsidiaries, and the service fees charged can be collected by signing a separate contract or agreement; You can also adopt a service sharing agreement, that is, the parent company signs a service sharing contract or agreement with its subsidiaries, and the actual expenses incurred by the parent company for providing services to its subsidiaries are added to a certain percentage of profits as the total service fees charged to its subsidiaries.

In service-oriented subsidiaries (including profit-making enterprises, loss-making enterprises and enterprises enjoying tax reduction or exemption), according to the second paragraph of Article 41 of the Enterprise Income Tax Law, "the costs incurred by enterprises and their related parties in developing and accepting intangible assets or providing and accepting labor services shall be shared according to the principle of independent transactions when calculating taxable income".

1. Tax avoidance methods of parent and subsidiary companies other than management fees

At present, there are great tax risks in using management fees to avoid taxes, but there are still other ways to avoid taxes between parent and subsidiary companies. For example, the parent company has more losses and its subsidiaries have more profits. In order to reduce the tax burden of group companies, there are three feasible tax avoidance methods:

The parent company may appoint financial personnel to its subsidiaries, and the subsidiaries shall pay financial consulting fees to the parent company; The parent company can also let the subsidiary use the patent, and the subsidiary pays the patent fee to the parent company; In the performance of the business contract between the parent company and the subsidiary company, if the subsidiary company breaches the contract, the subsidiary company will pay liquidated damages to the parent company.

2. Tax reduction plan for personnel dispatched by the parent company and subsidiaries

The parent company sends employees to its subsidiaries. If the subsidiaries pay employees directly, the subsidiaries can't deduct them before tax, and there is a risk through wage deduction. A personnel service fee agreement can be signed between the parent company and the subsidiary company. The parent company collects service fees as income, issues invoices and pays relevant taxes. The wages of dispatched personnel are deducted before tax as the salary and salary expenses of the parent company, and the invoices obtained by subsidiaries when they pay for services are deducted before tax as normal service fees.

3. Pay attention to the tax-related risks of the group company's "cash pool"

For the cash pool managed by the "settlement center", the subsidiaries charge the deposit interest from the settlement center of the group company, which is the income received by occupying funds, and the subsidiaries must pay VAT. In the fund pool managed by the finance company, since the finance company belongs to a financial institution, the deposit interest obtained by the member enterprises of the "fund pool" from the finance company is the same as that obtained from the bank, and the subsidiaries are not required to pay VAT. Whether it is the fund settlement center model or the financial company model, the interest of the "fund pool" charged by the parent company of the group from the member enterprises should be subject to VAT.