Unlike other types of structures that can be set up by foreign businesses, the representative office can’t be used for commercial purposes. With that being said, the representative office can be used solely for the purpose of analyzing the local market or establishing a relation with the company’s clients or partners.
It can be employed for the purpose of getting to know better a foreign market, prior to actually starting an investment project in the respective jurisdiction and prior to opening a company that will sell various products or goods. The liaison office may also be used as a way to conduct market research and the information gathered by the appointed company representative will be reported to the company’s head office.
It is also important to know that this structure is regulated by the national legislation of most of the world’s jurisdictions; this can also be found in Belize, a country that is generally selected by foreign investors for the purpose of opening an offshore company, as this jurisdiction provides multiple tax advantages for foreign entrepreneurs.
Another advantage of the liaison office is that it can also participate in various trade fairs, where it can promote the company’s products or services. However, the rights that can be obtained by foreign businessmen through a representative office can vary based on the country where the office will be registered, as each country may have its particularities regarding this matter. Still, even if the regulations can vary, this structure is seen as a dependent entity to its parent company abroad, as it does not have a separate legal personality.
In Europe, most of the countries provide the same legal framework for the registration of a liaison office – for example, in all cases, investors must appoint a local representative who will have the quality of company employee; this will also create the obligation for the foreign company to register the employee with the social security system in the respective country.
In Switzerland, the above mentioned conditions are both applicable when opening a representative office. However, these obligations must also be met when opening a Swiss company that is set up for commercial purposes. Besides these, the registration of the office implies to submit a Declaration of Existence with the Chamber of Commerce and Industry.