COUNTRY OVERVIEW

Germany is the world’s fourth largest economy and accounts for more than a fifth of the EU’s GDP (21% in 2017). In 2017 Germany was the third largest exporter in the world, with exports worth €1.28 trillion (US$1.43 trillion) and a healthy balance of trade. Germany has 32 of the Fortune Global 500 companies (2017).

There are around 70,000 foreign companies based in Germany. Almost 70% of the workforce is employed by small to medium sized companies specialising in industries such as engineering, biotechnologies and renewable energy. Germany hosts two-thirds – just under 160 – of the world’s industry trade fairs which attract around 10 million visitors annually. Germany has the largest manufacturing economy in Europe.

Corporation tax is 15% plus an additional 5.5% solidarity surcharge. This surcharge was introduced to support and develop growth and living standards in former East Germany. There is also a municipal corporate tax known as trade tax. Income tax rates range from 14% to 45%.

Germany is a social welfare state and over 27% of GDP is spent on health and social care.

Reunified in October 1990, following its division into East and West Germany after the Second World War, Germany is one of the top world economies (and is the leading economy within Europe), with a population estimated at 81,305,856 in July 2012. The country is rich in iron ore, coal, timber and copper, but it is the service sector which dominates the economy, with around 70% of German workers empoyed in this area (industry and agriculture account for the remainder). Corporate income tax is imposed at 15% plus an additional 5.5% solidarity surcharge, and a local corporate income tax known as the trade tax, which is imposed at is levied at a rate of 3.5%, multiplied by a local factor which varies between 200% and 490%, giving an effective rate of between 7% and 17.15%. The highest personal income tax rate is 45%, and the standard VAT rate is 19%. Business structures commonly used in Germany include the Limited Liability Company (Gesellschaft mit beschränkter Haftung (GmbH)) and the Joint Stock Corporation (Aktiengesellschaft (AG)), with the former structure the most popular. In early 2013, there were 95 tax treaties in place.

  • Country: Germany
  • Region: Europe
  • Currency: Euro (EUR) (€)
  • Languages: German
  • Time Zone: UTC +1
  • Phone Code: +49
  • Communications: Very Good
  • Capital primary business districts: Berlin, Frankfurt
  • Good Relationships: Austria, Belgium, Bulgaria, China, Croatia, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Greece, Hungary, India, Ireland, Israel, Italy, Latvia, Lithuania, Luxembourg, Malta, Netherlands, Pakistan, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden, Turkey, United Kingdom
  • Bad Relationships: Burma, Egypt, Iran, Korea (Democratic People’s Republic of), Libya, Somalia, Sudan, Syria

BUSINESS ADVANTAGES

  • 100% Foreign Ownership: Foreigners can own 100% of the shares in a German LLC.
  • Limited Liability: Shareholders liabilities are limited to the company’s assets.
  • A Low Capital Mini LLC: Small companies can start out as a Mini LLC with 50% of the normal minimum authorized capital.
  • Simple Registration: Only two documents are required which can be filed by a notary.
  • One Shareholder/Manager: Only one shareholder and one manager are required which can be the same person.

TAXATION

  • Headline tax rates: CIT 29.875%, PIT 14%-45%, VAT 19%
  • Treaty Jurisdictions: Albania, Algeria, Argentina, Armenia, Australia, Austria, Azerbaijan, Bangladesh, Belarus, Belgium, Bolivia, Bosnia and Herzegovina, Bulgaria, Canada, China, Croatia, Cyprus, Czech Republic, Denmark, Ecuador, Egypt, Estonia, Finland, France, Georgia, Ghana, Greece, Hungary, Iceland, India, Indonesia, Iran, Ireland, Israel, Italy, Ivory Coast, Jamaica, Japan, Kazakhstan, Kenya, Korea, Republic of, Kosovo, Kuwait, Kyrgyzstan, Latvia, Liberia, Liechtenstein, Lithuania, Luxembourg, Macedonia, Malaysia, Malta, Mauritius, Mexico, Moldova, Mongolia, Montenegro, Morocco, Namibia, Netherlands, New Zealand, Norway, Pakistan, Philippines, Poland, Portugal, Romania, Russia, Serbia, Singapore, Slovak Republic, Slovenia, South Africa, Spain, Sri Lanka, Sweden, Switzerland, Syria, Taiwan, Tajikistan, Thailand, Trinidad and Tobago, Tunisia, Turkey, Turkmenistan, Ukraine, United Arab Emirates, United Kingdom, United States, Uruguay, Uzbekistan, Venezuela, Vietnam, Zambia, Zimbabwe
  • TIEA Jurisdictions: Andorra, Anguilla, Antigua and Barbuda, Bahamas, Bermuda, British Virgin Islands, Cayman Islands, Cook Islands, Dominica, Gibraltar, Grenada, Guernsey, Isle of Man, Jersey, Liechtenstein, Monaco, Montserrat, Saint Kitts and Nevis, Saint Lucia, Saint Vincent and the Grenadines, San Marino, Turks and Caicos Islands

In addition, there is a “Solidarity Surcharge” of 5.5% of the total corporation tax paid. There is also a “Trade Tax” on trade earnings plus some municipalities charge a tax too. It is estimated that a typical LLC involved in a trade pays around 30% in total taxes.

COMPANY FORMATION

  • Suitable for: Wealth Management |Treasury Management, Fund Management, Yachting, Trading Financial, Intellectual Property/Licensing, Holding Companies, E-commerce, Property Ownership
  • Company Types: Limited companies, joint stock companies, branches, general partnerships, limited partnerships and civil law partnerships
  • Formation Cost: 4000 – 5200 USD$
  • Formation Time: 15 – 25 days
  • Maintenance cost: 2100 – 3500 USD$

INCORPORATION PROCESS

  • Corporate Name First, verify a unique name for the corporation that will not be similar with any other German corporation which will be verified by the local chamber of industry and commerce.
  • Articles of Association: After verifying the corporation’s unique name, the Articles of Association will be prepared by a lawyer and all signatures notarized.
  • Open a Bank Account: After the Articles of Association are completed, a local bank must be opened where the minimum share capital or the start-up capital for the corporation will be deposited. Obtain proof of the deposit.
  • Corporate Structure: The corporation then needs to complete a document showing the planned management and board structure of the business.
  • Registration of the Corporation The German Commercial Register requires the delivery of the above-mentioned documents to begin the corporation registration process. These documents include a registration application, the notarized articles of association, the completed document showing the business’s management and board plan, and a deposit slip displaying proof of the share capital deposit. All of these items must be submitted electronically. The Commercial Register hosts a central electronic platform for new company registration.
  • Trading License Next, the corporation needs to obtain a trading license from the local Office of Business and Standards. Following this, the company needs to fill out a questionnaire in regards to its business practices, and register this information at the statistical office and with the chamber of industry and commerce as well as the labor office.
  • Once the labor office receives this information, it will issue an eight-digit operating number, and this number needs to be sent to social security.
  • After receiving the eight digits operating number, the entity needs to submit an application for federal health insurance.
  • Once the health insurance application completes itself, the company or limited company is required to send a notification to the Tax Office about the existence of this new business. To finish the tax reporting process, the company or limited company also needs to complete registration for corporate taxes and VAT.
  • Once the company or limited company completes these steps and becomes registered in Germany, the business can start its commercial process. Most company start-ups taking place in Germany naturally need employees. One benefit to incorporating in Germany is the fact there is a well-trained workforce from which to pick from, as well as job websites and recruitment agencies that can assist any business with finding talented employees. Businesses incorporating in Germany have plenty of opportunities to find the best employees to fill their positions.