Register a Company in Germany
Why choose Germany for Company Registration
In the business world, it is well known that Germany has a strong economy and worldwide trading reputation. Germany supports and trains all businesses for all types of activity. Germany's central European location promotes corporate development and networking.
Types of business entities in Germany
Sole Proprietorship
Partnerships
Limited Partnership (KG)
Legal entities, regardless of whether they are established under German or foreign law may also be partners in a KG. No minimum capital required. Filing for incorporation requires an office in Germany.
General Partnership (OHG)
Same as KG, Legal entities, regardless of whether they are established under German or foreign law, may also be partners in a KG. It also does not have any minimum capital requirement.
Companies
Limited Liability Company
(GmbH)
(GmbH)
The minimum capital required to open a Limited Liability Company is €25,000. The shares of these companies are not publicly transferable. A company needs to be recorded in Germany’s Business Register to be incorporated.
Limited liability entrepreneurial company
(UG)
(UG)
The UG (limited liability) is an alternative to foreign legal forms with little capital stock where startup founders must comply with unfamiliar legal rules. As compared to GmbH a UG can be incorporated with just one €1. In addition to natural persons, shareholders can be other companies too.
Foreigners or foreign companies may become shareholders.
Joint stock company (AG)
Most suited for large corporations.
Founders of an AG can be natural and legal entities, also foreign ones, as well as partnerships. Law prescribes three executive organs: Board of Directors, Supervisory Board and General Meeting.
Foreign incorporations in Germany
Branch office
There are two types of branch office available in Germany:
Autonomous branch
Dependent branch office
Subsidiary company
A German subsidiary is usually considered a limited liability company (GmbH) and it must have its own share capital, management, and accounting system. The subsidiary is allowed to conduct business operations in name of the parent company. A subsidiary in Germany is required to register with the local commercial register and the trade office. Subsidiaries are subject to the German taxation system as any other local business.
Representative office
A representative office is only allowed to conduct a market research and
marketing for the parent company in Germany.
Taxation
The German corporate income tax is levied at a flat tax rate of 15%, butan additional 5.5 % solidarity surcharge tax applies.
German subsidiaries of foreign companies are subject to 25% withholding tax on dividends. However, if a double taxation agreement is enforced between Germany and another country, the dividend tax may be reimbursed.
Corporate entities in Germany are subject to the municipal trade tax if they generate business incomes. Foreign companies that have a permanent establishment in Germany are also subject to the municipal trade tax that ranges between 7% and 17.2% depending where the permanent establishment is located.
Any dividend incomes or capital gains repatriated to another corporation; the foreign company will benefit from tax exemptions for trade tax purposes. The exemption is applied by excluding the dividend income or capital gains from the trade income, thus reducing the tax burden to approximately 1.5%. In order to qualify for the exemption of dividends from the trade tax, the foreign company must hold at least 15% of the shares in the German permanent establishment.
VAT applies on the supply of certain goods and services, according to a certain threshold.
Distinction between Branch office and Subsidiary company
Basis | Branch Office | Subsidiary Office |
|---|---|---|
Legal structure | Branch is a local structure and not a company treated as a German resident corporation. | Subsidiary is 100% local German company, typically a GmnH. |
Independence | Branch is not independent of the parent company abroad. It must have the same name and perform the same business activities. | Subsidiary obtains full independence from the parent company and can perform additional and different business activities. |
Ease of incorporation | Generally, the branch only has medium incorporation requirements compared to a usual German company. | Investors need to go through all of the incorporation stages when opening a resident Germany company. |
Taxation | The branch is taxed according to German laws and the provisions of a double tax treaty can apply. | The subsidiary is subject to the same taxation principles as a German resident company. |
FAQs
Qu. What are the basic legal requirements for foreign investors wanting to
invest in Germany?
Ans – If you want to set up a limited liability company you must deposit25,000 euros in a bank account, while for joint stock companies the minimum share capital required is 50,000 euros.
Qu. Do you need a visa to enter Germany? How can I obtain it?
Ans –Foreign citizens of non-EU countries are required to apply for one of the available types of visas when coming to Germany. Our German attorneys can explain the visa application procedure.
Qu.How are individuals and companies taxed in Germany?
Ans –The German taxation system applies at federal, state and local level. Individuals must pay an income tax which is applied progressively, while companies are subject to the 15% tax rate plus the 5.5% solidarity surcharge.
Qu. Is there any requirement of minimum paid up share capital in forming a
representative office?
Ans –No.
Qu. Minimum number of directors required?
Ans –One.
Qu. How do I register a company in Germany?
- Decide on the legal structure that suits your business needs.
- Choose a unique and appropriate company name.
- Prepare the Articles of Association outlining company details.
- Set up a business bank account for financial transactions.
- Complete registration with the commercial register for legal recognition.
- Register for tax purposes to comply with fiscal regulations.
- Obtain any required licenses or permits to operate legally in your industry.
Qu. Can a foreigner set up a company in Germany?
Yes, foreigners can set up a company in Germany. However, certain requirements and regulations may apply depending on the type of business entity and the individual's residency status.
Qu. Can I register a company in Germany from India?
Yes, you can register a company in Germany from India. Germany offers a favorable business environment, access to a skilled workforce, advanced infrastructure, and opportunities for growth and innovation.
Qu. Is Germany a good country to start a company?
Yes, Germany is considered a good country to start a company due to its strong economy, stable political environment, well-developed infrastructure, access to European markets, and support for entrepreneurship and innovation.
Qu. Eligibility Criteria for Germany Company Formation
Setting up a business in Germany involves fulfilling some basic legal requirements. You must be at least 18 years old and have never been prohibited from practicing the profession you intend to pursue. These prerequisites ensure that individuals starting a business are legally qualified and competent in their chosen field. By adhering to these regulations, aspiring entrepreneurs can establish their ventures in compliance with German law.
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