Company in Germany

General information

15%*

Tax rate

4 - 5 Weeks

Time of establishment of the company

25 000 Euro

Minimum capital

Germany offers a strategic position due to its central geographical location and also because it represents the largest European population. It is the leading European power with the highest GDP in the world, while offering advanced technology infrastructure.

Types of companies

There are four main types of company in Germany:

  • Limited liability company (GmbH)
  • Limited company (AG)
  • Partnership
  • Sole Proprietor

The GmbH is the corporate status of the most common commercial enterprises in Germany.

It is usually used by foreign companies to set up in the country.

 

Tax rate

– Tax in profits: 15%, actual rate of 33.3% if we include the business tax (7% to 17%) and the solidarity levy – Capital gains (shares): 5% for a company, 25% + surcharge of 5.5% for an individual who holds a stake of less than 1% – Capital gains (real estate): 15% – Dividends: 5% for a company, 25% + surcharge of 5.5% – Interest: 25% + surcharge of 5.5% (resident), 0% (non-resident) – Royalties: 15% + surcharge of 5.5% (non-resident) – Transfer of ownership: 3.5% – Insurance: 19% – VAT: 19% – No tax on capital

Minimum share capital

25,000 (50% to be released on incorporation)

Shareholders

One associate minimum

Foreign shareholders

Yes. Subject to review if holding more than 25% of the share capital

Foreign Holding

Yes, a foreign company can become associated with a GmbH provided that it has the legal capacity

Set-up time

4-5 weeks from receipt of all documents

Corporate headquarters

Business address, transfer of telephone, fax and mail. Possibility of having a physical office (prices vary depending on demand)

Accounting

Annual financial report, exhibits and management reports mandatory.

Company registration procedure

Taxes and finances

Tax system

German companies are strictly regulated, particularly the listed AG. State agencies oversee the activities of financial institutions such as banks and insurance brokers. Other industries come together to regulate the activities of their members

Foreign investors are offered a wide range of financial incentives in Germany. In particular, the list includes loans and grants, depending on the nature of the company and the intended location, some regions offering grants of up to 50% for SMEs. Another incentive available is a favorable tax rate, but this is rarely the case in large cities.

Companies are required to prepare a balance sheet and income statement along the lines of the 4th European Directive of 1978, transposed into German law. GmbH and AG companies must also produce an exhibit and a management report.

The main corporate taxes are:

· Taxes on profit, local business tax and solidarity levy

· VAT (Umsatzsteuer, abbreviated to USt in Germany)

· customs duties

Corporate income tax is 19%.

Under Community law, free movement of capital is the norm.

Accounting

A mandatory accounting plan does not exist in Germany. It is up to the company to choose the form, language and currency.

Financial statements must be prepared within three months of the end of the year for medium and large companies and within six months for small companies.

– Unlimited liability or partially limited companies (Einzelkaufleute, OHG, KG) are required to provide a formal report according to the model of the 4th European Directive of 1978, transposed into German law, together with an income statement. These companies (except KG) have no obligation to publish their accounts, or to have them audited.

– In addition to the two above documents, limited liability companies (GmbH and AG) have to provide an exhibit and a management report. With the exception of small companies and corporate groups, all other companies must publish annual accounts and have them audited (along with the management report) by an external auditor.

A cash flow sheet is not mandatory, except for listed companies.

Local labor law

Other information