Starting a business in Germany
By Simon O' Connor, 22nd May 2016
Germany boasts both the largest and the most significant economies in Europe. Home to such companies as Allianz, BMW and Siemens, the country is often considered the most attractive location for new and developed business within the European Union.
The German government is open to establishment of all types of businesses, regardless of the size or whether or not it involves a German citizen or a foreigner. The country has a well-developed financial and banking market and provides a secure platform to set up operations in Europe.
Business entities in Germany
There are four main business entities set up in Germany. This includes the Mini – GmbH, Limited Liability Corporation (GmbH), Stock Corporation (AG) and Partnerships. The “Mini-GmbH” would be the most popular type of business entity with international investors who have chosen to incorporate in Germany.
You can see a full break down on each business entity in Germany in our previous blog – “Company types in Germany”.
Taxation in Germany
Of course, tax is a major issue when choosing a suitable jurisdiction for your business. There are three main taxes that your German business may be liable to pay depending on the business type you choose.
- Municipal Trade Tax (Gewerbesteur)
Municipal Trade Tax (Gewerbesteur) is a levy charged on the profits of the business by local authorities, and varies in different locations. It is usually charged at around 18%.
- Value Added Tax (Mehrwersreuer)
Value Added Tax (Mehrwersreuer) is a levy you are expected to charge on each item you sell to your customers and each service you perform for them. VAT is charged at either 19% or 7%, depending on the item or service being sold. Bank, Insurance and Medical are generally exempt from VAT.
- Corporate Tax (Korperschaftsteuer)
The Corporate Tax (Korperschaftsteuer) is Germany currently stands at an attractive 15%. It is only incorporated companies that are liable to pay this levy on all earnings.
There is no shortage of qualified staff in most areas of Germany, particularly in the east of the country and in the Ruhr where unemployment is high. Most companies advertise jobs at the local government-run employment exchange but for specialist staff and senior management, you would be better advised to use an executive search agency.
How to get started?
Individuals or companies seeking to set up a business in Germany should seek advice from a professional company formation agent such as Euro Company Formations (ECF). With offices in both Germany and Ireland, ECF can assist you with all the German company formation services you may require, including incorporation, bank account, VAT Registration, virtual office/domicile and accountancy services.