Germany is an attractive country both for registering a new company and for transferring a successful business. The stability of the EU’s first largest economy, legal transparency, a huge consumer market and effective state support measures for entrepreneurs are just a small part of the advantages the birthplace of Bach and Schiller offers.
The German economy shows remarkable resilience to financial crises. Foreign businessmen appreciate modern Germany as one of the world’s economic centres, where innovative ideas can find investment and entrepreneurial spirit. Combined with hard work it leads to inevitable commercial success.
Modern Germany is home to around 84 million people, which, combined with its high level of prosperity, makes it one of the largest and richest markets in continental Europe. The average annual pre-tax salary here in 2024 is around €49,000.
Germany has a well-developed infrastructure for business, including modern transport networks, advanced telecommunications facilities and efficient logistics companies.
An additional business advantage is Germany’s prime location in the centre of Europe. You will be able to offer your products to a huge customer base from the UK to the Baltics and far beyond.
A favourable business environment has developed in Germany largely due to the transparent legal system and low level of corruption in the country. In a stable legal environment where no favours are given to local residents, foreign entrepreneurs can not only conduct their trade business in peace, but also plan their company’s development for years to come.
In addition, Germany has a whole body of legislation aimed at protecting intellectual property, trade marks and combating unfair competition.
Those foreign entrepreneurs who plan to work from Germany will undoubtedly be attracted by the high human resources potential. Every year, tens of thousands of highly qualified specialists with a wide range of skills graduate from German educational institutions. Some of these graduates go abroad, but the vast majority stay at home and become part of its more than 42 million-strong workforce.
Therefore, aspiring entrepreneurs and owners of successful foreign businesses have access to a pool of highly qualified employees in Germany. The German state becomes an excellent choice for those businessmen who recruit employees with academic degrees in maths, engineering, natural sciences, statistics and digital technology.
The German government not only provides entrepreneurs with reliable legal protection, but also stimulates business development in Germany in every possible way. Government support in Germany is available not only to businessmen with a German passport, but also to enterprising foreigners.
The authorities provide advisory support, tax incentives, reimburse part of the costs of start-ups, and also directly finance commercial organisations by providing grants and low-interest loans.
According to statistics, every tenth startup in Europe is launched in Germany. Modern Germany attracts innovative businesses for the reasons listed above: strong and stable economy, large solvent domestic market, reliable legal protection of intellectual property, professionalism of German employees, etc.
Germany also provides access to private investment. Some experts estimate that there are about 800 registered venture capital funds in Germany, which willingly finance promising commercial projects.
Startups are also attracted by the German business community and the opportunity to make useful contacts at numerous industry fairs and forums.
First, let’s list the legal forms of doing business in Germany according to the principle “from simple to complex”.
Kommanditgesellschaft / KG – a limited liability partnership, It doesn’t have any requirements to create charter capital and the total assets of the firm are formed by means of monetary or property contributions of the participants;
Kommanditgesellschaft auf Aktien / KGaA is a limited liability partnership with unlimited general partners and shareholders. The shareholders’ risk in the event of KGaA’s bankruptcy is limited to the value of their shares.
Let see what you need to do to open a limited liability company (GmbH). This legal form is the most popular among foreign entrepreneurs.
The involvement of a good corporate lawyer can save you time and money. Imperial & Legal can help you prepare all the necessary documents to start your new company.
At the initial stage, you should choose your region of incorporation in Germany very responsibly, especially if you will be offering your products on the domestic market.
Once the federal land for company registration has been determined, the office that will be listed as the legal address on the application for registration and the statutory documents must be found. For a small fee, Imperial & Legal can provide an address for the incorporation of your company.
You should then come up with a name for your company and our lawyers will check it and assign it to you on the online portal of the German Chamber of Commerce and Industry.
The statutory documents of the future German company must show the following information:
As a rule, at this stage, the founders need to select and approve the head of the future company.
Imperial & Legal will draw up the GmbH Memorandum of Association and help to collect the accompanying documents. When everything is ready, we will contact a German notary and arrange an appointment to sign the incorporation documents.
Once all the founders have signed the constitutional documents in the presence of a German notary, the company is formally considered to be open, although it cannot begin active business activities until it is officially registered in the Commercial Register.
The reliability and efficiency of a notary define how quickly your company in Germany can start operating. Imperial & Legal will take care of all the hassle of finding a notary, organising a meeting, and drawing up powers of attorney for representatives of foreign businessmen who cannot attend in person.
As you know, before the notary applies for the registration of your GmbH in the Commercial Register, you must deposit at least €12,500 into a special account in a German bank. The financial institution sends a document to the company director, which will then have to be handed over to your notary.
Having received confirmation of the deposit of the authorised capital, the notary applies to the German Commercial Register for the registration of your company. This is the final stage of incorporation, which Imperial & Legal’s experienced corporate lawyers have no difficulty in completing.
From the first consultation with our staff until your company is entered in the Commercial Register, it usually takes no more than 8 weeks. The exact time it takes to register a GmbH depends on the region of Germany you have chosen.
The majority of entrepreneurs we worked with stay with Imperial & Legal even after the company has been opened, as many of them will need to register for tax purposes, obtain a commercial licence, open a current account in a European bank and move their employees to Germany.
No matter what task a start-up businessman faces, our staff is ready to help with its solution, providing comprehensive legal support.
The corporate tax system in modern Germany is not simple: the tax burden on business can vary significantly from region to region.
One thing is certain: German companies pay taxes on virtually all of their profits, regardless of whether they originate in their place of incorporation or abroad. Exceptions are made for foreign income falling under the scope of interstate agreements on avoidance of double taxation. Also, interest paid to a German resident company will most likely not be taxed in Germany.
The uniform corporate tax rate for the whole country is 15%.
A tax known as the solidarity surcharge must be added to this percentage. This tax was introduced back in 1989 after the reunification of the country to rebuild the territories of the GDR, but has since become an integral part of German law. The solidarity surcharge is 5.5 per cent, not on corporate profits, but on the initial amount of corporate tax.
Therefore, the total corporate tax rate, including the surcharge, is 15.825%.
Like corporation tax, trade tax comprises a basic rate of 3.5% of profits earned and a council tax, the rate of which varies depending on the location and method of calculating the taxable base.
In sum, the total tax burden on corporate profits in Germany reaches 28-32 per cent.
The price of goods and services sold in Germany generally includes value added tax, the standard rate of which is 19%.
The country has a reduced VAT rate:
Stamp duty or real estate transfer tax is levied in Germany on the purchase of immovable property as well as on the transfer of 90% or more of the shares in companies that own real estate in the country.
The rate of this tax varies considerably depending on the region of the country. While in Bavaria stamp duty is charged at a rate of 3.5 per cent, in Brandenburg it reaches 6.5 per cent of the transaction value.
If you would like to learn more about all the taxes that may be charged in the course of operating a German company, make an appointment for a consultation with Imperial & Legal. Our consultants will tell you which tax optimisation methods will help to reduce the fiscal burden on your business.
There are several public funding instruments that entrepreneurs in Germany can rely on:
1. GRW cash grants
GRW or Gemeinschaftsaufgabe Verbesserung der regional Wirtschaftsstruktur is a special investment programme of the German government aimed at creating new jobs and supporting economic development in the country.
GRW provides grants to German-registered companies in the manufacturing and service sectors to partially offset some of their costs. As a rule, capital investments related to the purchase of new premises, machinery and equipment during the first 3 years of business existence are financed in this way. GRW grants can also be used to cover part of the personnel costs of new job creation during the first 2 years.
2. Grants for research and development
The German government also actively finances modern research and development. According to some estimates, Germany’s expenditures on specially created programmes for these purposes reach 3% of GDP. An example of such a programme is KMU-innovativ, a funding scheme for small and medium-sized businesses focused on high-tech development.
3. Grants for personnel recruitment and training
The German Federal Employment Agency uses many tools to incentivise entrepreneurs who create new jobs. These can be:
The payment of at least half of the minimum founding authorised capital is a financial requirement that must be met before an application can be made to register a company in Germany.
In the case of a German GmbH, this means that the founders deposit €12,500 in a special account in a German bank. The remaining amount is either paid upon incorporation or contributed in other ways permitted by law, such as tangible assets, intellectual property rights, etc.
Finally, part of the share capital of a German limited liability company can be fulfilled by financial obligations of the shareholders. In this case, the business owners undertake to pay an amount corresponding to the value of their share in the company’s share capital when the GmbH declares bankruptcy.
General partnerships and limited liability partnerships registered in Germany do not pay tax on profits earned at the organisation level. Partnerships distribute profits to the partnership members, who in turn declare the income received and pay taxes.
Unfortunately, practice shows that there are no indirect signs with the help of which an aspiring German entrepreneur can determine which notary will register his company quickly, and which one is better to avoid. Even the cost of services is unlikely to tell anything about the specialist himself, as almost all notary offices in Germany have approximately the same rates.
Thus, the only objective evaluation criterion is the experience of working with the notary. Having turned to us for help, a newcomer gets an opportunity to register his company through a reliable specialist with an impeccable business reputation.
How to register a company in Germany. Pros of doing business in this country. Types of German companies. Corporate taxation.
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