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Germany – Turkey

WHAT KIND OF COMPANY FOR YOUR BUSINESS IN GERMANY?

Foreign investors who wishes to start a business in Germany may establish German operations as partnerships ,companies or branches of the parent entity. It is also possible to establish an inofficial presence through a liaison or contact office or, for that matter, by merely employing an individual to live and work in Germany as a direct employee of the main company.

When you set up a business, you have to choose what kind of company to set up. There are several considerations to take into account:

  • Initial share-capital, the number of shareholders,
  • Whether there are any partners,
  • The responsibilities of the management,
  • The tax regime for the management, etc.
  • Level of limitation of liability

Entrepreneurs can choose between a variety of legal forms for conducting business in Germany. There is no specific investment legislation in Germany, nor is a minimum percentage of German shareholdings required for foreign entrepreneurs.

FORMS OF CORPORATION IN GERMANY

Legal Establishment Forms
Legal/Establishment Form Minimum Number of Partners Minimum Share Capital Legal Liability
Limited Liability Company Gesellschaft mit beschränkter Haftung (GmbH) One partner EUR 25.000 Liability limited to share capital
Limited Liability Entrepreneurial Company Unternehmergesellschaft (Mini GmbH - UG) One partner EUR 1,00 Liability limited to share capital
Joint Stock Company Aktiengesellschaft (AG) One partner EUR 50.000 Liability limited to share capital
Partnership Limited by Share Kommanditgesellschaft auf Aktien (KGaA) Two partners: general partner and limited shareholder EUR 50.000 General partner: personal unlimited liability Limited shareholder: limited share liability

FORMS OF PARTNERSHIP

The main feature of a partnership is the personal commitment of the partners to their working efforts to the partnership. In contrast to corporations, partnerships are not independent legal entities but associations of people. In partnerships, the individual partners responsible for the liabilities of the company (including private assets) act for the company. Limitations of liability for individual partners are only possible to a limited extent.

Legal Establishment Forms
Legal/Establishment Form Minimum Number of Partners Minimum Share Capital Legal Liability
Civil Law Partnership Gesellschaft bürgerlichen Rechts (GbR) Two partners Not required Personal unlimited liability
General Commercial Partnership Offene Handelsgesellschaft (oHG) Two partners Not required Personal unlimited liability
Limited Partnership Kommanditgesellschaft (KG) Two partners: general partner and limited partner Not required General partner: personal unlimited liability Limited partner: limited share liability
Limited Partnership with a Limited Liability Company as a General Partner GmbH & Co. KG Two partners: general partner (GmbH) and limited partner (the general partner is typically the limited partner of the KG) Not required General partner (GmbH): personal unlimited liability Limited partner: limited share liability

Value Added Tax – VAT

The VAT tax rate in Germany is most likely 19% with reduced rate of 7 percent applies to daily items like certain consumer goods and everyday services (such as food, newspapers, local public transport, and hotel stays).

Corporate Income Tax in Germany

The aggregate German corporate tax rate is around 29.58%. it is calculated on the basis of the official corporate income tax rate being 15%, the solidarity surcharge being 0.825% (5.5% of the corporate income tax), and the local trade tax, which varies between 7% and 17.15%

Current Tax rates are:

Tax Rates
Tax Type Rate
Corporation Tax 15%
Solidarity Surcharge 5.5%
Municipal Trade Tax 7% – 17.5%
Withholding Tax (dividends) 25%
Withholding Tax (interest) Up to 25%
Sales Tax/VAT 19%