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:
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 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 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
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 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% |
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