Germany offers an attractive market for new business owners, but setting up a company outside your jurisdiction can be daunting. We’re here to make the process easier for our clients. Let’s get your business in Germany started!
As the largest economy in the Eurozone and one of the largest in the world, Germany is a global powerhouse that offers lucrative opportunities to investors and business owners. Some of the most prominent industries in the country are automobiles, chemicals, and electronics. With an outstanding reputation and incredibly high standards, German products and services are lauded in the world market!
A bureaucratic country that follows a specific set of rules, Germany’s comprehensive social security and tax systems can become complicated to deal with on your own. Setting up your business and registering your company in Germany will be easier when you work with experienced professionals who’ll save you from unnecessary steps along the way.
Forms Of Companies In Germany
- GmbH “Gesellschaft mit beschränkter Haftung”—limited liability company
- AG “Aktiengesellschaft”—Joint Stock Company/Public Listed Company (PLC)
- UG “Unternehmergesellschaft”— a type of mini-GmbH, limited liability company
- Einzelunternehmen—sole trader
- OHG “Die Offene Handelsgesellschaft”—Commercial partnership
- GbR “Gesellschaft bürgerlichen Rechts”—Private partnership
- Branch of a foreign company
- KG “Kommanditgesellschaft”—Limited partnership
What are the most incorporated companies?
German limited liability companies—GmbH and UG—are the most incorporated amongst the various types of companies.
The main difference between this 2 forms is the minimum amount of share capital involved. While UG companies have a minimum 1 EUR share capital, GmbH companies have a 25,000 EUR share capital with a minimum of 12,500 EUR that needs to be paid. UG can automatically become GmbH once the share capital has reached 25,000 EUR.
Have any queries about GmbH and UG companies? contact us today and we’ll help you make the right choice!
Fundamentals Of A Limited Liability Company
Corporate Tax in Germany
VAT in Germany
19% standard and 16% (Covid-19 VAT tax rate for 2020.)
Fundamentals of GmbH and UG
|Limited liability company||GmbH and UG|
|Minimum Share capital|
GmbH: 25000 EUR, min to pay 12500 EUR, UG: 1 EUR
|Registered office required||Yes|
|Physical office required||No|
|Min. number of Shareholders||1|
|Min. number of Directors||1|
|Local Director required||No|
|Bank signatory must travel||Yes|
|Timescale for company formation||30 days|
|Timescale for bank account opening||7 days|
|Timescale for obtaining VAT number||7 days|
|Statutory audit requirements||No|
|Shelf companies available||Yes|
How can I set up my company in Germany?
The first step to registering your company is getting approval to set up a bank account. To be able to register your company, you need to obtain the share capital payment certificate from the bank. While this process is underway, we prepare your company documents and inform you on the process as we go.
The timescale of the process will depend on which one of our options you choose (with visit or without, high street bank or online bank). Regardless of your selection, you’ll be required to certify and submit documentation in order to proceed to the next step.
This required documentation will be different for every client, depending on the country of residence, and/or the country of origin of the parent company in case you’re registering a subsidiary.
Every director, shareholder, and member of the company structure will be required to submit the following:
- A copy of their passport (certification will be needed in some cases)
- Proof of address (this can be in the form of a bank statement or original utility bill that isn’t more than 3 months old
How can you register your limited liability company in Germany?
CompyCo has three different options you can choose from. Depending on your priorities you can pick one that suits you best. These priorities may be about how promptly you want to set up or whether you want a remote or high-street bank account.
Each of the three options includes:
What are your options?
- Company registration with a high-street bank. Opening the bank account will require the director of the company to visit Germany for 1 day. This option will cost you only EUR 4950 ex. VAT.
Among all the options, this one has the longest process and can take between 5 to 7 weeks after you provide us the original documents but you will have High Street bank account and its the cheapest.
- Company registration with an online bank account. Everything can be done remotely, and the company director doesn’t need to travel to Germany. The cost for this option will amount to EUR 5650 ex. VAT.
Please note: this option is only available when the shareholders or director are EU residents, it isn’t applicable on residents from other countries.
This option takes 3 to 4 weeks to process after you’ve delivered the original documents to us.
- You can purchase a shelf company. This is the quickest process for setting up your business in Germany and can be done fast if you opt for an online bank account. If you choose a high-street bank account, you’ll have to travel to Germany. This option will cost EUR 7400 ex. VAT. The entire process for this option will last up to 1 week if you chose online bank after we’ve received your original documents.
Each of the above packages includes all the costs (for max 2 individuals shareholders, max 2 directors) in Germany for required mandatory company registration services. That is company registration, Registered office address, tax registration, Notary fees, Commercial Register express fees, drafting documents, help with Bank account opening, setting up meetings if needed, transport from airport to first destination.
Setting Up A Branch Office In Germany
Many foreign investors and business owners choose Germany’s lucrative market as the perfect place to set up a branch of their business. Registering a branch can take up to 2 months to complete.
There’s no need for the payment of share capital when registering a branch office in Germany since the foreign parent company is fully liable for the German branch. Due to this liability, the accountancy of the branch office will be extended to the parent company. As a result, higher costs may be incurred.
To set up a branch office, a Commercial Register and local trade office registration are necessary.
In order to complete the process, a Manager and German Registered office address have to be assigned to the branch office.
Bank Account Opening
Opening a bank account is one of the first steps for setting up your company in Germany. The country has some of the world’s best international banking facilities, and CompyCo is connected with all of them.
CompyCo maintains a strong relationship with high-street and online banks in Germany. Our process is focused on catering to your needs while also offering our expert opinion based on years of experience. That’s why we work with you to determine where you should open your bank account considering the residency of shareholders and company directors, business activity, monthly transactions, and turnover.
Listed above are some of the factors that banks consider when deciding to take you on as a client. Depending on their selection criteria, you can find a bank that suits your business best.
For more information about International banking solutions that CompyCo can assist with, head over here.
Accounting & Taxation
Some of the accounting obligations to take into consideration are:
- Germany operates under a standard VAT rate of 19% and due to COVID-19 reduced rate of 16% for certain goods and services up to the end of 2020th. When it comes to effective corporate tax rate, which includes solidarity surcharge and trade tax is in a range of approx. 30-33%
- Once your company is registered for taxes, you’ll need to submit a monthly report.
- All German tax returns need to be filed by 31st May after the end of the company’s financial year.
- The requirements for tax filing and disclosure may vary depending on the type of company. Small firms should create a balance sheet, while medium-sized firms need a balance sheet, management report, and profit & loss statement.
- Any reports submitted by medium-sized firms need to be audited.
- Non-resident German companies are only taxed on the income derived from their Germany-based ventures.
- Everyone working in Germany has to pay progressive personal taxes depending on their annual income.
How can you employ staff in Germany?
Germany is home to a large pool of highly-qualified, technically-trained individuals. If you’re looking to employ a German resident while your company is in another country, CompyCo can help you out.
We’ll assist you in registering your foreign company in Germany and setting you up as a non-resident employer. This is a common practice for businesses that want to hire talented individuals to work from home. Popularly used for hiring Sales Managers, Web designers, and Digital Marketing Experts, you can avoid some of the major costs associated with local companies.
In some business activities, you won’t be able to hire employees to work from home. For these cases, we’ll take care of arranging your company’s registration and set you up as a local employer.
Whatever the case is, you can rely on CompyCo to make sure you’re set to hire only the best for your company. We’ll arrange HR services for your needs, provide monthly maintenance, and keep you updated on Germany’s changing requirements and regulations.
Want to find out more? Take a look at our HR services page to find out how we can help you!