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Characteristics

GENERAL
Type of entity
Joint-Stock Company
(Aktiengesellschaft – AG)
Limited-Liability Company
(Gesellschaft mit beschränkter Haftung – GmbH)
Type of law
Continental law
Our time to establish a new company
1-3 days
Migration of Domicile permitted
Yes
Corporate taxation
30%
Double taxation treaty access
More than 70 countries
SHARE CAPITAL OR EQUIVALENT
Standard currency
EUR
Permitted currencies
Any
Minimum paid up
50 000 EUR for AG
25 000 EUR for GmbH
DIRECTORS OR MANAGERS
Minimum number
Board of Directors for AG
1 director for GmbH
Local required
No
Corporate directors permitted
Yes
Publicly accessible records
Yes
Location of meetings
Anywhere
SHAREHOLDERS OR MEMBERS
Minimum number
1 shareholder
Publicly accessible records
No
Location of meetings
Anywhere
COMPANY SECRETARY
Required
No
Local or qualified
No
ACCOUNTS
Requirement to prepare
Yes
Audit requirements
Yes, for medium and large companies
Requirement to file accounts
Yes
Publicly accessible accounts
No
OTHERS
Language
German
Controlled foreign companies,
transfer pricing
Yes
Thin capitalization, exchange control
No
Change in domicile permitted
Yes

INTEREST OF THE JURISDICTION

Advantages of a company in Germany

  • One of the most powerful economies in Europe;
  • Prestigious jurisdiction and high reputation of German enterprises;
  • Stable political and economic situation;
  • Large consumer market.

Possible disadvantages of a company in Germany

  • High corporate income tax rate;
  • High requirements to the size of the authorized capital.

Main info

Germany, or, officially, the Federal Republic of Germany, is a highly developed state in Central Europe. Germany is one of the founding countries and an important member of the EU, a member of NATO. Germany plays an important role in the international political and economic arena and is among the world’s top ten leaders.

Germany borders on Denmark, Austria, the Czech Republic, Poland, Switzerland, France, Luxembourg, Belgium and the Netherlands, and is washed by the North and Baltic Sea.



Germany has an area of just under 350,000 km², and its population is about 82 million people. The capital of Germany is Berlin.

Germany is a federal parliamentary republic, the head of state is the federal president, he performs representative functions. Legislative power belongs to the parliament and the body of representation of the lands. At the regional level, legislative activities are carried out by the parliaments of the lands. The executive branch is represented by the federal government headed by the Chancellor.

The political system of Germany consists of two levels – the federal one, at which decisions of national importance are taken, and the regional one, on which the issues of federal lands are resolved.

The judicial system is represented by several jurisdictions: general, labor, social, financial and administrative, each of which has its own judicial system. Thus, for example, courts of general jurisdiction consist of the Supreme Court, the highest courts of land, land courts.

Also in Germany is the Federal Constitutional Court, its decisions are binding on all other courts.

Types of companies and incorporation procedure

There are a number of different forms of corporation. But the most important forms of business organizations in Germany are Joint-Stock Company (Aktiengesellschaft – AG) and Limited-Liability Company (Gesellschaft mit beschränkter Haftung – GmbH).

01. Limited Liability Company

GmbH is the most common form of doing business, as the process of its creation and management is simpler than AG.

The minimum share capital of the GmbH is 25,000 EUR, the minimum number of shareholders is 1 person. To manage the GmbH, 1 manager or director is sufficient, and the supervisory board is appointed only if the number of employees exceeds 500 people.

Shares of GmbH may not be publicly traded on a stock exchange.

Every enterprise that conducts business or business in Germany must register in the local registry (commercial register) for the city of its place or its main place of business.

02. Joint-Stock Company

In order to form a Joint-Stock Company the constituent documents or association must be officially certified by a notary. The minimum subscription capital is 50,000 EUR, it is divided into shares with a minimum nominal value of at least 1 EUR. To create an AG, at least one shareholder is required. Participants can be individuals or companies. The member’s liability is limited to his contribution to the share capital, signed by that member.

Shares of AG may be publicly traded on a stock exchange.

Directors of AG:

  • Directors meet as a board (Vorstand) and take decisions collectively;
  • Must appoint a labor director if employees exceed 2,000;
  • Must appoint a supervisory board.

03. Partnerships

Since 2004, the European Union can form Societas Europaea (SE). SE is created in one of EU Member States and operates in accordance with a single set of rules in other Member States through branches. The minimum capital of SE is 120,000 EUR.

With a few exceptions, each business is required to maintain accounting records and prepare financial statements (balances and income statements). Books should clearly show all commercial transactions and financial position in accordance with generally accepted accounting principles.

Small companies are not subject to an audit requirement. Medium-size and large companies must have their financial statements audited.

Taxation

  • German resident corporations are subject to corporate income tax on their world income. Agreements for the avoidance of double taxation may limit these taxation rules. A company that is not a non-resident is taxed only for its income from a source in Germany. Residents for tax purposes are companies that have a registration or a place of general management in Germany.

  • Taxable income is based on net profit or loss received for accounting purposes and adjusted in accordance with tax requirements. Capital gains are usually treated as income that is subject to normal taxation. The exception is the capital gains earned by GmbH from the sale of shares or from the distribution of profits from other GmbH, in which the company that distributes profits owns no less than 10% of the shares that are 95% tax exempt. The remaining 5% are subject to corporate income tax.

  • The withholding tax of income for dividends and interest is 25%, for royalties – 15% (for non-residents). However, dividends, interest and royalties received by non-resident companies may be exempt from income tax in accordance with the relevant double taxation agreement or the Parent Subsidiary Directive if certain stringent conditions are met.

    Corporate taxation in Germany consists of a corporate tax (15%) and a solidarity surcharge (5.5%). A trade tax is also paid, the rate of which varies in different lands. Thus, the cumulative tax burden is slightly less than 30%.

  • The standard VAT rate in Germany is 19%, and a reduced rate of 7% may apply to certain types of goods and services.

Banking system and economy overview

The economy of Germany is the largest economy in Europe, characterized by a well-developed infrastructure and highly skilled labor and is based on social and market principles. The leading sectors of the German economy are the services sector, industry (automotive, electrical, chemical and pharmaceutical industries). An important role is played by agriculture and tourism. Another feature of the German economy is its export orientation. The state is interested in an open market and over the past decade significant expansion of its presence in the world market has been achieved.

The German banking system is one of the most stable and organized systems in the world. The German banking system has two main levels: at the first level is the European Central Bank and the German Federal Bank (Bundesbank) with their banks of federal states, the second – credit and financial organizations. The Bundesbank is the central bank of Germany. He carries out a unified monetary policy in the country, maintains the stability of the currency, regulates money circulation and credit. More than two thousand banks work in Germany.

HOW TO
PROCEED

To incorporate or purchase a company the following documentation should be provided:

01

A completed application form signed by the company or by the representative

03

A personal bill, which is less than 3 months old from the date of the application

02

Copy of valid passport

04

Payment of our fees

Note: additional documents may be required depending on the certain offshore bank.

Set-up time: From the moment, we are in possession of all required documents:

3 days

Incorporation of
a company or purchase
of an existing company

15 days

Delivery of the original
company documents

3 weeks

Offshore Bank: offshore
bank account opening