REGISTRATION OF A BUSINESS (FIRM) IN GERMANY

What you need to know about “Business Immigration” to Germany.

There are several ways to immigrate to Germany, among which a special place has “Business Immigration”. Since 2012, this has been made possible by changes in German law. Popular names today: “Business Relocation” or “Business Immigration” are actually a simple registration of a Limited Liability Company or a Private Individual abroad. It is important to understand why, among other EU countries, Germany is the best place to start a profitable business.

Benefits of registering a business in Germany?

• Doing business in the world’s leading country: without corruption and raiding.
• Geographical location of the country. Germany shares borders with 9 European countries (Denmark, the Netherlands, Belgium, Luxembourg, France, Switzerland, Austria, the Czech Republic and Poland).
• State subsidies and grants for the development of underdeveloped regions.
• Long-term loans.
• Opportunity to open affiliates outside Germany.
• High living standard of the population, which affects its payment ability.

Same as in Ukraine, business in Germany can be opened by a Private Entrepreneur (Einzelunternehmen), an analogue of the Ukrainian Private Individual, and a legal entity. The most popular organizational and legal form of Germany in 2022 – Gesellschaft mit beschränkter Haftung – Limited Liability Company (LLC). The vast majority of companies in Germany are small and have up to 10 employees.

Germany is one of the G7 countries, which contributes to the development of international relations. According to the ranking of the best countries in 2021 by the magazine “U.S. News »Germany ranks 3rd with a score of 9.8 out of 10 points. The results were summarized in ten subcategories with different weights and include the areas of politics, economics and culture.

Starting from August 1, 2012, the procedure for starting a business in Germany has become much simpler: limits on jobs and the amount of investment have disappeared. Also in Germany, you can open a Limited Liability Company (UG) with a minimum share capital of 1 euro. Taxes for business in Germany depend on the size of the business and its turnover. Conditional benchmark: corporate tax – 15%, capital gains tax (dividends) – 25%; VAT – 19%.

CONCLUSION. Registering a business in Germany gives you the following benefits

• Doing business in the G7 country, which opens the market for cooperation not only with the countries of the European Union, but also with the whole world.
• Opportunity to open a business with a share capital of 1 euro.
• Government grants and subsidies.
• Protection of business (bank deposits, real estate).
• High level of solvency of the population.

OPENING A BANK ACCOUNT IN GERMANY AND TAX ADVICE

Documents submitted for opening an account by an individual:

• Identity document (passport);
• Individual tax number;
• Visa or residence permit;
• Document from the place of work or employment permit.

For legal entities:

• Documents certifying the identity of the founders and managers of the legal entity;
• Article of assosiation;
• Extract from the Trade Register, if the company is registered;
• A document confirming the authority of the applicant.

Business taxes in Germany

• VAT (Umsatzsteuer) is charged for the sale of goods, performance of works, provision of services based on their value. VAT is indirect tax because it is ultimately paid by consumers. Types of rates:
• total – 19%;
• reduced – 7% (for certain types of goods/services, for example, passenger transportation, food products, etc.);
• 0 % – on export operations.
• Corporate tax (Körperschaftssteuer) – 15% of the annual profit and additionally a solidarity surcharge of 5.5% of the calculated amount. The solidarity surcharge is a special levy introduced in 1995 to finance German reunification. The size of the solidarity allowance is 5.5% of the 15% corporate tax, i.e. 0.83% of the annual profit. The total cost of the corporate tax and solidarity surcharge is 15.83%. The tax period is 1 calendar year.
• Industrial tax (Gewerbesteuer). The sales tax rate depends on two components:
• tax index (statewide in the amount of 3.5%)
• the sales tax rate (depends on the location, cannot be less than 200% of the tax index).

The company’s taxable profit is multiplied by the tax base (3.5%). This tax amount is then multiplied by the applicable municipal sales tax rate to produce the sales tax amount. The minimum rate of Industrial tax is 7%. There is no upper limit, but the average sales tax rate is 14-18%.

Capital gains tax (Kapitalertragsteuer). Interest, dividends from deposits and profit from the sale of securities are subject to capital gains tax. Capital gains tax is withheld directly when capital gains are credited to the source – usually a bank – and remitted to the tax authorities. The tax rate is 25% and an additional solidarity surcharge of 5.5%.

Basic taxes for individuals

• Income tax (Einkommenssteuer). This tax is paid by both self-employed persons and employees. Taxable income from:
• freelance;
• hired labor. Taxation of income from work under an employment contract is a special form of income tax, which is called Lohnsteuer and is withheld by the employer;
• activities of individual entrepreneurs;
• agriculture and forestry;
• fixed assets;
• rent and leasing;
• other incomes defined by the Income Tax Law, in particular, pensions.

The tax rate depends on

• amount of income;
• the class to which the person belongs.

Depending on the amount of income, the Einkommenssteuer tax rate ranges from 14 to 45%. If the annual income does not exceed the tax-free minimum income of citizens (about 11,000 euros for the year 2022) Einkommenssteuer is not paid. A maximum rate of 45% applies to individuals whose annual income exceeds EUR 270,000.

Representation in the tax authorities in Germany by Prykhodko and Partners law firm includes consulting, preparation of all necessary documentation, relations with German and EU tax authorities on Umsatzsteuer, Körperschaftssteuer, Gewersteuer, Kapitalertragsteuer, etc.

Migration lawyer in Germany – JK “Prykhodko and Partners” Your reliable partner.