Company formation in Germany

Before deciding to set up a new company in Germany, read the information below to understand the characteristics of a Limited Liability Company (LLC) / Gesellschaft mit beschränkter Haftung (GmbH):

Shareholders: the company must have a minimum 1 shareholder, who can be an individual or legal entity. The nationality and residence of the shareholder(s) are irrelevant.

Director: the company is required to have at least 1 managing director, who can be a natural person or a legal entity. The nationality and residence of the director(s) are irrelevant.

Company secretary: no requirement.

Minimum share capital: minimum amount of the share capital is €25,000. The share capital can also be contributed in kind. The contribution in kind must be stipulated in the articles of association, a valuation report is needed, and the asset must be contributed in full.

Legal address: a GmbH is required to have its registered office in Germany, where it can receive official correspondence.

Liability: the liability of shareholders is limited to their capital contributions, protecting them from personal liability beyond their investment.

Accounting: a GmbH is required to maintain proper accounting records and prepare annual financial statements in accordance with German accounting standards.

• Companies based in Germany or with an executive board in Germany must pay CIT on globally generated income.
• The standard rate is 15%.
• In addition, a solidarity surcharge is added on top of the CIT. This is a fixed and flat nationwide component of company taxation and set at a rate of 5.5% of the 15% CIT (not the income); creating a total of around 0.8% of taxable income. So, the CIT and solidarity surcharge amount to a total taxable rate of around 15.8%.
• According to German commercial law, the annual profit of a corporate company is calculated on an accrual basis. It is reported in the annual financial report and serves as the basis for determining taxable profit.

• All resident individuals are taxed on their worldwide income. Non-resident individuals are only taxed on German source income.
• The PIT rates ingle persons are as follows:
• €0 - €11,604 - 0%
• €11,605 - €66,760 - 14% to 42%
• €66,761 - €277,825 - 42%
• €277,826 and above - 45%
• The most convenient way to complete tax forms is online through the BZSt’s Mein ELSTER portal.

• The standard rate is 19%.
• The reduced rates are 7% (food, newspapers, local public transport, and hotel stays) and 0% (bank and health services or community work).
• Companies submit periodic VAT reports online to the tax authorities on a monthly or quarterly basis using Germany’s ELSTER online tax office system.
• An annual VAT return must be submitted.

Double taxation avoidance agreements in Germany: Albania, Algeria, Argentina, Armenia, Australia, Austria, Azerbaijan, Bangladesh, Belarus, Belgium, Bolivia, Bosnia and Herzegovina, Bulgaria, Canada, China, Costa Rica, Cote d'lvoire, Croatia, Cyprus, Czech Republic, Denmark, Ecuador, Egypt, Estonia, Finland, France, Georgia, Ghana, Greece, Hungary, Iceland, India, Indonesia, Iran, Ireland, Israel, Italy, Jamaica, Japan, Jersey, Kazakhstan, Kenya, Kosovo, Kuwait, Kyrgyzstan, Latvia, Liberia, Liechtenstein, Lithuania, Luxembourg, Macedonia, Malaysia, Malta, Mauritius, Mexico, Moldova, Mongolia, Montenegro, Morocco, Namibia, Netherlands, New Zealand, Norway, Pakistan, Philippines, Poland, Portugal, Romania, Russia (the DTA has partially been suspended), Serbia, Singapore, Slovak Republic, Slovenia, South Africa, South Korea, Spain, Sri Lanka, Sweden, Switzerland, Syria, Taiwan, Tajikistan, Thailand, Trinidad and Tobago, Tunisia, Turkey, Turkmenistan, Ukraine, United Kingdom, United States, Uruguay, Uzbekistan, Venezuela, Vietnam, Zambia, Zimbabwe.