Germany is one of the most attractive markets for foreign investors in the world. With a high-income population of over 80 million people, it is the largest and wealthiest economy in Europe. Germany is a core member of the EU’s Single Market and Customs Union, which makes it great base for expanding into the European market. With its central position it offers good access to both the west and east of Europe, in particular the developing economies of the CEE.
Legal structure: It is possible for foreign owners to wholly-own businesses in Germany but take care – the World Bank ranks Germany only 114th in terms of ease of setting up business. It is more common to set up employees in Germany without creating a full legal entity, which reduces costs considerably. So when you are considering how to set up your business in Germany, we can advise on the most appropriate and cost-effective legal structure for you. It is also common for US companies to set up limited liability companies. Note that even foreign directors of legal entities need to be disclosed on a company’s headed business paper.
Payroll: Germany has a highly complex tax and social security system due to its developed welfare state. It also has complex regulations around the provision of healthcare and pensions which foreign employers can find onerous and confusing. Ensure that your payroll operator has a fully competent German operation which can readily communicate with you in English. Also check that you can comply easily with any HR administration to avoid tying your staff up in unproductive bureaucracy.
Relocating U.S. staff: If you use your U.S. staff to get your business set up in Germany, make sure you get them the right immigration papers so they can legally work in Germany. German citizens can work anywhere else in the EU and vice versa. We can help with immigration and expat planning services to keep your costs down and avoid you paying taxes twice.
Taxes and Accounting: Businesses in Germany are often required to file VAT on a monthly basis as well as annual financials and tax returns. The rules on tax compliance are particularly strict in Germany as all German entity bookkeeping must be available locally for the tax authorities to inspect in German language.
What to watch:
- Due to the complex taxes, payroll reporting from your German operations can be difficult to use. Make sure your payroll provider can provide easy to use reports which are consistent with your other international operations.