Registration of a new business in Germany

Starting a business in Germany requires various registration procedures. The same applies for fundamental changes in the entity’s legal structure or the liquidation of the entity or the termination of business activities.

Forms of business activities in Germany

Foreign companies who first enter the German market have a variety of possibilities to conduct their business activities in Germany:

• Direct trade: If a foreign business entity wants to sell their products or services in Germany and does not need an establishment in Germany, has no or limited registration obligation. If their customers are predominately individuals they often use electronical market place (Amazon, eBay etc.). If their customers are other business entities they may use an independent agent.
• Subsidiary: The most common legal form for a subsidiary is a GmbH which is the German equivalent of a Limited Liability Company. In this case the German subsidiary has to fulfil the full range of registration obligations as described below.
• Participation in a partnership: Trading partnerships are for foreign business entities in general not the right form to do business in Germany. However, there are situations where a foreign business entity is forced to become a partner in a German trading partnership (e.g. in a joint venture). In general German partners fulfil registration procedures for their foreign business partners.
• Registered establishment: This is a dependent establishment of a foreign company which is registered in Germany’s commercial register. A registered establishment requires a certain minimum of economical and organisational substance. In general it has to fulfil all below mentioned registration obligations.
• Non-registered permanent establishment: This is a dependent section of a foreign company or business entity which is not registered in the German commercial register. It has to fulfil most of below mentioned registration obligations. For more information see https://scheller-international.com/blog-beitraege/the-unwanted-permanent-establishment-in-germany.html

See about the legal forms of partnerships and corporations in Germany at https://scheller-international.com/blog-beitraege/german-legal-framework-for-businesses.html

Trade and commercial registration

Starting a commercial activity in Germany requires a trade registration with the competent public affairs office. Every commercial or trade activity requires this registration (Gewerbeanmeldung). Freelance professionals, farmers and similar producers (agriculture and forestry) and individuals who manage their own investments do not have to register.

Companies and trading partnerships have to be registered with Germany’s commercial register (Handelsregister). Sole entrepreneurs have to be registered if their business activities require a commercially organised business setup. A dependent establishment (eingetragene Zweigniederlassung) can also be registered if it fulfils certain preconditions. The register splits into two sections. Section A is reserved for sole entrepreneurs, partnerships and registered associations. Their registration numbers always start with “HRA …”. Section B is reserved for corporations and their registration numbers always start with “HRB…”. The formation of a corporation requires the authentication of a public notary. The notary does the register application on behalf of his/her client. In other cases the registration has to be done by the entrepreneur, the managing partner or any other person who is an authorised person. The commercial register is public and therefore a source of information for banks, business partners and other interested parties.

Chamber of Commerce

Every trading person (sole entrepreneurs, trading partnerships, corporations) is an obligatory member of its local chamber of commerce with the exception of freelance professionals, farmer and craftsmen. Craftsmen such as carpenters, plumbers, etc. must be members of the local Chamber of Craftsmen. There are about 80 different Chambers of Commerce in Germany.

Tax registration

New business entities have to register with their local tax office. If the trade and commercial registration has be done, the register authorities will inform the competent tax office accordingly. The entrepreneur or company will get a detailed questionnaire form by the tax office asking for basic tax relevant information.

Foreign business entities who establish a permanent establishment in Germany have to inform the local tax office within reasonable time. Missing this obligation may be seen as misconduct of law which may result in penalties.

Foreign business entities can be liable to German Value Added Tax (VAT) even if they are not tax resident and have no permanent establishment in Germany. Examples:

• Foreign companies who carry out distance selling in Germany (see also http://zoll-recht-steuern.de/2015/08/vat-rules-of-distance-selling-in-germany/).
• A foreign company carries on services in connection with German real estate (such as building firms, architects etc.).
• Business entities from non-EU member states importing goods into Germany and are debtor of the import-VAT (see also https://scheller-international.com/blog-beitraege/why-is-ddp-not-suitable-for-imports-to-germany.html).
• Other special services

In cases like this the registration has not to be done at the local tax office. For every major country a special tax office is responsible. The list of responsible tax office can be seen here https://www.hk24.de/produktmarken/beratung-service/recht_und_steuern/steuerrecht/umsatzsteuer_mehrwertsteuer/umsatzsteuer_mehrwertsteuer_international/registrierung-vertretung/finanzaemter-ausland-unternehmen/1167660

If a foreign entity wants to import excise goods to Germany it has to register for excise tax purposes and fulfil all relevant tax obligations. Excise tax are due for the following types of goods:

• Energy products and electricity
• Alcoholic beverages
• Tabaco
• Coffee

Social security registration

Foreign companies employing staff in Germany have to register for social security purposes. Of no significance is whether the employer is resident or has a permanent establishment in Germany.

Glossary

Author: Peter Scheller, Steuerberater, Master of International Taxation, Fachberater für Zölle und Verbrauchsteuern

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