Setting up a Company
The most common corporate structure in Germany is the GmbH (limited liability company). The procedure for setting up as a GmbH is less lumbered with regulations than it is with many other countries, principally those operating under the scope of common law jurisdictions. The drafting of the corporate charter can be framed in relatively simple general language, without any need for lengthy purpose clauses defining all possible corporate activities. There are no nationality requirements for shareholders or company heads and no compulsory boards.
The minimum capital of a GmbH is 25.000,00 EURO. A quarter of the nominal capital but at least 12.500,00 EUR has to be paid in at the time when the company is founded and before the application for the entry in the commercial registry is filed. If the GmbH has only one partner who shall also act as director he will have to provide a security for the outstanding residual amount.
In November 2008 a new sort of baby-sized GmbH was introduced. It is called Unternehmergesellschaft (haftungsbeschränkt) or UG (haftungsbeschränkt) and may operate at the start with a share capital between 1,00 and 24.999 EURO. However, the partners of such business company with limited liability are obliged to invest one quarter of the future annual profits of the company in into its capital reserves until the statutory minimum share capital of 25.000 EURO is reached.
In principal, the company agreement is subject to a notarial recording. The notary manages for the partners also the application for the registration of the company in the Commercial Register. However, the a notarial recording if the partners choose a standard set of clauses provided by law for their articles of association. This set stipulates only the minimum which is necessary for the company´s entry in the registry.
GmbHs have to maintain an adequate and orderly accounting in the shape of a double entry book keeping irrespective of their size. They will also have to produce annual statements consisting at least of a balance sheet, the explanatory notes to the accounts and a profit-and-loss report within three months as of the beginning of a new accounting year. For small GmbHs this period is extended to six months. The annual statements have to be published by furnishing them to the Commercial Register.
Taxation of the GmbH
The German government offers a variety of tax advantages as well as funding supports to starting businesses.
The GmbH is liable to corporate income tax including the solidarity surcharge and to business income tax. The corporation tax rate has been reduced from 25 % at present to 15 % in order to realize the main policy of the government reducing the tax burden for corporations to 30 % and less.
If profits of the company are paid out to the shareholders such payments are liable to capital gains taxes which however can be set off against the final income tax debt of the shareholder generated by this source. As of 01.01.2009 the half-income taxation system will be replaced by a final withholding tax system. Under the present half-income system, an individual shareholder is entitled to a dividends-received exclusion from taxable income in an amount of 50% of the gross amount paid. Foreign shareholders/ partners have to observe the taxation rules as stipulated in the double taxation agreements between Germany and their respective home country. As of 2009, the withholding tax rate will be 25 % plus solidarity surcharge.
If the GmbH incurs losses from its operations its partners cannot set off such losses with their income resulting from other sources. As a self-contained legal entity the GmbH's taxation is independent of the taxation of its partners. Although the losses are locked in the GmbH it is possible to carry such losses further or backwards which may reduce the tax burden of the GmbH in earlier or later tax assessment periods.
Labour Relations
A foreign employer will have to observe that labour contracts had better concluded in writing. This also applies to notices of termination of a work contract. Employees benefit from several rights which cannot be deviated from by mutual agreement to their disadvantage, e.g. in regard to the vacation which are stipulated in the Federal Vacation Act.
Employers are required to pay half of their workers' health, unemployment, pension and old-age care insurance. They also have to pay for the statutory accident insurance. Moreover, they are responsible that the employers' and the employees' shares of the insurance contributions are paid to the Employers` Liability Insurance Association and health insurance fund in charge for the collections.
Report to Public Authorities
The start of a business must be reported to the local office of trade and industry. It will inform the tax office immediately and they will send a questionnaire to the owner of the business in order to acquire data which are necessary for taxation purposes. The questions refer from general information such as the type of business, its address, banking data and so on to data which are particularly important for the taxation, e.g. if the business is liable to VAT due to its size or whether the tax office will have to assess advance payments on the income, corporation and business taxes. If cross border business is planned the business owner can apply for a trade ID. The questionnaire has to be filled in and sent back to the tax office within a month.
Further Information for Founders of New Businesses and Foreign Investors
The German Ministry of Economy and Technology offers an English language online service for foreigners wishing to start a business in Germany. This step-by-step portal lists start-up procedures, business planning strategies and management techniques to ensure the company is successful. State aid can also be applied for, although previous employment in the country is required for at least a year to be eligible for assistance in general.
Foreign nationals seeking to start-up a business the German Federal Ministry of Economy provides a website in English, French, Turkish and Russian with further information (URL: existenzgruender.de)
For foreign investors the "Invest in Germany GmbH" - a government agency - provides among others a thorough investment guide and comprehensive information about the German industries (URL: gtai.com)
Henning M. Haarhaus
Certified German Attorney-at-Law
Certified Tax Specialist Lawyer
Schloßstr. 29, 12163 Berlin
http://www.kanzlei-haarhaus.de/english/Overview-english.htm
No comments:
Post a Comment