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In Germany, there are tens of thousands of businesses ranging from small old town market kiosks to large corporations. The German government is really open to the establishment of businesses, it doesn’t matter if it involves a German or not.
For instance, if you would like to send parcel to Germany, you may need to create an LTD (private limited company) or become officially self-employed in Germany. Down below there are 5 important things to know before starting a business in Germany.
If you are willing to move to Germany and create a business right off the bat you can start off as a self-employed business owner. You just need to meet certain criteria and you are good to go. First things first you need to be issued a residential permit. Your family also needs to be issued a residence permit in order to do business in Germany.
Second, you need to provide some more details of how you are going to positively impact Germany’s economy. In order to receive a valid residence permit, the local foreigner office will need to check with the local Chamber of Commerce to see whether or not your business is well prepared. It will impact the economy positively.
We strongly advise communicating with the authorities before creating a business by yourself. Get to know tax laws before as well.
Taxes and other obligations
Taxe law is certainly a major concern when starting a new business. It is a big concern in pretty much any country, not only Germany. In Germany tax includes the municipal tax and the value-added tax (VAT). As well as income tax, solidarity surcharge, and church tax of your employees if you have any.
If your business is incorporated you may need to pay Corporate Tax as well.
- The municipal tax is around 18 percent and it depends on business profits.
- The VAT tax varies between two numbers. Either 19 percent or 7 percent – it depends on the item.
- The solidarity surcharge amounting to 5.5 percent for a person’s income tax.
- The church tax is around 8-9 percent, but it is only paid when the business opts to one of the officially affiliated Germany’s established churches.
- If you would like to pay dividends you’ll need to pay 15% income tax.
If you use the service of so-called freelance workers then they are completely relying on themselves and you don’t need to take care of workers’ taxes.
But you are willing to employ full or part-time employees, hiring these employees will place certain obligations on you or your company. You will be obligated to pay taxes for them.
First of all, we highly recommend starting a business in Germany as self-employed before establishing a corporation. Some corporations are even willing to designate an agent which you can become. Advice from business experts is crucial considering a fact that you are only starting off.
An official term for starting a business in Germany is Gesellschaft mit beschränkter Haftung (GmbH) (Limited liability company). This is probably by far the most popular concept form. Under its stakeholders are not personally responsible for the debts of a business.
You also can establish a Kommanditgesellschaft (KG) (Limited partnership) which is similar to LTD but it is more like a partnership. Also provides for a limitation of liability by having two types of partners.
Either general partner who has unlimited liability extended to his personal assets or limited partner whose liability extends his nominal holdings in the firm.
Only one person is enough to establish an LTD in Germany, but there should be a shared capital minimum of 25,000 dollars. Also, the acronym GmbH is an obligation to add up either at the beginning of the company name or at the end of it.
Where to find help
In order to find some help regarding questions such as tax, insurance, company establishment, self-employment should seek expert advice, accounting and tax matter institutions and legal entities.
You can contact The Federal Ministry of Economics and Energy which also has English language booklets.
To sum up
It is relatively easy to start a business in Germany if you already have a residence permit to live there. But have a deeper look into the tax payment system. Then you will decide what form of business you would like to establish, is it LTD or self-employed. As mentioned before, Germany is really passionate about bringing new markets and raising their economy. So you are more than welcome to start a business here.
Also keep in mind that 50 of Forbe’s listings biggest companies are located in Germany, and more precisely in The Mittelstand.
If you would like to learn more about the possibilities in Germany, feel free to visit: EU Parcel service