Branch Office in Germany in 2023
Are you intending to set up a branch office in Germany?
Germany has a rich history and cultural heritage, which can provide companies with a unique and memorable setting for their operations, as well as opportunities for cultural exchange and enrichment. As a result, many business owners decide to
incorporate a branch in Germany. But foreign business owners who wants to expand their business in Germany might think about setting up a branch office.
A branch office in Germany is a type of foreign business presence that allows a company to conduct business in Germany without having to establish a separate legal entity. However, it is considered to be an extension of the parent company and is subject to the same legal requirements and regulations as the parent company.
Overall, a branch office in Germany provides a flexible and cost-effective way for companies to establish a business presence in the country while retaining the benefits of the parent company’s legal and financial structure.
In this article, you will learn about the requirements, documentation, and benefits of establishing a branch office in Germany.
How to setup a branch office in Germany?
International entrepreneurs who want to expand their business in Germany may do so by opening a branch office.
Here is a step-by-step process for opening a branch office in Germany:
Register the branch office
You will need to enroll the branch office with the German trade register (Handelsregister). This will give you a company registration number, which is necessary for opening a bank account and obtaining a tax ID.
Obtain essential licenses
Relying on the type of entities you plan to govern, you may require to procure licenses and permits from local authorities.
Open a bank account
Once you have registered your company branch, you will be required to open a bank account in Germany. You will be required to offer your company registration number, tax ID, and proof of address.
Register for taxes
You will need to register for taxes in Germany and obtain a tax ID number. This will authorize you to reimburse taxes on your business income and pay VAT on sales.
Rent office space
You will need a physical office space in Germany, which you can rent or lease. Make sure you select an area that is helpful for your workers and clients.
Documentation Required for Registering a Branch Office in Germany
To register a branch office in Germany, the additional documents and data are generally needed:
- Business registration certificate which proves the existence of the parent company.
- Certificate of Good Standing that proves the parent company is in good standing and has no legal restrictions or problems.
- Power of Attorney authorizes a representative to act on behalf of the parent company in Germany.
- Proof of identity and address of the authorized representative
- A comprehensive explanation of the industry activities that the branch office will be engaged in.
- Company Statutes or Memorandum of Association which outlines the structure and rules of the company.
- Documentation that demonstrates that the parent company has the financial resources to support the branch office in Germany.
- A unique tax identification number is assigned to the branch office by the German tax authorities.
Book end-to-end experts consultation with Odint company formation experts
Eligibility for Registering a Branch Office in Germany
To be eligible to register a branch office in Germany, the following criteria must be met:
- Company Name: The firm name should be unique and not already used by another company in Germany.
- Legal form: The firm should possess a legal entity, such as a limited liability company (GmbH), joint-stock company (AG), or a limited partnership (KG).
- Minimum share capital: Depending on the legal form of the firm, the least share capital needed for a GmbH is 25,000 euros, while for an AG it is 50,000 euros.
- Directors: The firm should possess a minimum of one director who is a resident of the European Union (EU) or the European Economic Area (EEA).
- Registered office: The firm should possess a registered office in Germany, which is the official address of the company, and must be located within the country.
- Business activities: The firm should engage in lawful and economically viable business activities. Some industries, such as financial services, may require additional licenses and permits.
- Incorporation documents: Incorporation documents, such as the articles of association and the certificate of incorporation are required to be given to the relevant German authorities.
- VAT registration: If the firm expected annual turnover exceeds a certain threshold, it may be required to register for value-added tax (VAT) in Germany.
It’s important to note that the exact requirements and procedures for company registration in Germany may vary depending on the type of business, the industry sector, and the specific location in the country.
Various Taxation of the Branch Office in Germany
A branch office in Germany is subject to the same taxes as any other type of company operating in the country.
The following is a list of the most general taxes that may apply to a branch office in Germany:
- Corporate Income Tax (Körperschaftsteuer): This is the leading tax levied on a company’s profits, and the standard corporate income tax rate in Germany is currently 15%.
- Value-Added Tax (VAT) (Umsatzsteuer): This tax is levied on the sale of goods and services in Germany, and the standard VAT rate is 19%. Firms with a turnover exceeding a certain threshold are expected to register for VAT.
- Trade Tax (Gewerbesteuer): This is a local tax that is levied on the profits of companies operating in certain municipalities in Germany. The rate varies by municipality and ranges from 7% to 17%.
- Payroll Tax ( Lohnsteuer): This is a tax levied on the wages and salaries paid to employees, and the rate varies by state.
- Capital Gains Tax (Kapitalertragsteuer): This tax applies to the sale of assets, such as real estate, and the rate varies depending on the type of asset and the length of time it was held.
- Withholding Tax (Abgeltungsteuer): This tax is levied on interest and dividend payments that are made to non-residents of Germany. The withholding tax rate is 25% for interest payments and 15% for dividend payments. However, there are a number of exemptions and reduced rates that apply to certain payments.
Cost to Setup a Branch Office in Germany
The cost of setting up a branch office in Germany depends on various factors, such as the type of business, the size of the branch office, and the location, but it can range from several thousand euros to tens of thousands of euros or more.
Here are some of the key expenditures to consider:
Legal fees: The cost of hiring a German lawyer to assist with the incorporation process, including the preparation of the necessary legal documents and filings.
Accounting fees: The cost of hiring an accountant to handle the branch office’s financial and tax affairs.
Advertising and marketing: The cost of promoting the branch office, including the development of a website, brochures, and business cards.
Business registration fees: The cost of registering the branch office with the German authorities, including the fees for obtaining a business license and a tax ID number.
Why Setup a Branch Office in Germany?
Setting up a branch office in Germany can offer several benefits for companies looking to expand their operations into the country or the wider European market.
Here are a few reasons why companies may select to set up a branch office in Germany:
- Legal Certainty: Germany has a stable and predictable legal system that provides a high degree of certainty for companies operating in the country.
- Innovation and R&D: Germany is known for its strong focus on innovation and research and development, and companies operating in the country have access to a large pool of highly skilled workers and world-class research institutions.
- Favourable Tax Regime: Germany has a favourable tax regime for companies, including low corporate tax rates and a comprehensive system of tax incentives for research and development.
- Strong Exports: Germany has a strong export-oriented economy, and companies operating in the country have access to a large and diverse market for their products and services.
- Government Support: The German government provides a range of support to companies operating in the country, including tax incentives, subsidies, and access to funding and financing programs.
- High-Quality Products and Services: Germany is known for its high-quality products and services, and companies operating in the country can leverage this reputation to enhance their brand and competitiveness.
- Environmental Awareness: Germany is known for its strong commitment to environmental protection, and companies operating in the country are encouraged to adopt sustainable business practices and technologies.
German Market Access: Germany is a large and economically powerful country, with a population of over 83 million people. Setting up a branch office in Germany gives a company access to this large and lucrative market.
Advantages of Registering a Branch Office in Germany
There are several advantages to registering a branch office in Germany, including:
Access to key industries
Germany is home to several key industries, including automotive, machinery, electronics, and chemicals.
Efficient transportation network
Germany has a well-developed transportation network, including an extensive network of roads, railways, and airports.
Favourable business climate
Germany has a favourable business climate, with a stable and predictable economic environment, low levels of corruption, and a well-functioning regulatory framework.
Access to funding and financing
Germany has a well-developed financial system, with a range of funding and financing options available to companies operating in the country.
High Quality of Life
Germany has a high standard of living, with outstanding healthcare, education, and social services, making it an attractive location for companies to attract and retain top talent.
Book end-to-end experts consultation with Odint company formation experts
Setting up a branch office in Germany can provide companies with a range of advantages, including access to a large and dynamic market, a skilled workforce, a favourable business climate, and access to funding and financing.
Germany has a strong legal and regulatory framework that provides stability and protection for companies operating in the country. This can help to minimize the risks and uncertainties involved in doing business in a foreign market.
It is recommended to obtain assistance from skilled professionals from Odint Consultancy to learn how to open a branch office in Germany.
A branch office is a separate unit of a foreign company that operates in Germany and is fully dependent on the parent company. It does not have its own legal identity and is not considered a separate entity under German law.
There is no specific minimum number of employees required to register a branch office in Germany.
The authorized representative for a branch office in Germany must be a natural person who is resident in Germany and has the power to bind the parent company in legal and business dealings.
The time required to register a branch office in Germany can vary, but it typically takes several weeks to complete all the necessary formalities.
The costs involved in registering a branch office in Germany can vary depending on the size and complexity of the business, but they typically include fees for legal and accounting services, trade register fees, and taxes.
- Registration with the local trade register: The branch office must be registered with the local trade register.
- Appointment of a representative: The branch office must appoint a representative who is resident in Germany.
- Obtaining a business license: The branch office may need to obtain a business license from the local authorities.
- Compliance with tax laws: The branch office must comply with all applicable tax laws.