SPECIFICS OF DOING BUSINESS IN GERMANY
Investing in German enterprises, and starting a business here is fairly profitable. Germany is the leading economy in Europe and one of the largest worldwide, it excels in various industries, particularly manufacturing. Advanced and highly developed industrial technologies are actively implemented here, alongside the development of environmentally friendly energy and innovative technologies. However, prior to registering a company in Germany, it is advisable to get acquainted with the specifics of doing business in this country.
As a federal state, Germany’s budget is divided into three levels: the federal budget, the budget of the states, and the budget of the communities. The tax system here operates on the principle of multiple taxation (there are more than 40 types of taxes here). These taxes are categorized as federal, regional, and local. So, depending on the type of business and annual turnover, it may be required to pay sales tax (Gewerbesteuer), corporate tax (Körperschaftsteuer), income tax (Einkommensteuer), VAT (Umsatzsteuer), payroll tax (Lohsteuer — if you have employees), church tax (Kirchensteuer) and many others. All of them are calculated individually according to the base rate. However, certain types of income may be exempt from corporate tax.
Numerous commercial activities in Germany are subject to licensing, and their regulation is pretty strict. Investment activity, construction, gambling, cross-border trade, hotel business, and transport enterprises among others require a licence. The process of obtaining these permits is notably intricate and varies significantly. Applicants are required to submit a lot of documents, which must be translated into German and officially certified.
According to the German legislation, all legal entities are obligated to annually publish their accounting and balance sheet data. Since 2006, these data have been transmitted electronically. The extent of published information varies depending on the company’s size, as prescribed by law. For instance, companies that trade securities on a regulated market are required to submit reports in compliance with the International Financial Reporting Standards (IFRS), while others can utilize national standards that align with the National Accounting Principles. Additionally, companies must disclose their reports through the Register (Handelsregister) and the Federal Gazette (Bundesanzeiger).