doing business in germany, 19 november 2014

26/11/2014

1

Export Opportunities: Think Germanic Europe

Cambridge, Wednesday 19th November

I. Germany – a brief overview

II. 10 Reasons to do Business in Germany

III. Establishing a Business and Company Taxation

IV. What else?

2

26/11/2014

2

• Approx. 82 million inhabitants

• Europe's largest economy and domestic market and

second most populous nation (after Russia)

• Germany is one of the largest exporters

• Germany is also one of the largest importers of

goods in the world (Imports: > GBP 800 billion

(2012))

• German economy was relatively resilient in recent

years >3% growth since 2009.

• Main imported commodities:

• Machinery

• Data processing equipment

• Vehicles

• Chemicals

• Metals

• Electric equipment

• Pharmaceuticals

• Foodstuffs/agricultural products

About Germany

• Germany has strong trading links with the UK

• One of the most important export markets for UK (annual sales >GBP30bn in goods and

services)

• Central location: easy access to the established markets in western Europe and

emerging markets in central and eastern Europe

• Regionalised markets

• Germany is highly regulated (e.g. environmental regulation, legal issues and tax)

• The German market is particularly supportive of SMEs - approximately 99% of all

German companies are SMEs.

• “Germany is like the John Lewis of markets. It's difficult to get in but once you are in you

are very secure.”

About Germany

26/11/2014

3




IV. What else?

5

10 Reasons to do Business in Germany

1. First Class Infrastructure

2. Inviting Incentive

3. Competitive Tax Conditions

4. Secure Investment Framework

5. Quality of Life

6. Leading Economy

7. Global Player

8. High Productivity

9. Excellent Workforce

10. Innovative Power

6

26/11/2014

4

II. First Class Infrastructure

Located at the heart of Europe,

Germany is Europe's number one

logistics market. A sophisticated

energy and communications

infrastructure and first-class

transportation networks ensure

on-time delivery and short roads

to success.

7

II. Inviting Incentive

Germany provides attractive

incentives to all investors. A

comprehensive range of programs

support the broad spectrum of

business activities at all stages of

the investment process. Support

ranges from cash incentives for the

reimbursement of direct

investment costs to incentives for

labour and R&D.

8

26/11/2014

5

II. Competitive Tax Conditions

Germany has significantly reduced

its corporate tax levels. A far-

reaching reform of company

taxation is helping companies

invest, and secure new business.

The Federal Government’s raft of

reforms to improve the general tax

framework and keep indirect

labour costs down are opening

doors of opportunity to ever more

investors.

9

II. Secure Investment Framework

Highly developed economic and

political frameworks provide the

necessary security for your

business investment. Our judiciary

and civil service institutions are

professionally regulated to ensure

consistently excellent service.

Contractual agreements are secure

and intellectual property is strictly

protected.

10

26/11/2014

6

II. Quality of Life

Germany is a modern, tolerant,

and cosmopolitan society with an

excellent standard of living.

Superior health and education

provision, endless opportunities

for sports and recreation in our

beautiful landscape, and a vibrant

cultural scene are just some of the

reasons why more than seven

million foreigners have made their

homes in Germany.

11

II. Leading Economy

Germany is Europe's economic

engine. Investors profit from the

economic performance of the

world's fourth largest economy.

We also offer a large domestic

market and easy access to growing

markets in the enlarged European

Union.

12

26/11/2014

7

II. Global Player

Germany is the world’s number

three exporter, neck and neck with

China and the US after six years at

the top spot. And with EUR 469

billion FDI, we also proved to be an

investment magnet and one of the

top regions for foreign investors.

13

II. High Productivity

One of the highest productivity

rates in the world, German quality,

and steadily decreasing unit labor

costs are the decisive factors for

our competitiveness. A series of

social and market reforms have

further contributed to Germany's

continued economic growth to

make it one of Europe’s most cost-

effective production locations.

14

26/11/2014

8

II. Excellent Workforce

Our world class education system

ensures the highest standards. 81

percent of the German population

have been trained to university

entrance level or possess a

recognized vocational qualification

– above the OECD average of 67

percent. An investor friendly

social-market economy promotes

stable labor relations.

15

II. Innovative Power

Germany is Europe's number 1

location for research. German R&D

is backed by billions of euros in

annual federal funds, helping to

make Germany the world's leader

in innovation. It's this commitment

which also makes us Europe's

leading patent applicant and the

leading global force in high-tech

solutions.

16

26/11/2014

9




IV. What else?

17

III. Business Establishment

For British companies there are different ways to establish a German market presence.

UK Company

18

26/11/2014

10


The German private limited liability company (GmbH) is the most widely used legal

form for corporations in Germany.

GmbH:

• Is suitable for every business object except listing on the stock

exchange.

• Combines high flexibility with relatively few obligations.

• Well-known company form with good reputation not only within

Germany.

• Requires a minimum share capital of EUR 25,000 (cash or kind).

• The liability of the shareholders is limited to their respective

contribution.

19


The GmbH has two mandatory bodies: the managing director(s) and the shareholders’

meeting.

• The managing director(s) (Geschäftsführer) represent(s) and manage(s) the

GmbH.

• The shareholders’ general meeting (Gesellschafterversammlung) is sovereign

and can issue directions binding the management.

• There are no requirements regarding nationality or domicile of the managing

director or the shareholders.

• German business address as well as a local representative are required.

Managing Director (s) Shareholders´meetingBinding Instructions

GmbH

20

26/11/2014

11


The establishment procedure of a GmbH is straightforward with well-defined steps.

Drafting of

articles of

association

(AoA)

Notarization

by a German

Notary

Opening a

bank

account &

payment of

share capital

Entry in

commercial

register

Trade office

notification

• The timeframe for a GmbH establishment is ideally 1-2 weeks.

• The statutory regulated establishment costs for a standard GmbH are around

EUR 800.

21


The UG (Unternehmergesellschaft -haftungsbeschränkt) also known as Mini-GmbH is a

special form and a starter version of the GmbH.

UG (haftungsbeschrängt)

• The UG is largely subject to the same provisions as the GmbH

(establishment procedure, mandatory bodies, limited liability etc.).

Main differences include:

• For the establishment of an UG a minimum share capital of only

EUR 1 is sufficient.

• The UG has to retain a quarter of its annual profit until it has

accumulated the minimum share capital of an ordinary GmbH (EUR

25.000).

• The accumulated EUR 25.000 can be converted into share capital

and the UG can change its corporate affix from “UG” to “GmbH”.

From now on profit can be fully distributed, if desired.

22

26/11/2014

12

III. Company Taxation

Germany does not have a consistent nationwide tax rate for the corporate income

taxation – it depends on the locally varying trade tax.

Average Corporate Tax Burden (2013, in %)

1National German average. Lower overall tax rates in certain areas are possible, e.g. only 22.83% in certain

municipalities.2Top corporate income taxation rate incl. local taxes; lower starting rates or other special tax rates

available. 3Based on standard rate of IRAP.Source: Federal Ministry of Finance (BMF)

23

III. Company Taxation

Income taxation of corporations consists of three taxation components.

Starts at 7 %

15.825 %

15 % of the taxable income0.825 % all over Germany

(5.5% of the corporate income tax rate of 15%)

1. Corporate Income Tax

(Körperschaftssteuer)

2. Solidarity Surcharge

(Solidaritätszuschlag)

3. Trade Tax (Gewerbesteuer)

• Trade tax rates are individually determined by each municipality.

• Trade tax rates range starts with 7.0 % and the average trade tax rate is around 14 % of the

taxable income

24

26/11/2014

13




IV. What else?

25

• High level of English proficiency

• Many companies already use English as their “official internal language”

• High adoption rate of modern (social) media and devices (smartphones, mobile

computing, online retailing etc.)

• Similar cultural values

• Short distances from the UK

• England/Great Britain is very popular in Germany – just don’t mention the war…

• A (work) ethic that is (largely) based on diligence, trust and loyalty

• German business partners (customers, suppliers, employees etc.) will put great

value on reliability

What else?

26/11/2014

14

• You will almost always have to meet the German standard or the approval of a German

regulation

• This is both a barrier and a bonus – once you are ‘approved’, doing business in Germany

becomes a smooth(er) process

• When visiting the market, expect short and productive business meetings, and be

prepared to invest in German speakers or literature

• Germans will let you know relatively quickly if they don’t think your product or service is

of interest or not

• Although this may appear to be rude, it saves time and effort and doesn’t leave false

hope

• They may want to negotiate terms immediately or at east very early on. You need to be

prepared and ready for this eventuality and make the effort to bridge the language

divide.

What else?