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Open a Subsidiary in Germany
Updated on Monday 25th September 2023 Rate this article
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According to the German legislation, foreign investors who want to open a company in Germany can choose from several legal options, depending on the preferences the investors have when referring to taxation and many other aspects. One of the ways in which a company can be set up here is through a subsidiary, which is a company subordinated to the parent company that can also be established in another country. However, the subsidiary has a set of rights and can take various decisions without receiving the approval of the parent company.
Businessmen who are interested to set up a subsidiary in Germany can receive assistance for the incorporation procedure from our team of German company formation representatives.
| Quick Facts | |
|---|---|
| Applicable legislation (home country/foreign country) | The parent company must respect the foreign country's legislation |
| Best used for | The subsidiary can be used for trading, commercial, and industrial activities |
| Minimum share capital (YES/NO) | Yes, depending on the chosen entity, EUR 25,000 (for private limited liability companies), and EUR 50,000 (for public companies). |
| Time frame for the incorporation (approx.) | Approx. 5 weeks |
| Documents to be filed by the parent company | - Articles of Association for the subsidiary; - information about the parent company; - proof of German legal address; - bank account reference; - proof of share capital. |
| Management (Local/Foreign) | The company must have at least one manager resident or non-resident |
| Legal representative required (YES/NO) | Yes, a legal representative must be appointed to act as a liaison with the Trade Register in Germany |
| Local bank account (YES/NO) | Yes, a German subsidiary must have a local bank account |
| Independence from the parent company | The subsidiary company is completely independent |
| Liability of the parent company | The parent company is not liable for any of the subsidiary's debts or other obligations |
| Corporate tax rate | 15% + a 5.5% solidarity surcharge |
| Annual accounts filing requirements | Annual returns must be filed by July 31st of the current year for the past one |
| Possibility of hiring local staff (YES/NO) | Yes, German subsidiaries are allowed to have local staff |
| Travel requirements for incorporating branch/subsidiary (YES/NO) | No, the procedure can be handled by our company formation agents in Germany |
| Double tax treaty access (YES/NO) | Yes, Germany has more than 70 double tax treaties worldwide |
| Legal forms available for registration | A subsidiary can be set up as a private or public limited liability company. |
| Legal status | A subsidiary has the legal status of a German/domestic business. |
| VAT registration upon incorporation required (YES/NO) | No, the subsidiary is not required to register for VAT immediately following company registration. |
| EORI registration requirements (if any) | The subsidiary can apply for an EORI number at any time it starts its operations abroad. |
| Tax registration requirements | Within 4 weeks from incorporation |
| Access to owning German property (YES/NO) | Yes, a German subsidiary can hold property. |
| Special licenses required (YES/NO) | Depending on the activities to undertake, special business permits may be required. |
| German legal address required (YES/NO) | Yes, this is a mandatory condition for setting up a company in Germany. |
| Activities permitted in relation to the parent company | The subsidiary can complete any type of activity in Germany. |
| Restrictions (if any) | There are no restrictions related to launching or operating a subsidiary company. |
| Employee transfer possibility (YES/NO) | Yes, it is possible to transfer employees from the parent company's headquarters to Germany. |
| Requirements to register for employment/social security purposes (YES/NO) | Yes, a subsidiary must register for both upon hiring employees. |
| Corporate tax applicability | Worldwide income |
| Advantages of a German subsidiary | - freedom to complete any activity; - access to tax rebates, deductions, and subsidies; - domestic business treatment; - easy to set up. |
| Incorporation services availability (YES/NO) | Yes, we are at your service if you want to set up a subsidiary company in Germany. |
Steps to open a subsidiary in Germany
Starting a German subsidiary company is the same as for any other domestic enterprise, as foreign businesses must use local legal forms for their activities. The steps to complete in this case are:
- obtaining a German business address;
- when establishing a subsidiary in Germany, choosing the appropriate legal entity type is essential and from this point of view the private and public companies are the most employed;
- getting a company name reserved with the Commercial Register;
- opening a bank account with a local bank is mandatory when setting up a German subsidiary;
- drafting all the essential and required documentation for the German subsidiary;
- registering the company with the Lower Regional Court of Germany in the Commercial Register;
- registering the company with the German tax authorities.
Feel free to address our company formation agents for support in starting a company in Germany, including a subsidiary.
Documents for launching a German subsidiary
The required paperwork and documentation for setting up a subsidiary in Germany are determined by the company's legal structure. The following administrative procedures must always be followed:
- - for the establishment of any commercial or industrial exploitation, a statement of existence must be submitted to the Trade Register;
- - a statement of creation to the financial administration;
- - a declaration for registration to the local statistics office;
- - an application for registration with the local labor office, if workers are hired.
- - a statement to the Social Security authorities and the appropriate professional organization.
It should be mentioned that specific authorizations or business licenses may be needed for some types of operation in Germany (such as transportation, real estate, and security agencies).
The paperwork must be delivered by the notary to the Commercial Register. The new company will be made public on the Trade Register’s. The last step is to register the subsidiary with the local tax office within 4 weeks of its launch and within a month after the articles of association's notarial certification.
The entire registration process may take up to 6 weeks to complete. You can rely on our company formation specialists in Germany in this sense.
We also have an infographic on this subject:
The main characteristics of subsidiaries in Germany
The creation of a subsidiary in Germany implies completing various steps, however, in order to know that the decision to expand a company under this business is the right one, we will present you below some of its main features. These are:
- it will take the form of one of the legal entities acknowledged by the Germany Company Law;
- it will operate as an independent business from the parent company and will have full power of decision over its actions;
- it will be able to complete the same as well as other undertakings than the foreign company’s establishing it;
- it will be allowed to own various assets, such as real estate property in Germany;
- it will be subject to the German corporate taxation system and will be levied on its worldwide income;
- it will be incorporated by following the requirements of the German commercial legislation.
Other aspects to consider when opening a subsidiary in Germany is that will need to have a legal address and a corporate bank account in this country.
If you want to open a company in Germany and need assistance with respect to the formalities that need to be fulfilled, our local agents can help you.
Business forms for setting up a German subsidiary in 2023
The Company Law in Germany is quite complex, and it allows for many business forms to be employed for starting a company. Some of these can be used for the establishment of a subsidiary. Among these, we mention the private and public limited liability companies, but the partnership limited by shares can also take the form of a subsidiary. However, the most employed type of structure remains the private limited liability company thanks to the simpler company incorporation requirements.
The main aspect to consider when choosing the entity under which the subsidiary will operate is the share capital. The following aspects need to be taken into account:
- - the minimum share capital to start a private limited liability company is 25,000 euros;
- - the minimum amount required for a joint stock company is 50,000 euros;
- - the same 50,000 euros are required for the registration of a partnership limited by shares.
In the case of a limited liability company, at least half of the amount must be deposited at the time of company incorporation. Despite the amounts of money mentioned here, it is important to note that the parent company will decide and deposit de share capital based on the activities to be undertaken in Germany.
Our consultants in Germany can advise on the features of each business form available for the creation of subsidiary companies in 2023.
Our agents describe the incorporation of a subsidiary in the following video:
German subsidiaries
Entrepreneurs who want to set up a company here can operate through a subsidiary, which is a type of establishment that allows a more independent management than in the case of the branch office.
Below you can see the main particularities of a subsidiary in Germany.
Below you can see the main particularities of a subsidiary in Germany.
A subsidiary is established under a legal entity provided by the German legislation (usually, the limited liability company is preferred by both local and foreign businessmen) by drafting the statutory documents of the company - the memorandum and the article of association.
A German subsidiary is registered following the procedures established for any other type of legal entity.
This type of business representation must be registered with the German Commercial Register, where the investor should provide the following:
- • the statutory documents of the company;
- • the minimum share capital (set out in accordance with the legal entity chosen by the investor);
- • a declaration of the parent company in which it states the decision to incorporate a subsidiary in Germany.
Our team of German company formation specialists can help businessmen with more details on the above mentioned documents.
The uses of a German subsidiary
The subsidiary is a versatile business form as it can be used for various purposes. In most situations, foreign companies set up subsidiaries in Germany with the purpose of completing various commercial activities tailored to the local market. Compared to the branch office, the subsidiary can complete other additional activities than its parent company’s and can better adjust to German consumers’ requests and tastes.
Then, the subsidiary can be used by a holding company with the purpose of managing its assets and protecting various rights, such as intellectual property rights. From this point of view, the German subsidiary is a valuable asset because of the tax benefits it brings to the parent company.
The subsidiary can also be used as a trading company and complete various import-export activities. For this purpose, the subsidiary will need to obtain its own EORI number in Germany.
Another useful information is that the subsidiary can trade under a different name from the parent company. For this purpose, the parent company will need to reserve a unique name with the Trade Registrar in Germany.
The subsidiary will also apply for its own VAT number with the tax office in the city it is registered in.
Our company formation specialists in Germany can offer detailed information on all the formalities that need to be completed when opening a subsidiary.
Taxation of a German subsidiary in 2023
It is important to know that the foreign subsidiary will fall under the rules and regulations imposed for any other type of company operating on the local market, which means that the company will have to register for the following taxes:
- • corporate tax;
- • trade tax;
- • value-added tax.
Our company formation specialists in Germany can explain how subsidiaries are taxed in 2023.
Incentives for starting a business in Germany
Foreign citizens and companies are invited to open companies in Germany, respectively to expand their activities through branches and subsidiaries and benefit from the incentives offered by the Trade and Investment Agency. Among these, there is the Cash Incentives Scheme under which:
- - small enterprises can obtain subsidies for investing in various projects of maximum 40% of the cost of the project;
- - medium-sized companies can benefit from subsidies of maximum 30% of the eligible costs of a project;
- - large companies can also obtain subsidies of maximum 20% if the investment is made in regions bordering with Poland;
- - for large companies the maximum subsidy reaches 200,000 euros depending on the area of investment.
If you have any questions on the creation of a subsidiary in Germany in 2023, you can direct them to our consultants.
Subsidiary laws in Germany
A subsidiary in Germany must conduct business as a limited liability corporation, as required by national subsidiary legislation. The German subsidiary needs elements that are distinct from those of its parent company, like:
- - its organizational structure;
- - its system of accounting.
To conduct business in Germany, the subsidiary may use the name of its parent company.
Based on the profits reported through the registration documents, the German tax office will determine the corporate and other taxes your subsidiary is required to pay. The deadline to file tax returns in order to claim them is May 31st of the current year for the previous one.
If you need support in complying with the accounting and auditing regulations, you can rely on us for tailored accounting services in Germany.
Here is also a video on the subsidiary opening process:
Setting up a German subsidiary in 2023 - the easiest way of expansion
The creation of a German subisidiary is one of the easiest way of expanding operations as a foreign company in 2023 considering that:
- - it can use the limited liability company which is the most popular business form in Germany,
- - it can complete the same activities, but also other operation than the parent company's,
- - it benefits from various tax incentives, including tax exemptions under Germany's dobule tax treaties;
- - because it can successfully manage operations and business activities and adapt to German requirements, foreign corporations establish a subsidiary in Germany.
- - when there is a German subsidiary, managing assets and defending rights (such intellectual property rights).
- - when a parent company uses a subsidiary company, there are more tax advantages for the parent firm.
By establishing a subsidiary, business operations that involve trading activities like imports and exports can be managed effectively. The parent business, however, is responsible for ensuring that the company receives an EORI number.
If you want to open a subsidiary company in Germany in 2023, our officers will guide you through the entire procedure.
According to a recent increase in investors' confidence, the economy is still predicted to see a modest fall in early 2023 because household heating costs are still rising and because government assistance for January and February will only be paid out in March, according to the Commission. In 2024, growth is anticipated to pick up to 1.3%, according to projections from the Commission.
Businessmen who want to receive further information on the procedure of opening a subsidiary in Germany can address to our team of German company incorporation agents for assistance.
Meet us in Germany
Marco Rössel is a Partner at Liesegang & Partner and an experienced Attorney at Law. He is specialized in commercial and corporate law and can help you open your company in Germany as fast as possible.
Call us now at +49 69 71 67 2 67 0 to set up an appointment with our company formation experts in Germany. Alternatively you can incorporate your company without traveling to Germany.
As our client, you will benefit from the joint expertize of local lawyers and international consultants. Together we will be able to offer you the specialized help you require for your business start-up in Germany.
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