Doing Business in Germany: 5 Things to Keep in Mind

Germany’s skilled labor force, technological expertise, and highly developed infrastructure make it one of the top investment destinations. In this post, we have listed five key factors that foreign businesses need to consider before beginning operations in Germany.

1.    Setting up a Business

Legal entity setup can be complex and time consuming as companies need to navigate through several procedures including liaising with the local commercial register, the local chamber of industry and commerce, and the professional association of the relevant trade.

2.    Complex Tax Environment

The German tax structure is relatively complex with various taxes such as value added tax (VAT), solidarity surcharges, and trade tax. Businesses may have to spend approximately 207 hours making 9 tax payments in a year and 134 hours dealing with social security contributions. Dealing with corporate tax payments may also be time-consuming.

3.    Unique Intellectual Property Rules

In addition to strict rules and processes related to trademarks, copyrights, patents, and inventions, Germany has some of the most stringent regulations for the transfer of intellectual property rights between employees and employers. The German IP law is unique and complex and employers are advised to seek professional advice in related matters.

4.    Registering Property

The registration of property in Germany can take up to 40 days due to bureaucratic complexities. Businesses are required to obtain an extract from the Land Registry, notarize the transfer agreement before getting the waiver of pre-emption rights, and pay the transfer tax.

5.    Strict Employment Laws

The employee-employer relationship is extensively regulated under the Germany’s labor and employment law. ‘’Employment at will’’ does not exist in Germany and failure to comply with statutory obligations, particularly with the German Termination Protection Act that restricts termination of employment, can put a business at legal risk.