Germany is the world’s third largest and Europe’s largest economy. It is also the world’s third-largest export nation due to exports of vehicle parts, motor vehicles, and chemical products. The nation’s business culture emphasizes professionalism, precision, and punctuality. Major growth sectors include automotive, manufacturing, IT, and renewable energy. The country consistently ranks among the top destinations for foreign direct investment, supported by its stable political environment and innovative business ecosystem.
Unlock growth opportunities in Germany with Cerity Global as your trusted partner. We offer end-to-end support for establishing your legal entity, navigating Germany’s often complex regulatory landscape with clarity and efficiency.
From company registration to ongoing back-office support, including HR, payroll, benefits, accounting, tax and compliance, Cerity Global simplifies the process so you can focus on growing your business.
Need to hire quickly before your entity is set up? We offer interim EOR services in Germany, enabling you to onboard talent fast. Once your entity is established, we ensure a smooth transition of your employees from the EOR Structure to your own legal entity, without disrupting payroll or compliance.
Our experts stay ahead of regulatory changes to keep your operations aligned with Germany’s employment and tax laws, helping you scale confidently and compliantly.
The Gesellschaft mit beschränkter Haftung (GmbH) is the most common legal entity for foreign companies establishing a presence in Germany. It offers limited liability protection and is well suited for small to medium-sized businesses.
The Unternehmergesellschaft (UG) is a simplified, low-capital version of the GmbH — often referred to as a “mini-GmbH.” It is subject to the same legal framework as the GmbH but requires only €1 in minimum share capital, making it a popular choice for startups and smaller operations.
Both GmbH and UG:
Also known as a stock corporation, it is typically used for larger enterprises and public companies. It requires a minimum share capital of €50,000.
Also known as a branch, it is an extension of the parent company that carries out business activities in Germany. It must be registered at the Commercial Register.
Gesellschaft mit beschränkter Haftung (GmbH)
All GmbH and UG entities in Germany must appoint at least one managing director (Geschäftsführer), who must be a natural person. Corporate entities are not permitted to serve in this role under German law.
There is no legal requirement for the managing director to reside in Germany or within the EU/EEA. Non-EU/EEA nationals may be appointed as managing directors provided, they do not physically work in Germany. However, if they intend to live and work in Germany, they must obtain the appropriate residence and work permits.
German banks, notaries, and tax authorities may be cautious when a company’s entire management is based abroad. Having a local or regional director can help streamline banking, registration, and tax compliance procedures, especially for operational or holding companies that need to demonstrate local substances.
An AG is managed by a management board (Vorstand) under the supervision of a supervisory board (Aufsichtsrat). The management board must have at least one member.
A local representative with power of attorney must be appointed and registered. This representative acts on behalf of the foreign parent company.
In Germany, bank account setup can be initiated before legal entity incorporation, but the process has specific requirements and timing:
Bank Account Setup in Germany: What’s Possible and When
Before Incorporation:
After Incorporation:
Note:
German banks typically require extensive documentation and may prefer in-person meetings. Many banks require at least one signatory to be a German resident or have a strong connection to Germany.
Required documents include the company’s certificate of incorporation, managing directors’ identification, notarized articles of association, and proof of address.
Cerity Global supports companies in their global expansion plans and helps in legal entity setup, registration and ongoing support services. With us, you can quickly set up a legal entity, operate compliantly, and expand globally. The process typically takes a few days to a week, depending on the bank.
Employment in Germany is primarily governed by the German Civil Code, also called, Bürgerliches Gesetzbuch (BGB), the Works Constitution Act, also known as, Betriebsverfassungsgesetz (BetrVG), and applicable Collective Bargaining Agreements (Tarifverträge).
Additionally, Collective Bargaining Agreements (CBAs) also play a crucial role in setting out specific terms and conditions for different professions and sectors.
Some of the standard details mentioned in the written contract include:
The different types of employment relationships are:
Indefinite-Term Employment (Unbefristete Arbeitsverträge)
Also known as permanent employment, these are the most common and preferred form of employment in Germany. These contracts provide job security and stability to employees and can be both full-time and part-time.
Fixed-Term Contracts (Befristete Arbeitsverträge)
Also known as temporary employment, these contracts have a stipulated end date and are used for specific projects, seasonal work, or temporary replacements. Without objective justification, fixed-term contracts are limited to 2 years maximum.
In Germany, a probationary period typically lasts up to six months.
The regular working hours in Germany are eight hours a day and 40 hours a week.
The overtime can be extended to 10 hours per day and 60 hours per week.
Overtime
Overtime work is generally limited and must be compensated either through additional pay or compensatory time off. The maximum weekly working time, including overtime, cannot exceed 48 hours on average over 6 months.
Germany’s minimum wage system sets the following:
The notice period in Germany usually depends on the length of service:
Severance pay is not legally mandated in Germany but is common in mutual termination agreements.
Foreign nationals can live and work in Germany by securing appropriate work authorization. With a valid job offer and employer sponsorship, individuals with the right skills or qualifications may be eligible for temporary or long-term work authorization.
Work Visa & Permit Options in Germany
1. EU Blue Card
A residence permit for skilled workers with university degrees.
2. Skilled Worker Visa
For qualified professionals with vocational training or university degrees.
3. Opportunity Card (Chancenkarte)
A new points-based system introduced in 2024 for job seekers.
4. Intra-Company Transfer Visa
For employees being transferred within the same company.
5.Research Visa
For researchers and academics.
Key Notes:
Employees in Germany receive:
Female employees are entitled to 14 weeks of maternity leave:
Germany does not have paternity leave, but fathers can take up to 3 (flexible) years of parental leave for their natural or adopted child and care for a newborn until they are three years old. Both parents can claim this separately or at the same time.
Employees usually receive 6 weeks of paid sick leave per year.
The following statutory national holidays are observed in Germany:
The payroll frequency is usually monthly, and employees are paid on the last working day.
In Germany, 13th and 14th-month salaries are common and typically paid in July and December as vacation bonuses (Urlaubsgeld) and/or Christmas bonuses (Weihnachtsgeld) based on collective bargaining agreements or company policy.
Employees in Germany must pay Social Security taxes, which contribute to Social Security benefits.
The mandatory and statutory benefits in Germany are:
Accounting standards must adhere to must adhere to the German Commercial Code, also known as, Handelsgesetzbuch (HGB) and International Financial Reporting Standards (IFRS) for consolidated groups or listed companies.
Companies in Germany must file annual financial statements with the Commercial Register (Handelsregister).
Statutory audit is required if a company exceeds two of the following three thresholds for two consecutive fiscal years:
Audits must be performed by a certified auditor (Wirtschaftsprüfer) and the audit report must be submitted with the annual accounts.
The standard corporate tax rate is 15%.
The VAT rate in Germany is 19% and applies to most taxable goods and services.
The reduced VAT rate is 7%.
Typically, the tax return must be filed electronically by July 31, following the tax year.
Penalties for late filing include up to 0.25% of the tax due, at a minimum of EUR 25 for each commenced month of delay.
Germany follows OECD Transfer Pricing Guidelines under the German Tax Code (Abgabenordnung).
Germany has implemented CbC reporting in line with OECD BEPS Action 13.
Transfer pricing documentation is required for companies exceeding certain thresholds.
Master File
Local File
Deadline: Transfer pricing documentation (Master File and Local File) must be prepared by the corporate tax return deadline (typically July 31 of the following year) and submitted within 60 days upon request by the tax authority.
All German companies (GmbH, UG, AG, KG, oHG) must disclose their beneficial owners (>25% ownership or control) in the Transparency Register (Transparenzregister).
This register strengthens Germany’s corporate transparency and supports enforcement of EU-wide anti-money laundering efforts.
Germany follows the EU General Data Protection Regulation (GDPR), requiring strict personal data protection and compliance, supplemented by the German Federal Data Protection Act (Bundesdatenschutzgesetz – BDSG), requiring comprehensive personal data protection and compliance measures.
Germany’s AML framework is governed by the Money Laundering Act (Geldwäschegesetz – GwG), which implements EU Anti-Money Laundering Directives.
Obligated entities: Financial institutions, lawyers, notaries, tax advisors, real estate agents, and other designated businesses must comply.
Key requirements:
Penalties: Fines up to €1 million for individuals and €5 million for entities.
Reasons you should setup legal entity in Germany:
Cerity Global ensures your business expansion in Germany is fast, compliant, and future-ready, so you can focus on growth while we manage the back-office tasks.
Economic figures are subject to change based on quarterly reports and market conditions.
Cerity Global combines deep local knowledge with proven expertise to make your Germany business establishment effortless and compliant. Whether you’re looking for legal entity setup and registration or ongoing support, we’re your trusted partner for sustainable global expansion in Germany.
Disclaimer – The information provided is for informational purposes only and does not constitute legal, business, or tax advice. Entity setup requirements, tax rates, and economic data are subject to change and may vary by location.
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