Germany Company Formation

With the largest economy in Europe and a leading export market in machinery, vehicles and household equipment, Germany offers a strong economic environment for forming a company. Germany's large domestic market, easy access to other markets in the EU and a low inflation rate places German companies in an advantageous trade position.

Germany has one of the most developed economies in the world supported by an advanced legal and world-class banking infrastructure.

Germany has signed Double Taxation Treaties with more than 80 countries around the world, providing relief from withholding tax on dividends, interest and royalties. These agreements follow the Organisation for Economic Cooperation and Development (OECD) model.

In its 2010 World Competitiveness Yearbook, the Switzerland-based IMD positively ranks Germany as the world’s 16th most competitive economy. The ranking takes into account factors including economic performance, government efficiency, business efficiency and infrastructure.

Germany is ranked 7th by the World Economic Forum in their Global Competitiveness Report, one of the world’s most comprehensive and respected assessment of countries’ competitiveness, offering invaluable insights into the policies, institutions, and factors driving productivity.

According to the 2010 Quality of Living Survey by Mercer Human Resources, Germany has seven of its cities rated amongst the Top 50 cities globally. Dusseldorf (6th), Frankfurt (7th), Munich (7th), Berlin (17th), Hamburg (23rd), Nurnburg (24th) and Stuttgart (30th). After incorporating a company in Germany, Healy Consultants assists entrepreneurs obtain Germany employment and residence visas, as well as purchase Germany property.

Munich ranks 2nd in the Monocle Quality of Life Index. The index bases its ranking on factors like quality of housing, urban scale as well as amount of crime and the quality of education and healthcare.

Companies in Germany are liable to paying two levels of tax: corporate tax of 15%, and trade tax levied and determined at the municipal-level. As there are no uniform rates for the overall tax burden of corporations across the country, firms may find themselves paying between 22.83%-29.83%, depending on the town or city which it is based in.

The German labour market is highly rigid, and this is an important caveat for companies seeking to start-up in Germany. According to the Doing Business.org ranking, Germany is ranked 158 on the Rigidity of Employment Index, indicating that it is hard for companies to hire and fire staff.

A Germany company is subject to value added tax (VAT) of 19% on all chargeable goods and services delivered in Germany, including intra-company transactions. A lower rate of 7% is charged for daily convenience goods (eg. food, public transport)

In the Heritage Foundation's 2010 Index of Economic Freedom, Germany is negatively ranked as the world's 23rd-freest economy, and scores at 85% in terms of investment freedom and capital flows. This is a measure of freedom enjoyed in  business, trade, monetary, financial, investment and labour markets.

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