Germany Company Formation

Germany's relatively high corporate tax rates, complex tax legislation and high incorporation costs make Germany company formation a less attractive option for international entrepreneurs. However, this European economic powerhouse does offer a range of incentives and fiscal concessions to support Germany company formation. The following information will help you determine whether Germany company formation is the optimum corporate solution to meet your business objectives:

Advantages of Germany Company Formation
1.	A German Limited Liability Company (GmbH), the most popular type of Germany company formation, requires only one director and shareholder.
2.	Germany has one of the most developed economies in the world supported by an advanced legal and world-class banking infrastructure.
3.	Germany has signed Double Taxation Treaties with more than 75 countries around the world. These treaties provide relief from withholding tax on dividends, interest and royalties. These agreements follow the Organisation for Economic Cooperation and Development (OECD) model.
4.	The federal government offers a wide range of incentive programmes, including loans and grants, depending on the nature of the company and its intended location. Some areas of Germany offer capital investment grants of up to 50% to small and medium-sized enterprises. Local government incentives may also be offered in the form of beneficial tax rates but these are not generally available in the major cities.
5.	There is an abundant supply of qualified staff in most regions of Germany to support our clients' Germany company formation plans.
6.	Germany is positively ranked as the 16th least corrupt country in the world, according to the 2007 Corruption Perceptions Index by Transparency International, a global measure of corruption amongst public officials and politicians.
7.	Germany is ranked 5th by the 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.
8.	In its 2008 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.
9.	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.
Disadvantages of Germany Company Formation
1.	A German Limited Liability company requires a minimum capital of 25,000 Euros (US$38,048).
2.	A German company must maintain accounts and submit annual financial statements.
3.	A German-resident company is liable to pay corporate tax of 25% on its worldwide income. Residency is defined as a Company having either its seat (as specified in the Articles of Association) or central place of management in Germany.
4.	Dividends distributed by a German company to a German-resident corporation, and capital gains from the sale of domestic or foreign shares in corporations, are taxed at the level of the shareholder only at 5% of the dividends or capital gains since this amount is generally treated as a nondeductible business expense.
5.	A Germany incorporated company is subject to Trade Tax, the rate of which varies according to the local authority in which the company operates.
6.	A Germany company is subject to value added tax (VAT) of 16% on all chargeable goods and services delivered in Germany, including intra-company transactions.
7.	In the Heritage Foundation's 2008 Index of Economic Freedom, Germany is negatively ranked as the world's 23rd-freest economy, and scores at 90% in terms of investment freedom and capital flows. This is a measure of freedom enjoyed in business, trade, monetary, financial, investment and labour markets.
Other Information
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