Branch of a Foreign Company in Germany
Many people mix up branch with a subsidiary and / or representation. A branch is just another registered footprint without incorporating in Germany. When you incorporate, you will found a different legal entity – another (juristic) person having its own rights and duties. Well, a branch is not a legal form of a company but only a registered domestic agent. A branch with no legal personality.
Scaleup & Expansion Possibilities for Foreign Companies in Germany
What is needed to set-up a branch in Germany?
Um, in Germany, you do not “set-up” a branch, you ”register“ one with the Commercial Registry and trade office (Gewerbeamt) of the municipality of where the branch is to be located. It exists when the company's management decides to have a branch here and an address exists. The registration must pass a notary to whom you will have to produce
- certificate of incorporation of represented company,
- certificate identifying the owners and legal representatives,
- notarized and legalized copies of the ID from the legal representatives,
- completed registration form, which I will fill out and sign with your company's power of attorney,
- office fees, which I will typically bear as I want to provide turnkey services.
Is it not better to incorporate?
If you are seriously intending to make business here, then best incorporate. At first glance, the branch seems cheaper / more quickly provided – freely admitted. The devil however is in the details. The tax office needs to understand what is German and what is home business. In doubt, they will assume all is German business and therefore taxable here. Then you have to prove that it is not subject to German taxation, which can become difficult. You will have to present your bank statements from which will typically have to be translated – if not already at least in English. Banks over here are reluctant to open an account for "only" a branch. German business persons are typically very reluctant to engage with a foreign business if they are not incorporated here. Depending on your ability to invest, I recommend either to found a UG (= 1 € statutory capital, a.k.a. mini-GmbH) or found a GmbH (= 25 k€ statutory capital).
What about taxes for a branch in Germany?
Generally, a branch is not subject to any taxes because it does not transact any business in Germany. Its sole function is to represent the parent company. Business is transacted and invoices are written at headquarters. It's comparable to a phone in another room.
What do Germans or Europeans think of a branch from a foreign company?
Germans and Europeans alike will automatically think with a sneer is: "What is this for a setup? They come over making a show of their wealth and yet cannot put down the initial capital of 25 k€ to have a German setup? They aren't serious business!"