Investor’s Basics: Setting Up Business in Germany
Facts & Figures
gtai. Long-term stays require a residence permit.
Facts & Figures 2011 www. corporate taxation. tax implications of certain what type of visa or residence company forms. We inform checking: about: whether a visa is needed before the German tax environment. Corporate Taxation Tax implications must be taken into account when choosing a legal company form. investors usually have to come to Germany in person. You will find essential information on these matters and many useful tips on how to establish a new business in Germany – both quickly and easily. the establishment procedure in detail. Different types of residence titles are available subject to the intended business activities. ing business establishment in Germany. knowledge of the different employment models and the terms and conditions of employment help sucOur legal experts help you in preparcessfully complete the hiring process. different terms of employment. These can be grouped into four key categories: entry and residence requirements. with only a few steps needed to establish a company in Germany. for instance.
Employees and Social Security Attention should already be paid to the question of how to recruit required specialists and employees at the company formation stage. It focuses on the que s tion s m o s t of ten p os e d b y foreign investor s. permit might be required for the planned business activity. investors may require a visa to enter Germany. entering Germany or not. prevent double taxation of distributed proﬁts.com
. granting requirements for different kinds of residence permits. We inform about: Our legal experts help you optimize the hiring process in advance by givgeneral ways to take up commering advise on: cial activities in Germany. Moreover. Germany has a comprehensive regime of double taxation agreements with foreign countries which. business establishment. registration with the commercial register and trade ofﬁce. different legal company forms. since company taxation details mainly depend on the company legal form. Entry and Residence At some point within the process of establishing a business in Germany. how to register with tax authorities. Formation procedures are swift and efﬁcient. and employees and social secur it y. ﬂexible models of employment. registering employees for the social security system. the social security system and payroll accounting. how to avoid double taxation.Setting Up Business in Germany
Legal Issues Important to Foreign Investors
T his brochure expl ains how the business establishment process in Germany works. Depending on the country of origin.
Our legal experts help you in preparOur taxation experts help you in oping your business trip to Germany by timizing your business.
Business Establishment German company law offers a variety of different legal structures suitable for every type of business. how the application procedure works.
The basic structure of all company forms A corporation can be established by is stipulated by law which provides Subsidiary one or more shareholders. foreigners to open Existing companies can also conduct a branch office business via a German branch ofﬁce. ding foreign companies often choose to establish a local subsidiary or to Corporations register a local branch ofﬁce. General Comholders have limited personal liabil. Limited ity. shareholder. the personal commitment of the this option.meaning that the holder of rights par tners to their working effor ts ment procedure is straightforward and obligations is not the individual to the partnership. Establishment fact sheet. beschränkter Haftung – GmbH) and the Business in Germany foreign companies can choose the stock corporation (Aktiengesellschaft – There are a number of different ways most suitable legal company form as AG). Either way.the contribution of capital by share.com
. There are four major to corporate income tax.Setting Up Business in Germany
Company Forms for Foreign Investor Expansion
Anyone can establish a business in Germany – irrespective of nationality or place of residence. the establish.
Facts & Figures 2011 www.Characteristic for a partnership is pendence is a major argument for holders. KG). The same legal conditions apply for A subsidiary is an autonomous com. trade tax forms of par tnerships: Civil Law and the solidarity surcharge. Corporations are liable two partners. but the company itself. Expan. is required. contracts. nor is a minimum percentage of German shareholdings required for foreign entrepreneurs setting up business in Germany. unlimited personal liability . a minimum share capital Par tnership (KG).a corporation or partnership. and Corporate Partnership (GmbH & Co.
Representative Office No independent business activity of the foreign company Activities typically via an independent commercial agent
With separate legal personality Different legal forms are available (i. As such. Espe.Par tnership (GbR). Share. Please find fur ther information about the GmbH in the Business to enter the German market. GmbH)
No separate legal entity but fully part of the foreign company Construction governed by foreign law
No restriction for Foreign investors can choose betforeigners to start ween a variety of legal forms for No restrictions for companies conducting business in Germany. holds assets and is liable Any partnership requires at least for taxation. The most for predictability and legal certainty. liability and terms of taxation. Decisive criteria for the choice of legal form are generally the intenGerman Market Presence ded function of the shareholders.e.The main feature of a corporation is Partnerships cially the subsidiary‘s degree of inde. For subsidiary formation. There is no speciﬁc investment legislation in Germany.mercial Partnership (oHG). pany established and predominantely many are the private limited liaheld by another company (parent bilit y company (Gesellschaf t mit Legal Structures for Your company).important corporate forms in Gerforeign and local entrepreneurs.a minThe corporation itself concludes imum share capital is not required.gtai. A corporation is a legal entity. Partners have with well-deﬁned steps.
g. limited by the scope of the business objective of the head ofﬁce. An autonomous branch ofﬁce is generally regarded as a perthe foreign company.” However. this term does not exist in German commercial law. A branch ofﬁce is a suitable business Dependant Branch Ofﬁce form for a foreign company wanting The dependent branch ofﬁce (abhänto establish a presence in Germany gige Zweigniederlassung) focuses on for the purpose of initiating business maintaining contacts and initiating and maintaining contacts with busi.Taxation of Branch Ofﬁce able to the extent of its own assets A branch ofﬁce is subject to taxation for any claims creditors might assert in Germany if it is considered as a against the branch ofﬁce. ofﬁce and registered business ope.different branch ofﬁce categories in fore subject to the law governing the the Company Formation fact sheet. there are two kinds of dependant branch ofﬁce is only ever branch establishment which prima. Please ﬁnd tion and support-related tasks. head ofﬁce. or separate legal personality distinct from the head ofﬁce itself. tablish a German branch ofﬁce. a commercial agent authorized by the company) can be considered a case in which no independent business activity is conducted on behalf of the foreign company. solidarity surcharge tasks that exceed mere implementa. tasks without having any individual business discretion and is entirely Main Characteristics A branch ofﬁce has no independent dependent on the head ofﬁce. a separate bank account.and municipal trade tax). manent establishment. Only an ofﬁce managed by a self-employed external business person (e.business in Germany. In legal Please ﬁnd more information about and organizational terms.gtai. In this speciﬁc instance. of a foreign corporation is taxed in Germany according to German taxaAutonomous Branch Ofﬁce The autonomous branch ofﬁce (unab.
Representative Ofﬁce Ofﬁces that purely serve to observe the market and pave the way for initial customer contacts are often described as “representative ofﬁces. In this context.dent business assets. a registration of the foreign company with the local trade ofﬁce is not required. Any obliga. It performs support and implementation-related ness partners. A representative ofﬁce must usually be registered as a branch ofﬁce in Germany. whereas a In Germany.and accounting as well as indepenrations outside of Germany can es.permanent establishment accordtions or debts incurred by the branch ing to the applicable double taxation ofﬁce are also legal responsibility of agreement.tion rules for corporations (corpohängige Zweigniederlassung) fulﬁlls rate income tax. It has further information in the Corporate its own business discretion that is Taxation fact sheet. independence from the head ofﬁce A German permanent establishment company.considered a permanent establishrily differ due to the degree of the ment under certain conditions. the foreign head ofﬁce company is fully li. the autonomous branch has its own management with execuAny foreign company with a head tive powers.com
. it is part of the registration procedure of the two the head ofﬁce business and is there.
Facts & Figures 2011 www.Setting Up Business in Germany
South Korea. Czech Republic. These foreign nationals can directly apply for the necessary residence or settlement permit at the Immigration Office in Germany. individual rules apply for certain countries. and Hong Kong can stay in Germany for up to 90 days (per half year from the date of first entry) without a visa. New Zealand. These transnational rules will cease by the end of April 2011 (for Bulgaria and Romania by 2014). Mexico. A residence or settlement permit is required for the purpose of employment and selfemployment and for long-term stays (more than 90 days per half year from the date of entry).gtai. Non-EU citizens from those countries exempt from the short-term stay visa requirements also require a national visa when entering Germany for long-term stay purposes. Latvia. New Zealand. Hong Kong. The respective visa is then issued in the applicant’s home country within a period of a few weeks. and Slovenia still require a work permit if they are employed in Germany. Canada.
Who Needs a Residence Title?
EU citizens do not require any residence title to be able to settle or work in Germany. The respective local German mission initially issues a national visa for entr y into Germany. Australia. These include: Visa (Schengen Visa and national visa) Residence permit Settlement permit A visa enables the holder to entry and short-term stays (up to 90 days per half year from the date of first entry) in Germany.com
.Entry and Residence
Germany distinguishes between different kinds of residence titles for specific purposes subject to the length of stay and intended (business) activity in Germany. Estonia. A residence permit is not normally required for the setting up of a business. Lithuania. Romania. the United States. For example. South-Korea. Residence permit Long-term stays or settlement and stays with the permit intention to take up gainful occupation. The national visa is subsequently conver ted into a residence permit by the competent local Immigration Office (Ausländerbehörde). Residence Title Visa (Schengen Visa and national visa) Enables the holder to
Application Procedure The residence title generally has to be applied for at the competent German embassy or consulate general prior to entering Germany. Australia. The application fee is EUR 60. Non-EU citizens excluding nationals from Australia. and particularly on the specific area of business activity intended in Germany. and the United States.
Which foreign nationals require a residence title? Non-EU citizens excluding nationals from Argentina. and the United States who may enter Germany for longterm stay purposes without a national visa. South Korea. nationals from Argentina. Non-EU citizens
Entry into Germany followed by a shortterm stay (up to 90 days).
Facts & Figures 2011 www. Mexico. Poland. Exceptions apply for nationals from Australia. Israel. Canada. New Zealand.
Entry into Germany followed by a longterm stay (for which an additional residence or settlement permit is required). Hungary.
Residence Titles for Differing Business Activities
The relevant residence title required depends on the investor’s nationality. non-EU citizens require a residence or settlement permit. Slovakia. a residence permit is required in those cases where the foreign national intends to run the business on-site. New Zealand. South Korea. Israel. However. Canada. Japan. However. Citizens of the new EU states Bulgaria. Brazil. Canada. Israel. Israel. Japan. Japan. and some other countries. the labor market has been opened up to university graduates from the new EU states since 2009. However. Brazil. Japan. the United States. Non-EU Citizens: Long-term Stays For long-term stays. Non-EU Citizens: Entry and Short-term Stays Non-EU citizens generally require a Schengen Visa for entry and shortterm stays in Germany.
If this is not the case. academics. As a rule. The FEA approves if no suitable German or EU employees are available for the job (priority check) and the nonEU citizen is hired at the same terms and conditions of employment as comparable German employees (especially in terms of wages and working hours).g. a residence permit for the purpose of taking up employment is only awarded to certain occupational groups (e. IT specialists. This can however be extended.Entry and Residence
Establishing a Company For most of the activities in the formation phase of your company. a residence permit can still be granted after an individual assessment of the investment project. a residence permit for self-employment or employment should be applied for in due time. This permit is usually granted if the planned business is expected to have a positive economic effect and has secure financing. Highly qualified persons are defined as including scientists with a special technical knowledge.gtai.000 (2011). Foreign entrepreneurs are considered to be self-employed if they hold any of the following positions: Who is considered self-employed? Entrepreneurs (including freelance professions) Sole traders (including freelance professions) Partners in a partnership Managing partners Managing director or managerial employees with proxy or full power of attorney who personally carry a business risk Employment in Germany Non-EU citizens employed in Germany require a residence permit for the purpose of taking up employment. Company Management On-Site (self-employed) Entrepreneurs from non-EU countries managing a company on-site in Germany in a self-employed capacity require a residence permit for the purpose of self-employment.g. It enables its holder to stay in Germany for up to 90 days. the residence permit for the purpose of taking up employment is limited for a period of up to three years. A residence permit must also be applied for if the proceedings for setting up a company exceed 90 days. during which time all fundamental establishment activities can be performed. managerial staff and employers with specialist knowledge) if a concrete
job offer can be demonstrated and the FEA (Federal Employment Agency Bundessagentur für Arbeit) has granted approval. A residence permit for the purpose of self-employment is limited in time for up to three years. A settlement permit (permanent) can be granted after three years if the investment project has been successfully realized and has stable income prospects. As with the residence permit for self-employment. a Schengen Travel Visa (in this context often referred to as a business visa) is sufficient. If necessary. or specialists and executive personnel with special professional experience and an annual salary of at least EUR 66. Certain occupational groups are however entirely exempt from the FEA approval requirement. teaching or scientific personnel in prominent positions. Exemptions from FEA Approval Employed managing directors Managerial employees Scientific research personnel FEA approval can for instance be granted without priority check for internal company specialists and non-EU citizens holding a German university degree Settlement Permit for Highly Qualiﬁed Foreign Employees Foreigners considered as “highly qualified foreign employees” can be granted a settlement permit from the outset. Establishment Activities with a Schengen Visa Signing and notarization of articles of association Application for registration in the commercial register (submitted by a German notary) Trade office registration Other preparatory activities in the company set-up phase (e. the opening of a bank account or the conclusion of lease contracts) Negotiation and conclusion of contracts with business partners Setting up a company in Germany using a Schengen Visa does not alone warrant residence permit issue at a later date. A permanent settlement permit can be issued after five years.
Facts & Figures 2011 www.000 or more is invested and at least five new jobs are created.com
. Generally these conditions are considered to be met
if EUR 250.
Chronological Steps Needed to Set Up a GmbH
Step 1 Step 2 Step 3 Step 4 Step 5 Drafting of articles of association Notarization of articles of association Payment of share capital Registration in the commercial register Trade office registration
Application for entry in the commercial register is usually prepared by the authorized notary when articles of association are notarized. requiring only a few clearly deﬁned steps. The articles of association must also be signed by all founding shareholders and notarized. The notary fees for a GmbH establishment depend on the share capital. The founding shareholder(s) adopt(s) its articles of association and appoint(s) one or more managing directors in a notarial deed. business name. However. shareholders and respective shares held.
Compensating the limited personal liability of the shareholder(s). and company object. The establishment procedure starts with the formation of a company and is completed upon registration. registered ofﬁce. the GmbH is a very ﬂexible corporation. Mandatory content includes share capital.500 in total is sufﬁcient for registration with the commercial register of a 25. amongst other things. In Germany notarization is required. Thanks to the large scope for contractual design. A payment of EUR 12. a company account should be opened and the share capital deposited. Notary fees are stipulated by law and subject to the value of the transaction. At least one shareholder is required (private individual or legal entity).Business Establishment
Efﬁcient Company Formation Procedures
There are a number of different ways to enter the German market. real estate or patents). German Notaries Notaries are law yers sworn to impartiality and entrusted with public functions. A subsidiary is an autonomous company established and completely held by another company (parent company).
3: Payment of Share Capital Once the articles of association have been notarized. the GmbH requires a minimum share capital of EUR 25.000 EUR GmbH. It can be contributed in cash or in kind (e. A GmbH can be set up by an optional number of shareholders.
Setting Up a GmbH: Formation Procedure
The GmbH is the most widely used legal form for corporations.gtai. A branch ofﬁce forms part of the foreign head ofﬁce company’s organization.000.
Facts & Figures 2011 www. The formation procedure can be divided into the following steps: 1: Drafting of Articles of Association The articles of association shape the identity and constitution of the company. Foreign companies typically choose the private limited liability company option (Gesellschaft mit beschränkter Haftung – GmbH) for local subsidiary formation. In both cases the establishment procedures are swift and efﬁcient. A formation procedure is therefore not applicable – only the registration of the branch is required. the company must have a German business address. for establishment of corporations and applications for entry in the commercial register (Handelsregister).com
. It combines high ﬂexibility with relatively few obligations. The nationality and residence of the shareholder(s) and the managing director(s) of a GmbH are irrelevant. 2: Notarization of Articles of Association The drafting and notarization of the articles of association are normally performed in one session by a German notary.g. Expanding foreign companies normally opt to establish a local subsidiary or register a local branch ofﬁce. The estimated total costs for a standard GmbH are approximately EUR 750 to EUR 900.
the GmbH is registered and comes into existence as a separate legal entity. If so. Registering in the Commercial Register Registration in the commercial register is only required by the autonomous branch ofﬁce. For some business sectors.
Setting Up a Branch Ofﬁce
Any foreign company with a head ofﬁce and registered business operations abroad can establish a German branch ofﬁce.Business Establishment
Setting Up a GmbH: Registration Procedure
Before taking up commercial activities a new business in Germany has to be registered with the public commercial register and the local trade ofﬁce. The trade ofﬁce generally forwards the registration to the tax authority. the managing director(s) apply for the registration of the GmbH in the commercial register. The documentation must be notarized and either legalized or issued with an apostille. Please notice that the documentation required can differ depending on the legal form and origin of the foreign company. the trade ofﬁce must be notiﬁed about the planned activity.000) are registered. All corporations and enterprises requiring business operations to be set up in a commercial manner (generally assumed if annual turnover exceeds EUR 250. Only for some business sectors.gtai. it is quick and easy to check the existence and power of representation of any given company. For instance. There are two different categories of branch ofﬁces: the autonomous branch ofﬁce (selbständige Zweigniederlassung) and the dependent branch ofﬁce (unselbständige Zweigniederlassung). Any application for inclusion in the commercial register must be submitted by a German notary in certiﬁed and electronic form. Required permits and veriﬁcation of representatives must also be submitted.
1Generally the following documents are required: excerpt of
the foreign commercial register or certiﬁcate of incorporation and certiﬁcate of good standing as well as articles of association of the foreign parent company. Please contact Germany Trade & Invest for further information. Trade ofﬁce registration must be submitted at the latest on commencement of business. 4: Registration in the Commercial Register When the required share capital has been veriﬁable contributed to the GmbH. Trade ofﬁce registration must be submitted on commencement of business at the latest. It should also be accompanied by a certiﬁed translation into German language. the regional association of professional trading associations.
Trade Ofﬁce Each company is obliged to register in the local trade ofﬁce (Gewerbeamt) of the municipality in which the business is located. and the chambers of industry and commerce (Industrie. This must be personally signed by all managing directors of the GmbH (power of attorney not possible) and accompanied by documentation pertaining to the applying GmbH. Speciﬁc documents from the commercial register or equivalent abroad must be submitted in ofﬁcially recognized translation excerpt form.1 The commercial register checks if all formation requirements for a GmbH have been met. The register can be inspected free of charge at the local court.com
. The application is electronically ﬁled by a notary. a permit or authorization may be required. a business license or permit is generally not necessary for registering the business.
Facts & Figures 2011 www. This includes.und Handelskammer – IHK) or the chambers of craft (Handwerkskammer).¹ Trade Ofﬁce Registration Both the autonomous and dependent branch must register in the trade ofﬁce before business operations are started. the commercial register requires documentation verifying the existence of any parent company as well as the power of representation for persons acting on behalf of it. for example. Chamber membership is automatic and mandatory. A business license or permit is not necessary for registering the business in the majority of cases.
Commercial Register The commercial register (Handelsregister) is administered by the local courts (Amtsgericht) and ensures legal certainty in the area of commercial law by providing important information about registered companies. As with the registration of a GmbH.000 and/or a proﬁt of EUR 25. The application must include detailed information pertaining to the foreign company and the branch ofﬁce. 5: Trade Ofﬁce Registration Before business operations are started. a permit or authorization may be required. documentation verifying the existence of the foreign company as well as the power of representation for persons acting on its behalf. Moreover.
lower starting rates or other special tax rates available.98 percent. The overall tax burden can therefore The solidarity surcharge (Solidaritätszuschlag) is a ﬁxed and ﬂ at nation. Germany does not have a consistent nationwide tax rate for corporate income taxation. the tax base rate resulting in the so. whereas the trade tax rate varies locally. lower overall tax rates in certain areas are possible.83% in certain municipalities.83 percent.5 percent of the assessed amount plicable municipal multiplier.
Top corporate income taxation rate. e. tax rates are individually determined by each municipality. Netherlands UK Germany Spain Italy Belgium France Japan USA (NY) 0% 5% 10% 15% 19.com
Competitive Tax Conditions
Germany offers one of the most highly competitive tax systems of the big industrialized countries. 3. creating a total of 0.
Average Corporate Tax Burden of Selected Countries 2009 (in percent)
Slovak Rep. The trade wide component of company taxation.00% 25. The individual trade tax rate of a speciﬁc site is therefore the decisive factor for the overall tax burden.83% 2 30. the solidarity surcharge is 5. of corporate income tax. the overall tax burden can differ by up to 10 percent between locations. Corporate income tax is payable by all German corporations such as the GmbH and AG. The surcharge amount is then multiplied by the apis 5.The taxable income is multiplied with be as low as 22. For corporations. as well as by all branches of foreign corporations in Germany.00% 20.40% 33. As a result of the ﬁxed and variable components. 22. As a result.50%2 2 28. The individual trade tax burden depends on two factors:
Corporate Income Tax
Corporate income tax is levied as a ﬂat nationwide tax at a rate of 15 percent of the taxable corporate income. Example USA: progressive rate from 15% to 35%.00% 1 29.gtai.5 percent of the 15 percent corporate income tax. As such.99% 2 34.
Facts & Figures 2011 www. The total amount of these two taxation components forms the overall tax burden. individually by every municipality.
The individual percentage of the local trade tax rate is calculated by multiplying the trade tax base rate of 3.5 percent with the local municipal multiplier. Signiﬁcantly lower tax rates trade tax code) of 3. the average overall tax burden is just below 30 percent.5 percent. Poland Czech Rep.825 percent of the taxable income.
By law. Instead.62% 20% 25% 30% 35% 40%
Note: 1 National German average.00% 19.5% base rate X municipal multiplier = trade tax rate
Trade tax is a municipal tax.43% 39. This tax base in urban areas than it is in rural areas. with certain local municipalities offering signiﬁcantly lower rates still.
Source: German Federal Ministry of Finance 2009
Thus.g. as a rule. Germany Trade & Invest can support you in identifying attractive locations in Germany.00% 31. to be higher It was introduced in 1995 to ﬁnance called tax base amount.55% 2 39. There is no statutory ceiling. the trade tax rate must be at least seven percent. taxation of corporate companies consists of two major components: Corporate income tax + solidarity surcharge Trade tax Corporate income tax and the solidarity surcharge are components with a ﬁxed rate. are available in certain German muThe multiplier (Hebesatz) stipulated nicipalities – up to eight percent less. the The tax base rate (= standard trade trade tax rate in metropolitan areas tax base rate according to German can currently be as high as 32.tax rate tends. German reuniﬁcation.
Companies are obliged to add valuecent is due.hotel stays). newspany has been exempted from divi.000.e.000 Corporate Income Tax 15% -8.
Facts & Figures 2011 www.000 German Average
1.975% 670.83% 701. i. The exact time frame depends on the company’s level of turnover. generally a withholding exchange of goods and services.000 Corporate Income Tax 15% -8.papers. The 19 percent VAT rate in Germany is below the European average.000 -70.5% of Corporate Income Tax) Overall Tax Burden Net Income (EUR) 1. The taxes collected and paid can be balanced out in the VAT return as input VAT deduction (Vorsteuerabzug).eryday services (such as food. If a German subsidiary pays out dividends to a foreign parent Value-added tax (VAT) is a tax on the corporation.250 Solidarity Surcharge 29.com
.500 (municipal multiplier: 490%) (municipal multiplier: 400 %) Trade Tax Rate 14% Trade Tax Rate 17. tax (Kapitalertragssteuer) of 25 per.Corporate Taxation
Taxation of Dividends
if certain requirements are fulﬁlled. work of double taxation agreements to ensure that double taxation in international business relations is Value-added Tax (VAT) ruled out. The dou.700
The overall tax burden of a corporation depends on the municipal multiplier within the trade tax.000 -171. and dend-payable tax abroad. Companies themselves also pay VAT when they purchase goods or services.000.5% x municipal multiplier) Corporate Income Tax (Tax Rate 15%) Solidarity Surcharge (5.
The overall tax burden for corporations is calculated as below: Minimal Municipal Multiplier Taxable Corporate Income (EUR) Trade Tax (3. In the case of an exist.15% -150.000 Corporate Income Tax 15% -8. quarterly or annual basis.gtai.000
-140.000. of dividend taxation to zero percent Value-added tax which is collected
has to be paid to the responsible tax ofﬁce on a monthly.000 (municipal multiplier: 200%) Trade Tax Rate 7% -150.825% 771. Some services (such as ble taxation agreement with the USA bank and health services or commufor example even allows a reduction nity work) are completely VAT exempt. 15. 10 or 5 percent.250 Solidarity Surcharge 32. A reWithholding tax still paid in Germany duced rate of seven percent applies can be offset against existing foreign to certain consumer goods and evtax obligations or the parent com. the withholding tomers accordingly.250 -150. tax is usually levied at a signiﬁcantly lower rate.750 Maximal Municipal Multiplier 1. Moreover. EU law allows tax free transfer of dividends between all 27 Germany provides an extensive netEU member states.250 Solidarity Surcharge 22.added tax to the prices of their goods ing double taxation agreement with or services and to invoice their cusa foreign country. local public transport.
Employers 3. employment contracts may be limited or extended several times up to Germany is known for very stable laa total duration of four years. wages are the contract may be terminated at exists between the leasing company generally negotiated freely. During the ﬁrst four years of tensive public support for hiring ema company’s existence in Germany.0%
Germany is internationally known for 2. has been observed.providing appropriate personnel at vided the total duration of contract short notice.5% Poland disability. gender. age.9% UK an equal opportunity basis without 7. Fixed-term Contracts Fixed-term contracts expire auto. there is and the employee. The experienced a rise of more than provided a mandatory notice period employee is legally employed by the seven percent. In marked contrast.temporary employment agency and Germany recorded the lowest labor ment contracts include a six-month receives the salary from them – as cost growth within the EU at just probationary period during which no formal contractual relationship two percent. and conscientious workforce. In Germany. temporary employment agency. while some countries – parunrestricted and can be terminated a company leases employees from a ticularly those in Eastern Europe – by a written letter of termination. In recent years there has been term contracts are generally limited a signiﬁcant increase in the number to a maximum of two years and may of temporary employment agencies be extended up to three times pro.6% Spain criminatory manner (meaning that employers are required to hire on 4. There does not exceed the maximum of two are several programs offering exWage Level years. or sexual orientation).
Facts & Figures 2011 www.tions. conviction. which provides its services free of charge Sources: OECD 2008.4% Slovak Republic Recruitment services are offered by the Federal Employment Agency 0% 5% 10% (Bundesagentur für Arbeit). Regular employ. It is company and temporary employfor the employer to decide whether ment agency – not to labor regulato renew the contract or not.4% France are free to tailor the recruiting pro3. religion.2% Czech Republic discrimination in terms of race.7 Regular Employment Regular employment contracts are Temporary employment means that percent. 8.com
. Wages have risen in most Employment Models European countries since 2000. ethnicity. motivated. 3.7% EU-27 cess to their individual needs.8% Netherlands such as offering jobs in a non-dis4. bor costs. the terms of termination of the ser.Employees and Social Security
Labor Market Hiring a Workforce
Growth of Labor Costs 2000-2008 (annual average growth expressed as percentage of total economy)
Germany 2.7% Italy its highly qualiﬁed.gtai. Fixed. The Temporary Employment EU-27 growth rate averaged at 3. The duration and no overall statutory minimum wage. Only a few guidelines need to be observed. 7.Minimum wage regulations exist only vice of the employee in the hiring in certain industries. any time. Development ployees. German Federal Statistical Office 2009 and operates job centers in all large towns and cities in Germany.company are subject solely to the matically on a speciﬁed date without service contract between the hiring a formal dismissal requirement.
Only the costs for accident insurance are exclusively borne by the employer. signed social insurance agreements with countries including Canada. Components of Social China.
Allocation of Social Security Contributions
Employer share of social security contributions
Generally speaking. all contributions are distributed to the relevant funds – with the exception of accident insurance.gtai.com
.meaning a salary from which tax and social security contributions have already been deducted. the dispatch of employees is facilitated by EU regulations. social security contributions are roughly shared equally by employer and employee with the exception of accident insurance costs which are solely borne by the employer. Japan.Social Security
Accident insurance contributions have to be transferred by the employer to the Employers’ Liability In contrast to some other indusInsurance Association (Berufsgetrialized countries. and Social security contributions are made up of: Health insurance* Nursing care insurance Pension insurance Unemployment insurance Accident insurance
the USA (Brazil as of spring 2011). Payroll Accounting Employees in Germany receive a net wage . They correspond to approximately 21 percent of the employee’s gross salary. In this case. Morocco. Israel. Turkey. those in need of nursing care. This allows transferred employees to remain within the national social insurance of their home country. the employer does not have to pay social security contributions for the employees temporarily located in Germany. India. All social security contributions are withheld by the employer after calculation of the gross wage. These are transferred to the employee’s health insurance company. the core social nossenschaft). Security Insurance South Korea. The salary tax of the security in Germany is collectively employee is also withheld by the ﬁnanced by means of a process of employer and transferred to the tax redistribution. Germany has by employees and employers alike.
Employee share of social security contributions Income tax to be paid by employee
Employee gross salary before personal income tax deduction
Employee net salary
Social security contributions are more or less shared equally by employer and employee. The current costs for authorities (Finanzamt). and unemployed peoIn order to facilitate the international ple are paid directly from contributions transfer of employees. pensioners.
Facts & Figures 2011 www. Tunisia. Within the EU. if they are relocated to Germany for a certain time. sick people. employees have the possibility to join a private health insurance company instead of the statutory health insurance obligatory for all employed people.
Components of social security insurance in Germany Pension insurance Health insurance Unemployment insurance Nursing care insurance
From a certain level of monthly gross wage salary on. From here.
Germany Trade & Invest. Germany Trade & Invest Layout Germany Trade & Invest Print CDS Chudeck-Druck-Service. accuracy. Michael Pfeiffer Authors Christina Schön.stumpf@gtai.Contact
Publisher Germany Trade and Invest Gesellschaft für Außenwirtschaft und Standortmarketing mbH Friedrichstraße 60 10117 Berlin Germany T. Jürgen Friedrich. or completeness of the information provided. Tax & Legal Services. Tax & Legal Services. Bornheim-Sechtem Notes © Germany Trade & Invest. +49 (0)30 200 099-555 F. Order Number 15720
in accordance with a German Parliament resolution
.com www. +49 (0)30 200 099-999 email@example.com Chief Executives Dr.com Heiko Stumpf. heiko.schoen@gtai. Germany Trade & Invest accepts no liability for the actuality.gtai. christina. January 2011 All data provided is based on the most current information available at the time of publication. Germany Trade & Invest.com Editor William MacDougall.
and assists companies established in Germany looking to enter foreign markets.About Us
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