Outstanding infrastructure, world-class research and development, and a business culture that values punctuality, formality, and efficiency. Companies that understand the latter will put themselves in a strong position to capitalize on what this vibrant market has to offer. Newcomers also have to understand they are subject to a significant degree of regulatory oversight related to complex tax structures, bureaucratic procedures, and a wide range of legal requirements for data protection.

At a Glance

There’s no local bank account needed.

Yes, Depends on the entity.

The standard payroll frequency is Monthly.

The employer taxes are ~21% of gross salary.

Good to Know

As the fourth-largest economy in the world, the largest economy in Europe, and the third-largest export nation globally, Germany is an undeniable powerhouse. A strong service sector and a world-renowned vocational training system are part of its recipe for success.

When GDPR went into effect in 2018, Germany, unlike other EU members, did not offer a grace period for compliance. Companies need to be aware of the strict regulatory environment and diligent enforcement of advanced privacy protection regulations.

Germany’s focus on testing, innovation, and quality gave rise to its powerful machine industry decades ago. Now, manufacturing-based exports, driven by the German Mittelstand, form the backbone of the economy. The large automotive industry is adjusting to the future demand of electric vehicles.

The federal government determines the Rates for Income, Corporate-, Payroll- and Sales Tax whereas each city or municipality, where the business is based, regulates the Trade Tax.

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Cultural Differences

Germany is a no-nonsense country. Friendly chitchat takes a backseat to getting the job done. Due to their risk-averse nature, companies rather deal with local counterparts than with foreign entities. Therefore, it can make sense to incorporate in Germany earlier than in other countries.

Complex Tax Law

German tax law has a reputation for being quite complicated. The corporate tax rate is 30% (15% Corporate Tax and 15% Trade Tax, depending on the place of business). To ensure compliance and that all deferred tax assets (DTAs) are properly applied, it is advisable to hire a tax firm with international experience to analyze the tax implications based on the home country.

Heavy Bureaucracy

Germany is sometimes referred to as the homeland of bureaucracy and although it brings stability, it’s not always conducive to today’s fast-moving business environment. Regulations are complex and compliance emphasized. It’s common to seek legal counsel, especially regarding employment law.

Next Steps

We can help you navigate the complex regulatory environment in Germany. Our expert-led managed services and technical consulting were designed to help you expand with ease. Backed by GateWay, our pioneering global expansion management (GXM) system, we bring an unparalleled focus on the customer experience. By unifying everything you need for cross-border success on a single platform, you can effortlessly and compliantly manage your international footprint.

“While local vendors tend to primarily care about their sliver of the business, HSP Group is, as the single provider, fully invested in the success of the entire organization.” 

Head of Finance and Operations at a fast-growing FinTech

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