Company Formation in Germany

Questions?

• What are the main aspects of a German GmbH?

  A Gesellschaft mit beschränkter Haftung (GmbH) requires a minimum share capital of €25,000, with at least 50% (€12,500) paid in cash before registration. Contributions can be made in cash or approved non-cash assets. If total contributions exceed €50,000, at least 25% of the total capital must still be paid up front. A GmbH must have at least one shareholder and one managing director (Geschäftsführer), who does not need to be a German resident. This structure is the most common form of company in Germany and is well regarded for its credibility and flexibility.

• What is the corporate tax rate in Germany?

  Germany levies a federal corporate income tax of 15%, plus a solidarity surcharge of 5.5% on that amount, resulting in an effective federal rate of approximately 15.83%. In addition, businesses are subject to a local trade tax (Gewerbesteuer), which varies by municipality—typically ranging between 14% and 17%. This means the overall effective corporate tax burden for most companies in Germany is around 30%.

• What is the withholding rate for dividend payments if I am not resident in Germany?

  Dividends paid by German companies to non-residents are generally subject to a withholding tax of 25%, plus a 5.5% solidarity surcharge on the tax amount, resulting in an effective rate of 26.375%. However, this rate can be reduced or eliminated under an applicable double taxation treaty (DTT) or the EU Parent-Subsidiary Directive. For example, under the Germany–UK tax treaty, the withholding tax on dividends to UK residents is typically reduced to 15%, provided all treaty conditions are met and the necessary documentation is filed with the German tax authorities.

• Can I do business in English in Germany?

  Theoretically, yes. Practically, not really. Although Germany boasts a large contingent of English-speaking people, particularly in areas like Frankfurt and Munich, the de jure business language is German and most small to medium businesses will insist you or a representative from your company speaks German. All official communications are carried out in German.

• How much is Capital Gains Tax in Germany?

  In Germany, capital gains earned by corporations are generally taxed at the same rate as corporate income tax — effectively around 30% once federal, solidarity, and trade taxes are included. However, capital gains from the sale of shares in other companies may be 95% tax-exempt if certain conditions are met, meaning only 5% of the gain is subject to taxation. For individuals, capital gains on shares are typically taxed at a flat rate of 25% plus the 5.5% solidarity surcharge, unless specific exemptions apply.