Investment in Germany

Transcription

1 Investment in Germany

2 Agenda 1. Ecovis Global Expertise with local faces P Business Location Germany P Establishment of a new foreign enterprise in Germany P Taxation in Germany P Real Estate in Germany P German Employment Law P

3 Agenda 1. Ecovis Global Expertise with local faces 2. Business Location Germany 3. Establishment of a new foreign enterprise in Germany 4. Taxation in Germany 5. Real Estate in Germany 6. German Employment Law 3

4 Your personal contacts in Germany Alexander Weigert, Munich Alexander is a partner and since 2011 Co-Chairman of ECOVIS in Germany. In general, Alexander - Tax Advisor and Certified Public Accountant - is part of Ecovis since 2003 and since 2015 he is also a member of the ECOVIS International management board. As partner of Ecovis, Alexander himself is entrepreneur and therefore knows how to best assist and give advice to entrepreneurs and corporations. His entrepreneurial expertise ranges from family owned enterprises, start-ups to industrial producers. After successfully completing his high school diploma he studied business administration at the University of Mannheim in Germany and at the École de Management (EM) Lyon/France. Since then, he was working for various enterprises in different countries, for instance in the USA and United Kingdom. Armin Weber, Munich Armin Weber is the Partner in Charge of the Ecovis Munich Head Office and is a Certified Public Accountant, Tax advisor and Business Graduate. Armin is a member of the German and international ECOVIS quality board and has many years of experience in auditing and consulting for capital market orientated and family owned international companies. As well has experience in consulting Chinese companies in Germany. Armin is experienced in such areas of advisory as company acquisitions, divestitures, including due diligence management. He is also chairman of our international Audit Task Force. 4

5 Why advice from Ecovis is something special Four Disciplines Intermesh Tax accounting Auditing Legal advice Corporate consulting An Interlocutor With Ideas Our consultant knows you personally additional colleagues provide him with support Worldwide and in Your Vicinity An Ecovis office is always in your vicinity We operate internationally in more than 60 countries throughout the world Entrepreneurs Advise Entrepreneurs Every Ecovis advisor is an entrepreneur himself We know your challenges from our own experience 5

6 Ecovis Our international presence 6

7 Ecovis in Germany 7

8 Top Attractions in Germany A Selection Munich 8

9 Top Attractions in Germany A Selection Berlin Düsseldorf Hamburg 9

10 Agenda 1. Ecovis Global Expertise with local faces 2. Business Location Germany 3. Establishment of a new foreign enterprise in Germany 4. Taxation in Germany 5. Real Estate in Germany 6. German Employment Law 10

11 Economic Overview 11

12 Why Germany is one of the most attractive business locations 1. Europe s largest market 12

13 Why Germany is one of the most attractive business locations Europe s largest market Production standards Stable economy Stable labour costs Global player Excellent infrastruct ure Manufactu ring location SMEs 13

14 Why Germany is one of the most attractive business locations 1. Europe s largest market 14

15 Why Germany is one of the most attractive business locations 2. Stable economy the economic stabilizing force in Europe between 2010 & 2014, EU-28 real GDP grew by less than 1% the German economy grew at a rate of around 2%, with Germany's real GDP growth rate higher than that of France, Italy, and the UK (during the same period) 3. Global player German products export hits worldwide innovative and competitive products of the highest quality since 2010, Germany s average export quota has amounted to 39% in 2014, German export levels reached EUR 1.1 trillion 68 % of all exports are exported to European countries 15

16 Why Germany is one of the most attractive business locations 4. Manufacturing location 10% of European manufacturing companies = German companies 28 % of total EU turnover in that sector 5. SMEs: Germany s economic backbone Exports are driven by SMEs 99.6% of all companies employing almost 80 percent of all employees in Germany 16

17 Why Germany is one of the most attractive business locations 6. Excellent infrastructure state-of-the-art transportation networks (road, rail, sea, and inland waterways) dense network of national and international airports Europe s second largest port measured in container port traffic (Hamburg) Europe s largest port container terminal (Bremerhaven) 7. Stable labour costs most European countries recorded an average growth rate of 2.5% Germany recorded the lowest labour cost growth with 1.8% 17

18 Why Germany is one of the most attractive business locations 7. Stable labour costs 18

19 Why Germany is one of the most attractive business locations 8. Excellent production standards 19

20 Agenda 1 Ecovis Global Expertise with local faces 2. Business Location Germany 3. Establishment of a new foreign enterprise in Germany 4. Taxation in Germany 5. Real Estate in Germany 6. German Employment Law 20

21 Company forms for foreign direct investment 21

22 Establishing a limited liability company (GmbH) 22

23 Establishing a limited liability company (GmbH) Steps to get started: 1. Drafting of articles of association The following must be included in the memorandum of association: Registered address and name of the company Nominal capital of the company Purpose of the company 23

24 Establishing a limited liability company (GmbH) 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. The following documents are needed for the appointment with the notary: Proof of identity, i. e. passport or identity card Power of attorney Certified translation of all necessary documents Documents you receive from the notary: Documents stating the foundation of the company (necessary for banks, the German tax authorities, etc.) 24

25 Establishing a limited liability company (GmbH) 2. Notarization of articles of association Further information: Drafting & notarization of the articles of association are normally performed in one session by a German notary Notary registers your company in the commercial register electronically Proof of payment of the deposit into the company s bank account is required to get registered Bank account can be opened after the appointment with the notary 25

26 Establishing a limited liability company (GmbH) 3. Payment of share capital A payment of EUR 12,500 in total is sufficient for registration with the commercial register of a standard EUR 25,000 GmbH. Things to do for opening a bank account: Show copies of the documents of the foundation of your company to the bank Show your identity card or passport Pay the deposit into the bank account (at least EUR ) Send proof of payment of the deposit to the notary. The notary needs these documents to register the company, as explained above. 26

27 Establishing a limited liability company (GmbH) 4. Registration in the commercial register ( Handelsregister ) Usually the notary helps/does this for you The registration has to be done in written form The application must be personally signed by all managing directors of the GmbH The notary has to certify the company s signature and the correctness of the documents All these documents must be certified and translated into German Show valid proof of identity Also a list of all stated partners/shareholders must be handed over by the director The registration can take up to five days 27

28 Establishing a limited liability company (GmbH) 5. Trade office registration ( Gewerbeamt ) The following documents must be shown at the trade office: Filled in registration form A business license or permit is not necessary for registering the business in the majority of cases Certificate of commercial registration Power of attorney if a third party wants to register the company Proof of identity Residence permit which permits to operate a business in Germany Further information: Every tradesman is a member of the responsible chamber (Chamber of Industry and Commerce Industrie- und Handelskammer ) The chambers are informed by the trade offices The German tax authorities ( Finanzamt ) are automatically informed, too 28

29 Establishing a limited liability company (GmbH) 6. Company number ( Betriebsnummer ) Only necessary in case of employees Can be obtained from the employment office This also leads to the registration of the employer for social security and compulsory health insurance 29

30 Agenda 1. Ecovis Global Expertise with local faces 2. Business Location Germany 3. Establishment of a new foreign enterprise in Germany 4. Taxation in Germany 5. Real Estate in Germany 6. German Employment Law 30

31 Corporate Income Tax ( Körperschaftsteuer ) 1. Taxable persons The corporate income tax and the solidarity surcharge are levied on the various types of entity listed in the Corporate Income Tax Law (section 1 of the KStG and section 1 of the SolzG). These include: stock companies (AG) and limited liability companies (GmbH) as well as limited partnerships with shares (KGaA). Partnerships not mentioned above are not taxed as separate entities, the partners being taxed individually on their share of profits. 2. Residence An entity is resident if either its legal seat or its place of management is in Germany (section 1 of the KStG). 31

32 Corporate Income Tax ( Körperschaftsteuer ) 3. Taxable income Resident companies are liable for the corporate income tax on their worldwide income (section 1 of the KStG). All income of a company is categorized as business income. The most important types of exempt income are (section 8b of the KStG): at the company level, capital contributions upon formation or capital increase, whether or not in return for shares, other membership rights or simply in connection with an increase in the capital reserves; at the shareholder level, capital repayments from the company if they do not contain dividend distributions (taxable to the extent they exceed the book value of the shareholder s investment); and qualifying dividends and capital gains à Taxable income = the total amount of income (domestic & foreign sources after deduction of business expenses) à Dividend payments, as opposed to interest and royalties, do not constitute deductible expenses. 32

33 Corporate Income Tax ( Körperschaftsteuer ) 4. Rates The rate of corporate income tax is 15% à increased to % by the 5.5% solidarity surcharge à section 23 of the KStG and section 4 of the SolzG 33

34 Business/ Trade Tax ( Gewerbesteuer ) Trade tax is a municipal tax à are individually determined by each municipality The individual trade tax rate of a specific site is therefore the decisive factor for the overall tax burden At least 7% no statutory ceiling of the trade tax rate à German average trade tax rate is around 14 percent the trade tax rate tends to be higher in urban areas than in rural areas 34

35 Business/ Trade Tax ( Gewerbesteuer ) The individual trade tax burden depends on two factors: The tax base rate of 3.5 percent (throughout Germany). The multiplier (Hebesatz) stipulated individually by every municipality starting at 200 percent up to 515%. 35

36 Business/ Trade Tax ( Gewerbesteuer ) 36

37 Withholding taxes on domestic payments 1. Taxation of dividends Dividends and other profit distributions paid by resident companies (AG, KGaA, GmbH) are subject to withholding tax at a rate of 25% à % including the 5.5% solidarity surcharge à section 43a of the EStG On 28 March 2014, China and Germany entered into a new double taxation agreement (DTA) and protocol. à not yet in power, but forecasted in early 2017 à According to the new DTA: reduction of withholding taxes on dividends paid from Germany to China from 10% to 5% if the Chinese parent company holds a direct participation of at least 25% of the German subsidiary 37

38 Withholding taxes on domestic payments 2. Interest A withholding tax is imposed on interest from convertible bonds, profit-sharing bonds, participation loans, as well as income from the participation of silent partners in a trade or business. The rate is 25% (26.375% including the 5.5% solidarity surcharge) (sections 43 and 43a of the EStG). According to the new DTA: à the WHT rate for interest payments remains unchanged at 10%. à only the actual WHT paid in China may be credited against German corporate income tax. 38

39 Withholding taxes on domestic payments 3. Royalties There is no withholding tax on royalties paid to residents, but to non residents. According to the new DTA: à the WHT rate for royalty payments amounts to 10%. à in case of license payments for the use of, or the right to use any industrial, commercial or scientific equipment, the tax base for WHT calculation purposes is reduced from 70% to 60% of the gross payments. Thus, the effective WHT rate is only 6% instead of 7%. à Only the actual WHT paid in China may be credited against German corporate income tax. 39

40 Value-added tax (VAT Umsatzsteuer ) à Tax on the exchange of goods and services à Companies are generally obliged to add VAT to the prices of their goods or services and to invoice their customers accordingly à reverse charge procedure (specific B2B transactions, applicable e.g. to certain types of construction work carried out by subcontractors). 1. VAT rate 19% A reduced rate of 7% applies to certain consumer goods and everyday services à food, newspapers, local public transport, and hotel stays). Some services are completely VAT exempt à bank and health services or community work has to be paid to the responsible tax office à on a monthly, quarterly or annual basis 40

41 Value-added tax (VAT Umsatzsteuer ) 1. VAT rate 41

42 Value-added tax (VAT Umsatzsteuer ) 2. Input VAT deduction Companies themselves regularly pay VAT when they purchase goods or services. The taxes collected and paid can be balanced out in the VAT return as input VAT deduction (Vorsteuerabzug). 3. Taxable persons all entrepreneurs, including persons exercising a liberal profession, and importers à section 2 of the UStG If a non-resident firm supplies goods or services in Germany, it is considered an entrepreneur for VAT purposes VAT on taxable supplies is not levied à if the entrepreneur s turnover did not exceed EUR 17,500 in the preceding calendar year & à is not likely to exceed EUR 50,000 in the current calendar year, à unless the entrepreneur opts otherwise. 42

43 Administration 1. Taxable period The tax year = calendar year. Taxable income = income of the company's financial year that coincides with the calendar year. If a company's financial year is different from the calendar year, taxable income is the income of the financial year that expires during the tax year. 2. Tax returns and assessment Tax returns must be filed by 31 May of the year following the year for which taxes are due (section 149 of the AO) This date can be extended upon request. 3. Payment of tax Resident companies must make quarterly advance payments of corporate income tax on 10 March, 10 June, 10 September and 10 December of each year. Assessed tax is payable 1 month after the taxpayer has received the assessment (section 37 of the EStG). 43

44 Agenda 1. Ecovis Global Expertise with local faces 2. Business Location Germany 3. Establishment of a new foreign enterprise in Germany 4. Taxation in Germany 5. Real Estate in Germany 6. German Employment Law 44

45 Types of property rights in real estate Ownership the strongest right in rem which consolidates both the ownership of land and buildings Hereditary building rights grant the ownership of a building together with the long term right to use But: not to own the related land Easements providing security in rem of certain rights to a piece of land the land owned by another person Property charges encumber the land with mortgages or land charges i.e. borrower does not fulfil his obligation under a loan the lender may satisfy the debt by realising the property charge 45

46 Forms of ownership in real estate Sole ownership the sole owner is the only person authorised to control & dispose of the respective land Co-ownership more than one person own an undivided share of land each co-owner is entitled to dispose of its share of land Joint ownership the land forms part of the jointly held assets Each joint owner is entitled to a share of the joint property but it is not entitled to dispose of its share independently 46

47 Tax aspects 1. Real estate transfer tax (RETT) is levied by the relevant tax authority where the real estate is located The level of taxation is decided by the respective Federal State vary between 3.5% and 6.5%. 2. Income tax The acquisition of real estate by share deal or asset deal generally triggers capital gains taxation on the seller In the case of a share deal, the buyer indirectly acquires all tax liabilities of the acquired entity 3. VAT The sale of real estate by way of an asset deal is either VATable but tax exempt or non-vatable the seller might opt for a tax liable transaction for buildings with VATable leases in order to collect input VAT VAT rate is currently 19% 47

48 Agenda 1. Ecovis Global Expertise with local faces 2. Business Location Germany 3. Establishment of a new foreign enterprise in Germany 4. Taxation in Germany 5. Real Estate in Germany 6. German Employment Law 48

49 German Employment Law 1. The Legal National Minimum Wage can generally be negotiated freely between the employer and employee an hourly minimum of 8.50 gross (since January 2015) The minimum wage applies to businesses of any size! à no exemption for small businesses Also Mini-jobber (earning up to 450 per month) are entitled to the hourly Working Times are very flexible in Germany employees are allowed to work ten hours per day (but 48 hours per week) Saturday is considered to be a normal working day Most business is conducted from Monday to Friday Overtime has to be compensated for with additional time off Employees are entitled to a break of 30 minutes (working 6-9 working hours/day) 49

50 German Employment Law 3. Sick Leave Employees are obliged to inform their employer about any sickness requiring an absence from work and the expected duration of this absence sick leave exceeds three days: à employees are obliged to have a general practitioner provide proof of their incapacity to work Employees are entitled to sick pay amounting to 100 percent of the normal salary until the time of recovery à though: limited to a maximum of six weeks! 4. Holidays Minimum holiday requirements are set out by the Federal Holiday Act (Bundesurlaubsgesetz) The minimum statutory holiday is 24 workdays (incl. Saturday) 50

51 German Employment Law 5. Maternity/Paternity Rights deployment of women is prohibited generally six weeks before and eight weeks after delivery entitlement to maternity/paternity leave (Elternzeit) are entitled to work part-time for a maximum of 30 hours per week during their leave 6. Equal Pay à is a fundamental principle of German employment law and EU-law 51

52 Thank you ECOVIS Wirtschaftstreuhand GmbH Wirtschaftsprüfungsgesellschaft WP StB Alexander Weigert Partner, Co-Chairman of ECOVIS in Germany Agnes-Bernauer-Str. 90, Munich, Germany Tel.: +49 (0)89/ Fax: +49 (0)89/ Internet: ECOVIS Wirtschaftstreuhand GmbH Wirtschaftsprüfungsgesellschaft WP StB Armin Weber Partner, Partner in Charge Head Office Munich Agnes-Bernauer-Str. 90, Munich, Germany Tel.: +49 (0)89/ Fax: +49 (0)89/ Internet: