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A German company is nearly always a GmbH (Gesellschaft mit beschränkter Haftung), the limited liability company of German law, or its low-capital variant, the UG (haftungsbeschränkt). Owners from abroad use it as the German subsidiary of a group based in the United Kingdom, the United States or elsewhere, or as a holding, whose dividends and gains on shares section 8b of the Corporation Tax Act largely leaves out of corporate tax. Where no separate German entity is wanted, a foreign company can register a branch (Zweigniederlassung) instead.
Germany has comprehensive double taxation agreements with more than 90 countries and applies the EU Parent-Subsidiary and Interest and Royalties Directives, though the Federal Central Tax Office tests substance before granting relief at source. A GmbH always has its statutory seat in Germany, so it is fully liable to German corporate tax on its worldwide income even when managed from another country.
| Form | Capital | Where it fits |
|---|---|---|
| GmbH | Registered capital of at least EUR 25,000; a quarter of each share and EUR 12,500 in total paid in before the register application | Subsidiaries, holdings and trading companies; the form we sell ready-made |
| UG (haftungsbeschränkt) | Capital of at least EUR 1 and below EUR 25,000, paid in full and in cash; a quarter of each year’s net income goes into a reserve | Founders starting with little capital |
| AG (Aktiengesellschaft) | Share capital of at least EUR 50,000 | The joint stock company |
| Branch (Zweigniederlassung) | No German capital rule | A foreign company working in Germany without a German subsidiary, registered with the court of the branch’s district |
The GmbH and the UG are founded by notarial deed, which holders of a German or notified EU or EEA electronic ID can sign by video, and exist only once the local court enters them in the Handelsregister. The deed, the Musterprotokoll and each filing are covered on our page on company registration in Germany.
| Tax | Rate or rule |
|---|---|
| Corporate income tax (Körperschaftsteuer) | 15% up to 2027, then one point lower each year from 14% in 2028 to 10% from 2032 |
| Solidarity surcharge | 5.5% of the corporate tax, so 15.825% in total at a 15% rate |
| Trade tax (Gewerbesteuer) | 3.5% of trade income multiplied by the municipal Hebesatz, which is at least 280% from 2027 |
| VAT (Umsatzsteuer) | 19% standard, 7% reduced; small businesses exempt with turnover of no more than EUR 25,000 last year and EUR 100,000 this year |
| Withholding tax on dividends | 25% capital gains tax plus the 5.5% surcharge on it; a foreign corporate shareholder can reclaim two fifths; an EU parent company holding at least 10% for twelve months can be exempt; treaties can lower it |
| Holding income | Dividends from holdings of at least 10% and gains on shares left out of corporate tax, with 5% treated as non-deductible |
The Hebesatz differs between municipalities, so the total tax on a GmbH’s profit depends on where it does business.
German company law sets no residence or nationality condition for shareholders or managing directors (Geschäftsführer). A GmbH may belong to one person, to several or to a foreign parent company, and it may be managed entirely from abroad. The managing director must be an individual with full legal capacity who is not disqualified, for instance by a trade ban overlapping the company’s objects or, for five years, by a conviction for listed offences, foreign convictions included. Two practical conditions remain: the company keeps a German business address for the register, and anyone who will actually work in Germany needs a residence title. A GmbH needs no company secretary and no resident agent.
The shareholder list on file at the Handelsregister, which anyone may inspect, names each individual shareholder with date of birth and place of residence, or a corporate shareholder with its seat and register number. The beneficial owners, individuals holding more than 25% of the capital or votes directly or through companies, or controlling the GmbH in another way, are reported to the Transparenzregister without delay. That register is open only to authorities, to obliged entities such as banks and to people with a legitimate interest.
A German business account is a euro account with a 22-character IBAN beginning DE inside the SEPA area. A GmbH’s deposits are protected up to EUR 100,000 per bank, by the statutory scheme for private banks or by the recognised protection schemes of the savings and cooperative banks. The bank usually comes before the register entry, since the managing directors declare that the paid capital is at their disposal and the court may ask for a deposit receipt. A company has no statutory right to an account, and a bank taking on a GmbH must see proof of its Transparenzregister entry, so that filing comes first. Pre-banked German shelf companies are not readily available. Our page on bank accounts for German companies sets out what German banks ask for.
For most founders a new GmbH or UG is the plainer route, with articles and a name of their own from the start. A ready-made GmbH, the Vorratsgesellschaft, earns its place when contracts must be signed by a company that already exists, so that nobody carries the personal liability of the period before the register entry, or when a counterparty wants an earlier date in the register. It does not escape the capital rules: putting a shelf company to use counts as an economic re-formation, its managing director confirms the capital to the court again, and the share transfer needs a notarial deed that cannot be signed by video.
The purchase, the re-formation filing and the tax points are explained on our page on ready-made shelf companies in Germany, and our guide to off-the-shelf companies compares the two routes across countries.
We can form a new GmbH or UG or supply a ready-made company, prepare the documents the notary needs together with the filings for the Handelsregister and the Transparenzregister, and help assemble the bank application. Where we know a bank that suits the company, we can introduce it, and the decision on the account rests with that bank alone.
GmbH stands for Gesellschaft mit beschränkter Haftung, a company with limited liability: the German form closest to a private limited company or an LLC. Its name must contain those words in full or a generally understood abbreviation such as GmbH. It has registered capital of at least EUR 25,000, can belong to a single shareholder and is run by one or more managing directors.
No. German company law has no office of company secretary and requires no resident agent or resident director. The managing directors answer for the company’s filings: they sign the applications to the Handelsregister, which a notary certifies, and report the beneficial owners to the Transparenzregister.
Yes. A UK, US or other foreign company can own every share of a GmbH and appoint any managing director who is not disqualified, wherever that person lives. The shareholder list names the parent with its seat and register number, and the individuals behind it are reported to the Transparenzregister as beneficial owners.
A branch is registered with the court of the district where it sits: the foreign company’s directors apply, prove that the company exists, and give a German business address and the branch’s objects. It needs no German capital, but it is part of the foreign company itself, which carries its obligations. A GmbH is a separate German company with its own capital and limited liability.
It can be. For corporate tax, dividends from holdings of at least 10% and gains on selling shares are left out of income, with 5% treated as non-deductible. Trade tax has its own threshold: dividends from a German subsidiary drop out of trade income only where the holding was at least 15% at the start of the year. A parent above the GmbH may receive dividends with less or no withholding tax under the EU directive or a treaty.
Setting up a German subsidiary, holding or trading company? Tell us who will own and manage it and which ID they hold, and we will set out what a new GmbH or a ready-made one would need. We also answer on Telegram and WhatsApp at +48 663 247 166.