Establishing a Company in Germany

Setting up a Company in Germany

Toset up a company in Germany, you must address the issue of taxation in Germany. Before choosing a specific legal structure, you can seek advice from World Company Setup to learn about the financial implications of your decision. Our consulting focus and core competencies lie in the areas of tax advice, accounting, auditing and legal advice. As the center of the European Union and with its stable investment climate, Germany is a magnet for entrepreneurs from all over the world who want to start companies and expand their business networks.

Germany is one of the world's leading investment and business locations. The country's large industrial base, skilled workforce and strong infrastructure are key factors contributing to economic growth and business success. The country has a diverse business, research and development environment. At the same time, the advanced vocational training system facilitates innovation and growth.

If you are also considering setting up a company in other European countries, our guides on company formation in the Netherlands, company registration in Britain or company formation in Estonia may also be useful.

Opening a Company in Germany

The first step in company formation in Germany is to choose the legal form. Most investors choose limited liability categories, usually GmnH or Mini GmbH. You can register your company through our office in Germany. We also provide execution services to help you comply with regulatory requirements. Please note In most cases, foreign investors will need to visit Germany during the incorporation process in Germany.

Company Types in Germany

Every investor is allowed to open a company in Germany, to establish a company through a partnership or branch office. The minimum startingcapital for a company in Germany is between 25 - 50 thousand EUR. However, reductions are possible if the conditions are met. A company to be established in Germany as a subsidiary of an existing company(s) in Turkey can provide many advantages and conveniences, for example in terms of establishment and capital expenses or residence/work permits in Germany itself.

Limited Liability Company (GmbH): A limited liability company can be established by at least one investor with a minimum share capital of EUR 25,000. However, the shares of a limited liability company cannot be transferred to the public and cannot be registered on the Stock Exchange. You can get a free quote from our expert team to determine the most suitable company type for your needs.

German Stock Corporation (AG): The German joint stock company is suitable for large businesses. It requires a minimum share capital of EUR 50,000. A supervisory board of at least three members will regularly check the performance of the company management.

German Limited Partnership: A German limited partnership is an arrangement between two or more persons who decide to work together by mutual understanding. It therefore requires at least two partners.

Sole Proprietorship: In Germany, it can only be established with one's personal assets. However, the individual has unlimited liability when the sole trader faces bankruptcy. This is because the sole trader's profits are subject to individual income tax rates.

Branches: Branches are a popular way to enter the German market. Many foreign investors choose to open a branch office. A branch is not a legal entity because its liabilities and assets belong to the parent company. All legal and tax responsibilities of the branch belong to the parent company.

What is a UG (Mini GmbH) in Germany?

The UG (Unternehmergesellschaft – haftungsbeschränkt), popularly known as the “Mini GmbH”, is a low-capital subtype of the GmbH. Its biggest advantage is that it can be founded with as little as 1 Euro of share capital, making it ideal for start-ups and entrepreneurs who want a fast, budget-friendly start. As with a GmbH, shareholders’ liability is limited to the company’s capital, so personal assets are not at risk.

By law, a UG must set aside 25% of its annual net profit as a legal reserve. Once the reserve reaches 25,000 Euro, the company can be converted into a full GmbH without any additional capital payment. This makes the UG a gradual path for founders who want to start small and formalize as they grow.

GmbH: Advantages and Disadvantages

The GmbH (Gesellschaft mit beschränkter Haftung) is the corporate structure most preferred by foreign investors in Germany. It is worth weighing its pros and cons before deciding.

Company Formation Processes in Germany

Collection of Information: We will need your personal data on the name of the future company, description of business activities, etc.

Signing of Documents: You need to prepare and officially sign all necessary forms and documents.

Notary Registration: The first step of the registration process is the signing of the notarial agreement and obtaining the status of a legal entity.

Registration in the Trade Register: The registration process involves registering your company in the German Trade Register and obtaining an official Company Number.

Obtaining a VAT Number: After registration in the Trade Register, your company is registered with the German Tax Office and a VAT number is obtained.

Opening a Bank Account: The last step of the registration process is to open a bank account for your company in one of the banks of your choice.

Cost of Setting Up a Company in Germany (2026)

The cost of establishing a company in Germany varies according to the type of company, ownership structure, city and choice of advisory services. The table below summarizes typical line items for a standard GmbH formation.

Types of Taxes and Tax System in Germany

Tax ratesin Germany are competitive. They are advantageous for both local and foreign entrepreneurs. The average tax contribution is around 30%. Companies bear the burden of their worldwide profits. However, it is worth noting that Germany has signed bilateral investment treaties (BITs) and double taxation avoidance agreements with nearly 90 countries. Typically, companies resident in Germany are subject to two main classes of taxes:

VAT Value Added Tax [Umsatzsteuer]: VAT [Umsatzsteuer] is paid when you sell goods or services. The standard rate is 19% and a reduced rate of 7% applies, for example for professions in the arts and media. You must also invoice your customers for VAT and indicate this separately on your invoices.

Input tax [Vorsteuer]: You pay input tax on (almost) all company-related purchases. You must ensure that this tax is separately indicated on the invoices you pay.

Income Tax: Everyone who earns or receives income must pay income tax [Einkommensteuer].

The rate of income tax depends on the personal profit you make in your company (less all your business expenses). In the first year of your self-employment, the Tax Office will estimate your profit based on the information you provide.

Trade Tax: You will have to pay trade tax to your municipality every three months. Once a year you or your tax advisor will be required to prepare a business tax return and submit it to the Tax Office.

Corporate Tax: Corporate tax [Körperschaftsteuer] is only payable on profits made by companies [Kapitalgesellschaften] (GmbH, AG).

Comprehensive Tax Table for Companies

Choosing a City and Trade Tax (Gewerbesteuer)

The trade tax (Gewerbesteuer) rate largely depends on the multiplier (Hebesatz) set by the municipality. Your choice of city directly affects your annual tax burden:

Key Regulatory Updates for 2026

E-Invoicing (E-Rechnung) Requirement

Since 2025, the ability to receive e-invoices for B2B transactions has become mandatory in Germany. The EN 16931-compliant formats XRechnung and ZUGFeRD are being adopted. The obligation to issue (send) e-invoices is being phased in gradually depending on company size and the transition timetable. Newly established companies are advised to take these standards into account when choosing accounting software.

Kleinunternehmerregelung — VAT Threshold Raised

As of 2025, the small business exemption (Kleinunternehmerregelung) threshold was raised from 22,000 Euro to 25,000 Euro. Businesses below this threshold are not required to charge VAT on their invoices, although the obligation to file VAT returns continues.

Online Notarization (Online-Beurkundung)

For UG and GmbH formations carried out with standard incorporation protocols, the option of online notarization and video identity verification has become available in certain federal states, subject to conditions. For cash-capital formations, this process can be completed faster than the traditional method.

Income Tax Exemption Threshold Increase

The 2025 basic tax-free allowance (Grundfreibetrag) was 12,096 Euro. As of 1 January 2026 it was raised to 12,348 Euro. Annual income below this amount is exempt from income tax.

Gradual Corporate Tax Reduction (From 2028)

For 2026 the corporate income tax (Körperschaftsteuer) rate remains 15%; together with the solidarity surcharge (Soli) the effective rate is 15.825%. Under Germany’s announced tax reform, the corporate tax rate is set to be gradually reduced from 2028: 14% in 2028, 13% in 2029, 12% in 2030 and 11% in 2031. This measure aims to make Germany more competitive for corporate investors over the medium term. Please verify current rates with the Finanzamt and official sources.