By Shannon Power, 1st February 2023
As the country with the largest economy in Europe and the fourth largest globally, Germany has always been attractive to entrepreneurs and business owners alike. Starting a business in Germany comes with numerous benefits and has a rich history of world-class research and innovation. The country has a large, diversified economy supported by a well-developed, reliable infrastructure, a stable legal environment, and multiple supports for those looking to set up a new business.
Investment Incentives for Starting a Business in Germany
The German Government provide a variety of incentive programmes and public funding instruments to those looking to incorporate their business or expand their pre-existing entity here. These incentives can help companies expand into the German market by assisting with some upfront costs. Public funding is divided into four different groups: Direct grants, public loans, public guarantees, and equity capital.
Some examples of direct grants:
GRW Cash Grants – Cash incentives are offered to reduce the cost of facility set-up in the form of grants. Larger companies are eligible to be reimbursed for up to 20% of their investment costs. Whilst medium companies are eligible for 20% reimbursement, and small companies can receive up to 40%.
Research & Development Grants – The government has committed 3% of its GDP to fund research and development. These programs include interest reduction loans and other special programs.
Hiring Grants – The German Federal Employment Agency and German States offer a variety of labour incentive programs created to meet the needs of companies looking to expand their workforce. These include support for searching for staff, employee training, and wage subsidies after hiring unemployed workers.
Strong Infrastructure and Market
Germany offers a second-to-none manufacturing, energy, and communications infrastructure with a state-of-the-art transportation network. In addition to the country’s location in the heart of Europe, the expansive infrastructure provides quick and easy access to both the domestic and international markets.
With over 300 airports, 23 heliports, and 27,000 miles of railway, Germany is responsible for 29% of all exports to non-EU countries. The country also offers an open economy with a foreign trade quota of 84.4%. An impressive quota when compared to the United States’ foreign trade quota of just 26.7%
Germany has widespread access to high-speed Internet and one of the world’s most advanced telephone systems. This advantage makes it an ideal location for hiring international remote workers.
Commitments to Research & Development
Germany is among the top ten most innovative and open-minded countries in the world, with a strong emphasis on using science for economic benefit. From software to pharmaceuticals, this emphasis has led to major job growth and has been an easy way to integrate German scientific research to benefit society.
The government shows a strong commitment to research and development by funding research institutes, supporting the creation of start-up companies, and licensing intellectual property to help researchers build careers outside of academics. The Agency for Breakthrough Innovations is charged with launching innovations with new technologies. Therefore, new investors have a greater potential to transform markets with new products, services, and value chains.
Legal Protection of Ideas & Concepts
Starting a business in Germany offers strong legal protections for ideas and innovations, thus enabling investors to enforce their rights and protect their industrial and intellectual property.
Intellectual property is protected under the following acts:
- The Copyright Act (UrhG)
- The Trademark Act (MarkenG)
- The Patent Act (PatG)
- The Utility Model Act (GebrMG)
- The Act Against Unfair Competition (UWG)
- The Designs Act (GeschMG)
Additionally, Germany’s Competition Laws also mean that people cannot make false claims about a business. Any individual or entity that makes such a claim can be charged with a crime.
Companies in Germany
Starting a business in Germany requires understanding its company types and tax structure.
Germany’s main entity types include:
- Limited Liability Companies (UG & GmbH)
- Joint Stock Company (AG)
- General Partnership (OHG)
- Limited Partnership (KG)
New businesses must register with the local tax and trade offices, the local chamber of commerce, the commercial register, and any relevant professional or industry organisation. Corporation tax is 15% with a solidarity surcharge of 5% levied on CIT and a municipal surcharge of between 14%-17%. Combined the tax rate is between 30%-33% approximately.
If you are interested in learning more about the benefits of setting up a company in Germany, contact the Euro Company Formations team today! Call us at + 353 (0) 1 6461627 or fill out our contact form.