Germany has a large, sophisticated economy and consumer base. Business culture emphasizes preparation for formal meetings and a hierarchical structure within companies. Accounting requires annual financial statements and taxation of income. Company directors must act within legal and organizational powers and are liable for misconduct. Forming a company requires a minimum capitalization and share specification. Entering the German market provides access to skilled labor but regulations and regional differences pose barriers.

1. Ralph Rached
Business In Germany

2. Outline
Business Culture
Accountancy and Tax
Directors’ Duties
Company Formation
Market Entry

3. Business Culture
• Germany continues to retain its position as the driving force of the European
economy.
• It is a successful modern economy with a massively effective export engine at its
core.
• Germany is also a highly attractive market for your products and services.
• Germany has a large sophisticated consumer base with high levels of disposable
income and a large manufacturing base looking for components, inspiration and
expertise.

4. Business Culture-Dress code in Germany
• It is common for men to wear sports jackets and trousers with a shirt
and tie in business situations and for women to wear smart casual
clothes.
• In some of the new technology industries, dress is more casual – with
jeans being seen as acceptable attire.

5. Business Culture-Meeting Etiquette
• Germans could be described as pre-planners who like to attend meetings
having done a considerable amount of preparation in order to help them
debate.
• People are expected to contribute to the debate when discussions touch
their area of expertise but are not necessarily expected to have an opinion
on everything.

6. Business Culture-Structures
• Most of the power in German companies is vested in the hands of a few
senior managers.
• The management board is the final decision-maker on policy matters which
affect management.
• Companies tend to have a strictly hierarchical approach within which
individuals’ specific roles and responsibilities are tightly defined and
compartmentalised.

7. Accountancy and Tax
• Germany has become one of the largest exporters in the world and, due to the
size of its population, Germany is the largest consumer market in Europe.
• Like most of the major economies, Germany has been affected by the financial
crisis in 2008 and 2009, but the impact was less in Germany than elsewhere.
• As Germany is a part of the European Monetary Union, the Euro has been its
official currency since January 1, 1999.

8. Accountancy and Tax (cont..)
• After a period of weakness at the beginning, the Euro and the US dollar
have almost achieved parity (EUR 1.00 vs USD 1.07 in April 2017).
• Transport infrastructure:
With its 12,993 kilometers of motorways and its very extensive railway
system, Germany offers good conditions for the exchange of services
and goods.
 More than 100 international airlines fly to Germany.

9. Accountancy and tax- Audit Requirements
• All corporations must complete the financial statements by notes.
• Medium sized and large corporations should additionally prepare a
management report.
• The German Commercial Code defines three size classes: small, medium
sized and large companies.
• The criteria used to determine to which size class the company belongs
are balance sheet total, turnover, and the number of employees.

10. Accountancy and tax- Employment
• The German social security system provides that a portion of the
employee’s gross salary must be withheld for: pension insurance,
unemployment insurance, health insurance, supplemental insurance to
cover long-term nursing care and workmen’s compensation insurance.
• The employer’s portion is not considered taxable income of the
employee.
• If an individual is a German resident, then all employment income is in
principle subject to German income taxation.

11. Accountancy and tax- Taxation
• Once a corporation commences its business activities in Germany, it
is automatically subject to taxation in Germany.
• If a German representative office of a foreign corporation merely
supplies information to customers in Germany but otherwise does
not provide any other service in Germany, the office is not deemed
to be a “permanent establishment” and, thus, is not taxable in
Germany.

12. Directors’ Duties
• The duties and responsibilities of directors are codified by the German
Limited Liability Companies Act
• You must act within the powers imposed by legislation, the company’s
Articles of Association (“articles”) and by-laws.
• The articles govern how the company is to be run, including the powers
and responsibilities of directors.

13. Directors’ Duties- Liabilities and penalties
• In several cases, misconduct of a managing director can lead to
criminal liabilities, eg in case of:
Reporting false information to the commercial register.
Failure to inform the shareholders of losses amount to half of the
registered capital
Failure to comply with bookkeeping and accounting obligations

14. Company Formation
• Does the name of the company require approval by the Registry or other
authorities?
Answer: No, but a review on whether the chosen name is restricted by legal
requirements or trademark rights of third Parties required.
• Does the company need to provide a registered address?
Answer: Yes, it has to have a domestic business address.
• How many shareholders are required?
Answer: One Shareholder

15. Company Formation (cont..)
• Will the company need to specify a maximum number of shares
that can be issued?
Answer: No, but the minimum share capital must be EUR 25,000
and the number of shares must be specified.

16. Market Entry
• There are few restrictions regarding a business in Germany which
makes it an attractive region to start a business or to enter the
European market with an existing business model.
• The market is very competitive and does present some challenges.
• Advantages of entering Germany:
A Dynamic economy (significant spending power, an innovative climate
and it is located in the heart of Europe.)

17. Market Entry (cont..)
A Good Home for ideas (Inventions, intellectual property is well
protected in Germany.)
Support and Funding (All German states have professional
information centres for entrepreneurs and the advice is free. )
A Diverse Society
Skilled Labor Pool (Although Germany has a shortage of skilled
labour the freedom of movement principle of the EU allows the
country to recruit suitable employees from the rest of the EU.)

18. Market Entry- Barriers
• Regulations and bureaucratic procedures (There are complex safety
environmental standards that can complicate market access for foreign
businesses.)
• Regional Differences (The decentralized German market is very diverse.
Interests and tastes will differ from one German state to another.)
• Tax rates and complicated business and tax laws (Germany’s relatively
high marginal tax rates and complicated tax laws may present a You must
have a good tax consultant to guide you through this complexity and to
avoid critical errors.)