[ESTABLISHING A BUSINESS ENTITY IN GERMANY]
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shareholders of the general partner (GmbH) are identical to the limited partners of the KG. In line with the registration formalities of the KG, the GmbH & Co KG must be entered in the commercial register and registered with the local trade office. The liability of the limited partner will become limited once the KG and the subscribed partnership contribution are registered in the commercial register. The application to the commercial register must be made by all partners and be certified and submitted by a notary. The costs for registration in the commercial register vary but are about EUR 400. Fees for legal counsel are not included. h. Branch Offices Any foreign company with a head office and registered business operations outside of Germany can establish a German branch office. A branch office is a suitable business form for a foreign company wanting to establish a presence in Germany for the purpose of initiating business and maintaining contacts with business partners. In Germany, there are two kinds of branch establishments which primarily differ due to the degree of the independence from the head office company: - Autonomous Branch Office - Dependent Branch Office aa. Main Characteristics A branch office has no independent or separate legal personality distinct from the head office itself. In legal and organizational terms, it is part of the head office business and is thus subject to the law governing the head office. In this context, the foreign head office company is fully liable to the extent of its own assets for any claims creditors might assert against the branch office. Any obligations or debts incurred
by the branch office are also the legal responsibility of the foreign company. bb. Taxation of Branch Offices A branch office is subject to taxation in Germany if it is considered a permanent establishment according to the applicable double taxation agreement (DTA). An autonomous branch office is generally regarded as a permanent establishment, whereas a dependent branch office is only considered a permanent establishment under certain conditions. A German permanent establishment of a foreign corporation is taxed in Germany according to German taxation rules for corporations (corporate income tax, solidarity surcharge and municipal trade tax). (i) Autonomous Branch Office Characteristics The autonomous branch office (selbständige Zweigniederlassung) fulfills tasks that exceed mere implementation and support-related tasks. It is dependent upon the head office company at the internal level but engages in business activities independently. However, the foreign head office company is liable for the business transactions concluded by the branch. At the organizational level, autonomous branch offices are to a certain extent independent from the parent company and usually have the following attributes: - • Management with freedom to act according to their own judgement (i.e. with full power of attorney and power to contract) - Own capital resources and bank account - Separate accounting
ILN Corporate Group – Establishing a Business Entity Series
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