[ESTABLISHING A BUSINESS ENTITY IN GERMANY]
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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 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
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 An autonomous branch office can use its own name affix (for example: XY Ltd., branch office, Berlin).
Setting Up an Autonomous Branch Office
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Foreign companies can set up an autonomous branch office in Germany if they are entered in a foreign commercial register (or a comparable directory). The decision to establish a branch office must be made by the managing directors of the head office. The autonomous branch office must be entered in the commercial register and registered with the local trade office.
Registration
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Commercial Register The application for registration with the commercial register must include detailed information on the foreign company and generally be accompanied by a notarized copy of an excerpt of the commercial register
Characteristics
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ILN Corporate Group – Establishing a Business Entity Series
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