7 ms·

Incorporating a limited company in Germany

104 points by timmy-turner 10y ago

_petronius 10y ago
Although designed for investors, rather than founders, this is an interesting (English-language) primer on different corporate structures available under German business law, and the regulations that pertain to each: http://www.fr-lawfirm.de/fileadmin/user_upload/Aufsaetze/Doin_Business_in_Germany.pdf http://www.fr-lawfirm.de/fileadmin/user_upload/Aufsaetze/Doi...
atemerev 10y ago
The same story in Switzerland, perhaps even worse. Any company here generally requires a full-time administrator to handle the paperwork (and salaries here are huge). Or you can outsource it to the agency, but it will cost at least $10k/year, even for the smallest operations (cheaper than hiring a full-time administrator, however, agencies tend to miss things).
- alternize 10y ago
  huh, where does your experience come from? currently running two small swiss it companies (3 and 6 employees), and ran several more in the past. none had a "full-time administrator". founding costs (notary, fees etc) were always around €2000 for GmbH and €5000 for AG. our yearly expense for an external accounting expert to do our end-of-year accounting and taxes is around 1k to 2k per company (i.e. 1 to 2 man-day).
  - atemerev 10y ago
    Which canton are you incorporated in? My experience is with the canton of Geneva, where I have made multiple beginner's mistakes.
    - alternize 10y ago
      sorry for the late reply. nidwalden and zurich... there was not much difference between the process in the two cantons. we had a lawyer and an accountant help us in the beginning to get the hard-to-figure-out things during incorporation right. money well spent!
- matt4077 10y ago
  If you actually look at the meat of the article you'll notice that all it takes for the setup is about an afternoon with a notary and 500 Euros. Yearly expenses are mentioned by the author somewhere in this threat, and he says 2000 Euro pa, but note that they're talking about a business that must do at least 6-figures revenue (otherwise VAT reporting wouldn't be on a monthly basis). For a minimum shell company, you can easily get by with a few hundred, and the burdens scale at below O(n), so it never becomes economical to chose a different jurisdiction for for the administrative burdens.
  - atemerev 10y ago
    It's not expensive, but quite time-consuming. :(
jasonlingx 10y ago
Try Singapore!
DanSmooth 10y ago
There is missing ("Gewerbeamt") and partially wrong information there (the 17.500 VAT thing), so use with caution! My best advice: get a tax-guy. They do all this crap and more and while they come with a price (German tax laws are no laughing matters) it's money well spent and also acts as security because said tax-guy shoulders a lot of accountability (pun intended).
- dom0 10y ago
  > German tax laws are no laughing matters Which are?
  - zdkl 10y ago
    Ever been to the middle east?
- swerner 10y ago
  You're right, that's the simple and valuable one-sentence advise for anyone starting a business in Germany, and I can only repeat it: get a tax advisor. Trust me, it'll pay for itself.
- 1029381010 10y ago
  Get a good tax guy. And therein lies the problem. No matter if you pick lawyers, doctors, tax advisors: 4 out of 5 are incompetent.
hdivider 10y ago
Infinitely easier in the UK: you don't need capital, the forms are simple, it costs virtually nothing and you'll be done in less than a day. https://www.gov.uk/limited-company-formation/register-your-company https://www.gov.uk/limited-company-formation/register-your-c...
- eb0la 10y ago
  I guess that's the reason a lot of companies work in the UK. I remember a lot of recruiters doing business from there because looks like it's easy to start. Probably after brexit this will be still a competitive advantage of the UK against other markets.
- wukerplank 10y ago
  There is/was quite some founding tourism from EU countries with more complicated laws to the UK. I wonder how the Brexit will affect them.
  - danmaz74 10y ago
    I did that from Italy, wouldn't do it now because of the uncertainty related to brexit. We'll see in the near future.
    - stefano 10y ago
      Don't you need to have physical presence in the UK to open a company?
      - helge5 10y ago
        You just need a postbox/business-address which is usually hosted by the service provider you use to do the UK registration and all that. Note that a Limited doesn't free you from having to deal with the local authorities (Gewerbeamt in Germany, tax office, etc).
  - helge5 10y ago
    In Germany this was common before they introduced the 'UG' which is a GmbH (limited liability company) w/o the 25000 Euro investment requirement. I know a few people who did found in the UK, it works and isn't particularly hard either (and there are companies which do the paperwork for you for relatively little money). Now you can start a UG with a 1,- Euro investment (more like 500 Euro min because it still has to cover setup fees). Which I think has made the UK thing superfluous, just complicates things even more.
eb0la 10y ago
I really love this quote: "only available in German, but don’t worry most Germans don’t understand it either, because it contains a million juristic and fiscal terms". I guess this applies to any human language ;-)
jankotek 10y ago
Germany is probably bad option within EU. I would recommend Bulgaria: flat tax rate 10% on corporate income and capital gains. Considerably cheaper office and accounting cost.
- deleted 10y ago
  [deleted]
- JPLeRouzic 10y ago
  Interesting, is there some kind of e-residency as in Estonia?
  - jankotek 10y ago
    To run corporation you should have physical presence in Estonia as well.
    - kennell 10y ago
      Others in this thread have suggested that no physical presence is required.
      - Neliquat 10y ago
        Others in this thread have also suggested tax fraud. Hearsay in either direction are not facts.
  - loxs 10y ago
    No, and dealing with the government is quite an adventure, even for natives (as I am). I certainly do not recommend, unless you have a Bulgarian native co-founder or/and lots of money to spend on good accountants/representatives.
- zurn 10y ago
  Note that registering a company in another country doesn't necessarily stop your local government from taxing it. Especially if the owners and employees stay in your country.
jcrei 10y ago
Estonia, simple forms, simple tax system (even a layman can understand it and can do their own taxes or small biz taxes). No need to visit to open a company or bank account if you have an e-resident card. E-residency cards are available to citizens of most nations.
- holydude 10y ago
  The only way for Estonia to get rich :-) keep it up!
- return0 10y ago
  How is their banking/financial/legal services compared to countries that have been doing it for decades, e.g. malta, cyprus, ireland?
- velcro 10y ago
  have always wondered on the benefits of forming a company in Estonia - I'm not an expert - but wouldn't you still need to pay personal taxes in your country of residence (where you spend 6+ months in a year) in addition on what you pay in Estonia?
  - helge5 10y ago
    You pay personal taxes on your personal income (the salary the company may give you). That is completely distinct to the type of the company discussed in the link, a GmbH/UG. A company construct like that is its own legal person and it pays its own taxes (which usually works different to your 'personal taxes'). Where it has to pay them is a question for your tax accountant, I think (ignoring loopholes) a company producing income in Germany has to pay taxes on that in Germany, regardless where the company is registered. Though especially with IT it is sometimes hard to specify the 'where' :-) But trust me, the tax authorities will know :-) What you can gain by filing your company in Estonia is less bureaucracy. The talk is that Estonia is a lot in e-government, so I suppose that means you can do a lot of filing stuff very conveniently on the Internet. Or if you employ people in Estonia, the employment laws may be less strict than in a country like Germany. If you plan to operate out of Germany, I don't think you'll gain much by registering a company in Estonia. If you want to move to and operate in Estonia, it may be well worth a consideration. As mentioned, in the past people filed companies in the UK to avoid the 25000 Euro investment required for a GmbH. But that's gone with the UG.
ringtail 10y ago
Is there a reason to not go BVI/Nevis IBC route for a small online startup ? The no accounting/record-keeping requirement should look appealing to many, beside 0% tax :).
- gcp 10y ago
  Well, if I Google the name, the first 10 hits look like spam sites set up to promote it. That's a reason not to go that route, IMHO.
- charlesdm 10y ago
  Some EU countries have tax laws that look through said structures, attributing earned income to the shareholders. That's one reason. Second, if you play by the book (and a lot of people who use these entities don't), you can't control said entity directly from an EU jurisdiction. You need to fly there (or somewhere else with no corporate tax) and do board meetings there. There are cases where it's worth it, but it almost always has to do with shaving off percentage points of corporate tax from your profits, and not with reducing administrative burden. If anything, if you want to use a company like this (or any foreign company), you need to be careful and understand what you can and cannot do under the laws of your resident country. The internet does offer some additional opportunities, because it's not location linked and it's often hard to figure out how to tax internet generated revenue. It's easier to do tax arbitrage, but doing it right also requires a great deal of additional paperwork (+ extra overhead expenses). You should read up on tax law -- the cost of getting it wrong can be high.
  - ringtail 10y ago
    Any real world success & failure stories I can read upon ? > Some EU countries have tax laws that look through said structures, attributing earned income to the shareholders. That's one reason. Even if the company is not tax resident of said countries ? Mind pointing me to the laws/countries. > doing it right also requires a great deal of additional paperwork (+ extra overhead expenses) Any estimate ? This is very informative. Thank You.
    - 10y ago
gcp 10y ago
Don't worry, your government representative has some good ideas to improve the startup landscape and internet companies! You'll get a 40% corporate tax deduction for the first 4 years if you crowdfund. There are, of course, specific conditions and regulatory work for the crowdfunding agency which mean no existing one (that anyone here has ever heard of) meets the bar and will essentially require a local operation to be set up. One of the biggest local banks (who probably pushed for the legislation?) meets the bar, though. What do you mean, your potential backers want to use existing platforms they know? I'm sorry but can you ask those Kickstarter guys to file paperwork in our country (which they have never heard of either)? If that's not an option, there' also the possibility to issue bonds. Bondholders won't have to pay the 30% tax on the bond's dividend if you start paying them out. Lastly, it should be noted that all of the above benefits are forfeit if the crowdfunding campaign sends any backers' rewards. I wish I'd make this up, but it was signed into law 3 days ago.
- sgift 10y ago
  Which monkey law was that? Must have missed that new "great" idea.
  - gcp 10y ago
    Wasn't in Germany, but I'd be surprised if you wouldn't find similar "initiatives" over there. It's a common EU disease.
helge5 10y ago
The text is pretty good and covers some basic rules (such as having an imprint), but it makes the process look much harder than it actually is. I did some as a noob and found setting up an (IT) GmbH and UG in Germany very easy. All the involved people, from the bank to the notary to the tax consultants are usually very helpful and supportive. E.g. setting up the bank account requires a certain flow (because a GmbH is its own legal person), but the notary and the bank will tell you the exact steps (it is like 3 or 4, having the bank and the notary close by makes it easier as you can just walk between the two and get it done on a day :-). The notary will notify all the local authorities that you got founded, you don't need to do anything on your own here. Though I suppose it is much harder if you don't speak German, or have a friend which does. I recommend finding a good tax consultant first. Unlike stated in the text they actually are cheap as long as your company doesn't make a lot of money (the fees are usually bound to the earnings). You pay ~70 euros a month, plus ~1000 for the year-end stuff, and they do everything required for you, all the filings, talk to the tax authorities when required, etc. Since they see you as a potential future business (when you make actual money), they will usually help you with all the other things (notary, bank). Some are even registered 'startup helpers'. Note that you don't have to have a GmbH, you can also just register a 'Gewerbe' (a business) under your own person. That is even easier and much cheaper, but you have full personal liability. Important: This is specifically for IT companies, which are easy. If you setup other companies, like in the building sector (but almost any other field is affected by this, even a hair cutter!), it can be way harder and usually requires an approved education (you need to be a 'meister' in your field). The text suggests that you should delay founding the company as long as possible. Be careful with that. If you say produced a significant amount of software before, you technically have to 'sell' that to the company for the fair value (and pay taxes on that etc). It can make things easier if everything is 'owned' by the company from the start. If you talk to investors or want to sell the company, they will want to know about such stuff. Summary: IMO it is very easy to setup a GmbH/UG - at least if you speak German or have a friend who can translate. Yes, it does cost some money to start and operate (I'd say, calculate ~2500/y), but you'll get limited liability. P.S.: This again makes the process kinda harder than easier, but most German states actively support startups. There is sponsored consulting for setting up business plans (usually as part of a competition), if you plan to employ people you can get that co-financed, most states even have state-VC's! There are many programs and a lot of public money is put into supporting startups in Germany, but well, you have to deal with authorities :-)
crypt1d 10y ago
Not sure if there is a specific benefit in incorporating in Germany vs some other EU country. If there isn't, I'd suggest looking into Estonia and their e-residency program. They have a fixed 20% corporate tax which you only pay when you take the money out of the company (as opposed to paying on income). I've recently applied and the bureaucracy has been a breeze so far. You can find some more info at https://bkpk.me/estonia-eresidency-digital-nomads https://bkpk.me/estonia-eresidency-digital-nomads
- therealmarv 10y ago
  In my opinion this is only great if you live outside the EU and want to have a financial place in the EU. One example: Imagine you live in Germany. When you create this company in Estonia good luck in describing to German tax authorities why you have founded it there and not in Germany! You probably also have to pay more taxes in total (to Estonia and Germany) if you are transferring money to yourself.
  - helge5 10y ago
    If you want to keep it simple it very likely makes sense to found the company where you reside. If you don't mind complexity, lookup `Double Irish With a Dutch Sandwich` :-> If you want to move to Europe (which I think was part of the idea of the article), it may indeed make sense to consider where to move. Germany (and one of its startup hubs, like Berlin or Hamburg) is probably not the worst place to be for various reasons, but I've also heard good things about e.g. Estonia. I don't have backup readily available but I think your statement about the taxes is just plain wrong. Generally I think income is taxed where it is produced and Europe has (no)double-taxation treaties with pretty much any country. Personally I'd still avoid the extra complexity for a startup :-)
    - tornadoboy55 10y ago
      Please don't put a smile after that. Corporate tax evasion is a blight on society and people facilitating it are scum. Pay your dues, just like the people of a society have to.
LanguageBarrier 10y ago
I would not recommend Bulgaria, Estonia or any other "dodgy" countries to form a limited company alas you yourself are from that country. For a lot of big businesses simply looking at a company address where the country has no to bad rep is already a red flag. So you will have to do a lot of convincing work to do if you want to get funding. Even a UK limited is the running gag in upper management since it needs next to no effort to create one and they are by default a risky to work with. In the past it was a common thing for dubious companies to create limiteds in the UK and this history is what drives the stereotypes of today. That said I am confident that Germany is not the cheapest option tax wise and there is a lot of paperwork to do to get your company running. On the flip side you will inherently gain more trust with potential customers and investors.
- loxs 10y ago
  I wonder how did you come up to put Bulgaria and Estonia in the same bucket. The two countries have almost nothing in common. I am a Bulgarian native and for my current endeavor I seriously consider creating an Estonian company.
  - adventured 10y ago
    The parent's comment ("dodgy") definitely doesn't seem to make sense. Estonia ranks fairly well internationally in terms of being non-corrupt and safe to live and do business in. It's at least on par with highly developed nations such as France or Japan and is better than most of Europe. eg: http://www.transparency.org/news/feature/corruption_perceptions_index_2016 http://www.transparency.org/news/feature/corruption_percepti...
    - matt4077 10y ago
      The dodgyness ("caninety?") in this case may actually be a result of their non-dodginess ("felinity?"): Estonia is big on e-government and have apparently made the process of registering an llc really easy. That attracts all sorts of people for whom it makes a difference if the process costs $100 or $110. And that is – as a group – self-selecting for people you can't necessarily trust as much as others. The same mechanism is at work with British LLCs. Those became somewhat famous (being first in this market) because they were often used by people who couldn't start a company in their native country – most often because of messy bankruptcies that can get barred from trying again for certain periods.
Loic 10y ago
For the context: 7 years running a UK limited from outside the UK (until 2014) and 3 years running a GmbH from Germany (now). In both cases, I am a chemical engineer and I am doing mostly programming/consulting work[0]. At the end of the day, it costs basically the same if you are in UK or in Germany because your cost will be your salary and if you read the advices here you are anyway to small to run some special tax optimization programs. For Germany because the costs are in my head: - Notary costs for the contract: 450€ - Registration of the company (chamber of commerce): 150€ - Registration at the city level: 20€ Opening a bank account is free but it will cost you about 100€ to "run" it. The real added costs are the accounting costs. About 80€/month to take care of the books and the paper work for the salary (inclusive transmission of the salary tax information to the Finanzamt and VAT) + 1500 to 2500€/year for the "end of the year" accounting and taking care of the related taxes. So, the "company structure" costs are about €2000/year if you go through the services of an accountant (you really must do it in fact). The real cost will anyway be your salary. In UK, the taxes on the profit of the company is lower than in Germany, it is here where I would have been pleased to have in Germany at least a small "less than XXX€ no taxes" or a relatively easy way to schedule charges in the future to transfer money from one year to another. If you are a single person, saving for a future project is a bit hard in the current structure. Let say you want to accumulate 100k€ before hiring somebody, you end up with the need to make 150k€ extra on top of your salary to have the 100 on your bank account "free" from tax liability. [0]: https://www.ceondo.com https://www.ceondo.com
- matt4077 10y ago
  Do you feel that any of the bureaucracy creates an undue burden – or one that could possibly thwart a company which would otherwise achieve scale? I'm asking because the article seems to buy into the narrative that these rules and regulation create an actual obstacle to ventures such as google ever being founded in Germany, and having gone through the process a few times, I can neither find any step of the process that I would consider completely unreasonable (except the chamber of commerce), nor could I imagine it being more than an irrelevant nuisance to any dedicated team. I also think the 2000 Euro/year you're citing is true only for a company actually doing a fair amount of business and having employees. I'm sure it's less than half that if you're just maintaining the legal structure, or are a single founder before launch – VAT reporting, for example, has threshold below which reporting happens only quarterly or yearly.
retromario 10y ago
A couple comments (having started both an UG and GmbH): - I don't recommend starting an UG with less than 2k capital. If you do the minimum (1 euro), you won't have anything to pay your startup bills and it costs extra money (and a trip to the notary) to change your company's investment capital. - While a GmbH requires 25k capital, only half has to be paid into the company. The rest is marked as a liability on the shareholders. - A GmbH is generally looked upon as "more serious" than an UG. Some companies won't interact with you if you're an UG, but this is changing over time. - For what it's worth, I used to hate the bureaucracy, and it can be streamlined further but over the years (and multiple attempts) I've come appreciate how it reduces the risk that you are dealing with shady companies. - Thanks for the tip about Fidor bank! Setting up a company bank account is a pain in the ass in Germany.
- harperlee 10y ago
  Can't you just donate money to the company? Would that entail tax?
  - i_don_t_know 10y ago
    It might subject you to gift tax. If you give more than 20k€ to a private person over the course of X years, you have to pay 20% gift tax on the amount above 20k€. Something like that, the numbers may be wrong. I don't know if there are similar rules when you give money to a company.
  - matt4077 10y ago
    "Donate" sounds strange, but yes, you can pay any bill from any account – including your personal one, or cash in your wallet. Technically, this would be regarded as a loan to the company, and you can later pay it back to yourself. As long as it's a business-related expense and the company's name is on the bill (above a certain threshold), you can claim those expenses on the business' taxes if you later make any revenue. What may make this a bit complicated (and make the advice given above sound) is that one of the condition triggering bankruptcy is having more liabilities than assets. If you start the company with 1 Euro, and then go for coffee with the notary spending 10 Euros with the intent to claim it as a business expense, you're 9 Euros underwater. Not sure if this is something you have to monitor throughout the year or if it only becomes relevant when you actually do the bookkeeping at the end of the year. Contrary to popular opinion (and the article) this stuff is quite easy to sort out as long as it doesn't involve real money, so I wouldn't worry about it. I know some people start companies with a bit of money for this reason, or even use something physical (i. e. their notebook) as an initial deposit into the company. And just in case people are wondering "but why": these rules are supposed to protect vendors. Limited liability companies shield the founders from financial responsibility, so the rules are written in such a way that founders/owners are on the hook for at least 25,000 Euro (GmbH), or – nowadays – that the risk is clearly communicated to vendors. You can start a personal company much easier (basically a form with an address field and three questions) if you don't need limited liability.
tobltobs 10y ago
I incorporated a Limited in the past in Switzerland, Germany and France. Switzerland is a snap, Germany is unnecessary time consuming. France is hell. Clarification: Setting up a SARL in France is comparable to Germany, but the red tape to run it is hell.
- thibaut_barrere 10y ago
  Curious to know when you incorporated in France exactly? It didn't seem too hard to me when I did it, and sites like https://www.legalstart.fr/fiches-pratiques/creer-sa-societe/ https://www.legalstart.fr/fiches-pratiques/creer-sa-societe/ mention that you need 5 admin procedure and 7 days to start one, where the average of the G20 countries is 7.6 admin procedures and 22 days on average. So I really wanted to know more about when and how you incorporated etc, out of curiosity. EDIT: more data, here is a report from 2013 with the data I mentioned above (table at page 8) http://www.ey.com/Publication/vwLUAssets/EY-G20-country-report-2013-France/$FILE/EY-G20-country-report-2013-France.pdf http://www.ey.com/Publication/vwLUAssets/EY-G20-country-repo...
  - charlesdm 10y ago
    Belgium is probably similar. One "trick" I've discovered for bureaucratic countries is that certain lawyers will be able to set up entities blazingly fast, in comparison to doing it all yourself. That's because they have the contacts to get it all done (bank account, notary visit, required reports, etc) in a day or two, instead of 1-2 months.
thomasbachem 10y ago
And there's the BAFA INVEST program (http://www.invest-wagniskapital.de http://www.invest-wagniskapital.de, German language only) that refunds/grants 20% to any EU-based angel investor who invests in German startups. It's actually a really great and pretty unbureaucratic program.
- pmoehring 10y ago
  ... if you invest more than 10K. But yes, it's a good setup.
  - dx034 10y ago
    I wouldn't consider someone who gives €100 to a startup an angel investor.
    - helge5 10y ago
      €100 Hm? 10k = ~10.000+. I'd consider that an angel investor (10..100k).
therealmarv 10y ago
3 words: Don't do it! Unless you are focused on Germany and German market and you are forced to live in Germany.
blsquare 10y ago
Germany is one of the worst options in Europe to incorporate, except you reside in Germany. My top 10 list of why not to incorporate in Germany: 1. Yearly accountant costs of a limited (UG/GmbH) is around €2,000; you need this accountant, he is kind of an API to the German tax system which is super complicated and even native Germans wouldn't be able to handle its requirements or to file in all the paperwork themselves; AND it's not so easy to find good accountants/tax consultants, once you found one you are locked-in and they happily charge you for every extra things; the pricing is regulated but still they find ways to get all your money 2. 'Protection money', you have to pay to IHK which should help business owners (but they nothing) and to ARD/ZDF which are Germany's public TV stations; the costs depend on your headcount and are not that high but once ARD/ZDF have your name they never ever again let you out, so it's impossible to cancel this 'subscription' and you might pay additional fees for you 'personal self'; it's a mafia which creates additional mental clutter and mail 1. + 2. Just the operating costs of a limited which doesn't make any money is €2,500 to €3,000 3. Germany has probably the most friendly labor law; at the end of the day employees have in Germany super powers; e.g. if you have more the ten headcount it's impossible to lay off people (there are many, many more, I could give you 20 more examples); 30% of your time is spend on how to work around German labor law with German lawyers at €300/h 4. They try to get everybody to pay into their social system, once you are under 49% shares you must join them leaving most of your personal salary to the state; the only benefits is an ok health system and an ok unemployement insurance 4.a) Having freelancers is risky because the state always suspect you to circumvent their social system; one mistake and the freelancer can blackmail you 5. Super strong consumer protection but which is applicable to all European countries; consumers get it all (money-back guarantee, ...) 6. Setup of the limited is unnecessary slow and bureaucratic, takes 6 to 8 weeks and all the momentum out of the founding team 7. You need at least €12,500 share captial for the GmbH, forget about the UG, doesn't have any reputation and to migrate to a GmbH later is a PITA 8. Taxes are cluttered, you have VAT, corporate tax and 'Gewerbesteuer' 9. German labor is ok but not as good as e.g. US labor; non-tech labor is in general too expensive and education is limited, especially English skills are not on par with other Northern European countries, still better than southern European countries; tech labor is good but expensive compared to rest of Europe, but cheap again compared to the US; still it's very hard to find affordable native German devs so people look for foreign tech talent which are good and easy to attract in bigger cities (Berlin) 10. Political situation is ok and stable compared to US and UK but could tip with elections in summer, right wing is strong but not as strong as in other countries Some more: 11. Shutting down your limited takes one year 12. Insolvency is covered in its own law and is super complicated, don't apply to early, don't apply to late 13. In general all German laws are very cryptic written and even for native German hard to understand without experts; even simple tax stuff is hard to grok and other countries have much more accessible laws (just look at gov.uk as an example); calling your tax guy helps here and there but costs money; researching stuff yourself takes days 14. You have to save documents and even mail which led to business for 10 (!!!) years; after few years you need to rent a space just for all the folders Who knows about better options in Europe? Happy to hear alternatives, also from a relocation perspective, so which country is founder-friendly AND nice to live?
stephanos2k 10y ago
Are there any (German) resources on how to do the tax reports yourself? I can't find anything. I did incorporate too early and now have nothing but a few payments to declare. Don't want to spend 500€+ on the accountant :-/
hhstartuper 10y ago
Anyway, I don't understand what I do wrong, if: 1. I have a job in Germany and live in Germany 2. I have opened a company in Estonia (owner) 3. I do consultancy through USA services (like Upwork) for USA or UK clients and money is earned by a company in Estonia 4. How an estonian's company income (not a income of a person) be taxed by germany? 5. If i want to get money from company - it will be dividents with taxation in Estonia and rest in Germany Is something wrong in this situation?
- helge5 10y ago
  Nothing about that seems wrong at all. 1. doesn't matter. It sounds like this is your day job unrelated to the hypothetical company. 2. this is OK, you can do that. 3. this is where it becomes a little more difficult. since you are presumably working from Germany, the value is created in Germany and therefore is going to be taxed there. sounds like the obvious (and fair) thing to do to me. 4. income is taxed where it is created, not where you originate from. Consider it like this: If I'm a German and live more than 6 months in the US, my primary taxation point is the US. My origin doesn't matter, it is where I live (and in essence whose state services (what taxes pay for) I use). The same goes for companies. If the company is registered in Estonia, fine, you can do that. But if the company is actually _operating_ in Germany, well, you have to pay taxes over there _just for the business you do over there, NOT for business you do from Estonia_. 5. yes, this is personal income. You'll pay taxes in Estonia which you can match up to your taxes in Germany. In no circumstance you pay twice. Again sounds very correct to me. To be honest I'm not entirely sure this is the actual situation, but nothing about it seems wrong :-)

104 points by timmy-turner 10y ago

Although designed for investors, rather than founders, this is an interesting (English-language) primer on different corporate structures available under German business law, and the regulations that pertain to each: http://www.fr-lawfirm.de/fileadmin/user_upload/Aufsaetze/Doin_Business_in_Germany.pdf http://www.fr-lawfirm.de/fileadmin/user_upload/Aufsaetze/Doi...

atemerev 10y ago

The same story in Switzerland, perhaps even worse. Any company here generally requires a full-time administrator to handle the paperwork (and salaries here are huge). Or you can outsource it to the agency, but it will cost at least $10k/year, even for the smallest operations (cheaper than hiring a full-time administrator, however, agencies tend to miss things).

alternize 10y ago
huh, where does your experience come from? currently running two small swiss it companies (3 and 6 employees), and ran several more in the past. none had a "full-time administrator". founding costs (notary, fees etc) were always around €2000 for GmbH and €5000 for AG. our yearly expense for an external accounting expert to do our end-of-year accounting and taxes is around 1k to 2k per company (i.e. 1 to 2 man-day).
- atemerev 10y ago
  Which canton are you incorporated in? My experience is with the canton of Geneva, where I have made multiple beginner's mistakes.
  - alternize 10y ago
    sorry for the late reply. nidwalden and zurich... there was not much difference between the process in the two cantons. we had a lawyer and an accountant help us in the beginning to get the hard-to-figure-out things during incorporation right. money well spent!
matt4077 10y ago
If you actually look at the meat of the article you'll notice that all it takes for the setup is about an afternoon with a notary and 500 Euros. Yearly expenses are mentioned by the author somewhere in this threat, and he says 2000 Euro pa, but note that they're talking about a business that must do at least 6-figures revenue (otherwise VAT reporting wouldn't be on a monthly basis). For a minimum shell company, you can easily get by with a few hundred, and the burdens scale at below O(n), so it never becomes economical to chose a different jurisdiction for for the administrative burdens.
- atemerev 10y ago
  It's not expensive, but quite time-consuming. :(

jasonlingx 10y ago

Try Singapore!

DanSmooth 10y ago

There is missing ("Gewerbeamt") and partially wrong information there (the 17.500 VAT thing), so use with caution! My best advice: get a tax-guy. They do all this crap and more and while they come with a price (German tax laws are no laughing matters) it's money well spent and also acts as security because said tax-guy shoulders a lot of accountability (pun intended).

dom0 10y ago
> German tax laws are no laughing matters Which are?
- zdkl 10y ago
  Ever been to the middle east?
swerner 10y ago
You're right, that's the simple and valuable one-sentence advise for anyone starting a business in Germany, and I can only repeat it: get a tax advisor. Trust me, it'll pay for itself.
1029381010 10y ago
Get a good tax guy. And therein lies the problem. No matter if you pick lawyers, doctors, tax advisors: 4 out of 5 are incompetent.

hdivider 10y ago

Infinitely easier in the UK: you don't need capital, the forms are simple, it costs virtually nothing and you'll be done in less than a day. https://www.gov.uk/limited-company-formation/register-your-company https://www.gov.uk/limited-company-formation/register-your-c...

eb0la 10y ago
I guess that's the reason a lot of companies work in the UK. I remember a lot of recruiters doing business from there because looks like it's easy to start. Probably after brexit this will be still a competitive advantage of the UK against other markets.
wukerplank 10y ago
There is/was quite some founding tourism from EU countries with more complicated laws to the UK. I wonder how the Brexit will affect them.
- danmaz74 10y ago
  I did that from Italy, wouldn't do it now because of the uncertainty related to brexit. We'll see in the near future.
  - stefano 10y ago
    Don't you need to have physical presence in the UK to open a company?
    - helge5 10y ago
      You just need a postbox/business-address which is usually hosted by the service provider you use to do the UK registration and all that. Note that a Limited doesn't free you from having to deal with the local authorities (Gewerbeamt in Germany, tax office, etc).
- helge5 10y ago
  In Germany this was common before they introduced the 'UG' which is a GmbH (limited liability company) w/o the 25000 Euro investment requirement. I know a few people who did found in the UK, it works and isn't particularly hard either (and there are companies which do the paperwork for you for relatively little money). Now you can start a UG with a 1,- Euro investment (more like 500 Euro min because it still has to cover setup fees). Which I think has made the UK thing superfluous, just complicates things even more.

eb0la 10y ago

I really love this quote: "only available in German, but don’t worry most Germans don’t understand it either, because it contains a million juristic and fiscal terms". I guess this applies to any human language ;-)

jankotek 10y ago

Germany is probably bad option within EU. I would recommend Bulgaria: flat tax rate 10% on corporate income and capital gains. Considerably cheaper office and accounting cost.

deleted 10y ago
[deleted]
JPLeRouzic 10y ago
Interesting, is there some kind of e-residency as in Estonia?
- jankotek 10y ago
  To run corporation you should have physical presence in Estonia as well.
  - kennell 10y ago
    Others in this thread have suggested that no physical presence is required.
    - Neliquat 10y ago
      Others in this thread have also suggested tax fraud. Hearsay in either direction are not facts.
- loxs 10y ago
  No, and dealing with the government is quite an adventure, even for natives (as I am). I certainly do not recommend, unless you have a Bulgarian native co-founder or/and lots of money to spend on good accountants/representatives.
zurn 10y ago
Note that registering a company in another country doesn't necessarily stop your local government from taxing it. Especially if the owners and employees stay in your country.

jcrei 10y ago

Estonia, simple forms, simple tax system (even a layman can understand it and can do their own taxes or small biz taxes). No need to visit to open a company or bank account if you have an e-resident card. E-residency cards are available to citizens of most nations.

holydude 10y ago
The only way for Estonia to get rich :-) keep it up!
return0 10y ago
How is their banking/financial/legal services compared to countries that have been doing it for decades, e.g. malta, cyprus, ireland?
velcro 10y ago
have always wondered on the benefits of forming a company in Estonia - I'm not an expert - but wouldn't you still need to pay personal taxes in your country of residence (where you spend 6+ months in a year) in addition on what you pay in Estonia?
- helge5 10y ago
  You pay personal taxes on your personal income (the salary the company may give you). That is completely distinct to the type of the company discussed in the link, a GmbH/UG. A company construct like that is its own legal person and it pays its own taxes (which usually works different to your 'personal taxes'). Where it has to pay them is a question for your tax accountant, I think (ignoring loopholes) a company producing income in Germany has to pay taxes on that in Germany, regardless where the company is registered. Though especially with IT it is sometimes hard to specify the 'where' :-) But trust me, the tax authorities will know :-) What you can gain by filing your company in Estonia is less bureaucracy. The talk is that Estonia is a lot in e-government, so I suppose that means you can do a lot of filing stuff very conveniently on the Internet. Or if you employ people in Estonia, the employment laws may be less strict than in a country like Germany. If you plan to operate out of Germany, I don't think you'll gain much by registering a company in Estonia. If you want to move to and operate in Estonia, it may be well worth a consideration. As mentioned, in the past people filed companies in the UK to avoid the 25000 Euro investment required for a GmbH. But that's gone with the UG.

ringtail 10y ago

Is there a reason to not go BVI/Nevis IBC route for a small online startup ? The no accounting/record-keeping requirement should look appealing to many, beside 0% tax :).

gcp 10y ago
Well, if I Google the name, the first 10 hits look like spam sites set up to promote it. That's a reason not to go that route, IMHO.
charlesdm 10y ago
Some EU countries have tax laws that look through said structures, attributing earned income to the shareholders. That's one reason. Second, if you play by the book (and a lot of people who use these entities don't), you can't control said entity directly from an EU jurisdiction. You need to fly there (or somewhere else with no corporate tax) and do board meetings there. There are cases where it's worth it, but it almost always has to do with shaving off percentage points of corporate tax from your profits, and not with reducing administrative burden. If anything, if you want to use a company like this (or any foreign company), you need to be careful and understand what you can and cannot do under the laws of your resident country. The internet does offer some additional opportunities, because it's not location linked and it's often hard to figure out how to tax internet generated revenue. It's easier to do tax arbitrage, but doing it right also requires a great deal of additional paperwork (+ extra overhead expenses). You should read up on tax law -- the cost of getting it wrong can be high.
- ringtail 10y ago
  Any real world success & failure stories I can read upon ? > Some EU countries have tax laws that look through said structures, attributing earned income to the shareholders. That's one reason. Even if the company is not tax resident of said countries ? Mind pointing me to the laws/countries. > doing it right also requires a great deal of additional paperwork (+ extra overhead expenses) Any estimate ? This is very informative. Thank You.
  - 10y ago

gcp 10y ago

Don't worry, your government representative has some good ideas to improve the startup landscape and internet companies! You'll get a 40% corporate tax deduction for the first 4 years if you crowdfund. There are, of course, specific conditions and regulatory work for the crowdfunding agency which mean no existing one (that anyone here has ever heard of) meets the bar and will essentially require a local operation to be set up. One of the biggest local banks (who probably pushed for the legislation?) meets the bar, though. What do you mean, your potential backers want to use existing platforms they know? I'm sorry but can you ask those Kickstarter guys to file paperwork in our country (which they have never heard of either)? If that's not an option, there' also the possibility to issue bonds. Bondholders won't have to pay the 30% tax on the bond's dividend if you start paying them out. Lastly, it should be noted that all of the above benefits are forfeit if the crowdfunding campaign sends any backers' rewards. I wish I'd make this up, but it was signed into law 3 days ago.

sgift 10y ago
Which monkey law was that? Must have missed that new "great" idea.
- gcp 10y ago
  Wasn't in Germany, but I'd be surprised if you wouldn't find similar "initiatives" over there. It's a common EU disease.

helge5 10y ago

The text is pretty good and covers some basic rules (such as having an imprint), but it makes the process look much harder than it actually is. I did some as a noob and found setting up an (IT) GmbH and UG in Germany very easy. All the involved people, from the bank to the notary to the tax consultants are usually very helpful and supportive. E.g. setting up the bank account requires a certain flow (because a GmbH is its own legal person), but the notary and the bank will tell you the exact steps (it is like 3 or 4, having the bank and the notary close by makes it easier as you can just walk between the two and get it done on a day :-). The notary will notify all the local authorities that you got founded, you don't need to do anything on your own here. Though I suppose it is much harder if you don't speak German, or have a friend which does. I recommend finding a good tax consultant first. Unlike stated in the text they actually are cheap as long as your company doesn't make a lot of money (the fees are usually bound to the earnings). You pay ~70 euros a month, plus ~1000 for the year-end stuff, and they do everything required for you, all the filings, talk to the tax authorities when required, etc. Since they see you as a potential future business (when you make actual money), they will usually help you with all the other things (notary, bank). Some are even registered 'startup helpers'. Note that you don't have to have a GmbH, you can also just register a 'Gewerbe' (a business) under your own person. That is even easier and much cheaper, but you have full personal liability. Important: This is specifically for IT companies, which are easy. If you setup other companies, like in the building sector (but almost any other field is affected by this, even a hair cutter!), it can be way harder and usually requires an approved education (you need to be a 'meister' in your field). The text suggests that you should delay founding the company as long as possible. Be careful with that. If you say produced a significant amount of software before, you technically have to 'sell' that to the company for the fair value (and pay taxes on that etc). It can make things easier if everything is 'owned' by the company from the start. If you talk to investors or want to sell the company, they will want to know about such stuff. Summary: IMO it is very easy to setup a GmbH/UG - at least if you speak German or have a friend who can translate. Yes, it does cost some money to start and operate (I'd say, calculate ~2500/y), but you'll get limited liability. P.S.: This again makes the process kinda harder than easier, but most German states actively support startups. There is sponsored consulting for setting up business plans (usually as part of a competition), if you plan to employ people you can get that co-financed, most states even have state-VC's! There are many programs and a lot of public money is put into supporting startups in Germany, but well, you have to deal with authorities :-)

crypt1d 10y ago

Not sure if there is a specific benefit in incorporating in Germany vs some other EU country. If there isn't, I'd suggest looking into Estonia and their e-residency program. They have a fixed 20% corporate tax which you only pay when you take the money out of the company (as opposed to paying on income). I've recently applied and the bureaucracy has been a breeze so far. You can find some more info at https://bkpk.me/estonia-eresidency-digital-nomads https://bkpk.me/estonia-eresidency-digital-nomads

therealmarv 10y ago
In my opinion this is only great if you live outside the EU and want to have a financial place in the EU. One example: Imagine you live in Germany. When you create this company in Estonia good luck in describing to German tax authorities why you have founded it there and not in Germany! You probably also have to pay more taxes in total (to Estonia and Germany) if you are transferring money to yourself.
- helge5 10y ago
  If you want to keep it simple it very likely makes sense to found the company where you reside. If you don't mind complexity, lookup `Double Irish With a Dutch Sandwich` :-> If you want to move to Europe (which I think was part of the idea of the article), it may indeed make sense to consider where to move. Germany (and one of its startup hubs, like Berlin or Hamburg) is probably not the worst place to be for various reasons, but I've also heard good things about e.g. Estonia. I don't have backup readily available but I think your statement about the taxes is just plain wrong. Generally I think income is taxed where it is produced and Europe has (no)double-taxation treaties with pretty much any country. Personally I'd still avoid the extra complexity for a startup :-)
  - tornadoboy55 10y ago
    Please don't put a smile after that. Corporate tax evasion is a blight on society and people facilitating it are scum. Pay your dues, just like the people of a society have to.

LanguageBarrier 10y ago

I would not recommend Bulgaria, Estonia or any other "dodgy" countries to form a limited company alas you yourself are from that country. For a lot of big businesses simply looking at a company address where the country has no to bad rep is already a red flag. So you will have to do a lot of convincing work to do if you want to get funding. Even a UK limited is the running gag in upper management since it needs next to no effort to create one and they are by default a risky to work with. In the past it was a common thing for dubious companies to create limiteds in the UK and this history is what drives the stereotypes of today. That said I am confident that Germany is not the cheapest option tax wise and there is a lot of paperwork to do to get your company running. On the flip side you will inherently gain more trust with potential customers and investors.

loxs 10y ago
I wonder how did you come up to put Bulgaria and Estonia in the same bucket. The two countries have almost nothing in common. I am a Bulgarian native and for my current endeavor I seriously consider creating an Estonian company.
- adventured 10y ago
  The parent's comment ("dodgy") definitely doesn't seem to make sense. Estonia ranks fairly well internationally in terms of being non-corrupt and safe to live and do business in. It's at least on par with highly developed nations such as France or Japan and is better than most of Europe. eg: http://www.transparency.org/news/feature/corruption_perceptions_index_2016 http://www.transparency.org/news/feature/corruption_percepti...
  - matt4077 10y ago
    The dodgyness ("caninety?") in this case may actually be a result of their non-dodginess ("felinity?"): Estonia is big on e-government and have apparently made the process of registering an llc really easy. That attracts all sorts of people for whom it makes a difference if the process costs $100 or $110. And that is – as a group – self-selecting for people you can't necessarily trust as much as others. The same mechanism is at work with British LLCs. Those became somewhat famous (being first in this market) because they were often used by people who couldn't start a company in their native country – most often because of messy bankruptcies that can get barred from trying again for certain periods.

Loic 10y ago

For the context: 7 years running a UK limited from outside the UK (until 2014) and 3 years running a GmbH from Germany (now). In both cases, I am a chemical engineer and I am doing mostly programming/consulting work[0]. At the end of the day, it costs basically the same if you are in UK or in Germany because your cost will be your salary and if you read the advices here you are anyway to small to run some special tax optimization programs. For Germany because the costs are in my head: - Notary costs for the contract: 450€ - Registration of the company (chamber of commerce): 150€ - Registration at the city level: 20€ Opening a bank account is free but it will cost you about 100€ to "run" it. The real added costs are the accounting costs. About 80€/month to take care of the books and the paper work for the salary (inclusive transmission of the salary tax information to the Finanzamt and VAT) + 1500 to 2500€/year for the "end of the year" accounting and taking care of the related taxes. So, the "company structure" costs are about €2000/year if you go through the services of an accountant (you really must do it in fact). The real cost will anyway be your salary. In UK, the taxes on the profit of the company is lower than in Germany, it is here where I would have been pleased to have in Germany at least a small "less than XXX€ no taxes" or a relatively easy way to schedule charges in the future to transfer money from one year to another. If you are a single person, saving for a future project is a bit hard in the current structure. Let say you want to accumulate 100k€ before hiring somebody, you end up with the need to make 150k€ extra on top of your salary to have the 100 on your bank account "free" from tax liability. [0]: https://www.ceondo.com https://www.ceondo.com

matt4077 10y ago
Do you feel that any of the bureaucracy creates an undue burden – or one that could possibly thwart a company which would otherwise achieve scale? I'm asking because the article seems to buy into the narrative that these rules and regulation create an actual obstacle to ventures such as google ever being founded in Germany, and having gone through the process a few times, I can neither find any step of the process that I would consider completely unreasonable (except the chamber of commerce), nor could I imagine it being more than an irrelevant nuisance to any dedicated team. I also think the 2000 Euro/year you're citing is true only for a company actually doing a fair amount of business and having employees. I'm sure it's less than half that if you're just maintaining the legal structure, or are a single founder before launch – VAT reporting, for example, has threshold below which reporting happens only quarterly or yearly.

retromario 10y ago

A couple comments (having started both an UG and GmbH): - I don't recommend starting an UG with less than 2k capital. If you do the minimum (1 euro), you won't have anything to pay your startup bills and it costs extra money (and a trip to the notary) to change your company's investment capital. - While a GmbH requires 25k capital, only half has to be paid into the company. The rest is marked as a liability on the shareholders. - A GmbH is generally looked upon as "more serious" than an UG. Some companies won't interact with you if you're an UG, but this is changing over time. - For what it's worth, I used to hate the bureaucracy, and it can be streamlined further but over the years (and multiple attempts) I've come appreciate how it reduces the risk that you are dealing with shady companies. - Thanks for the tip about Fidor bank! Setting up a company bank account is a pain in the ass in Germany.

harperlee 10y ago
Can't you just donate money to the company? Would that entail tax?
- i_don_t_know 10y ago
  It might subject you to gift tax. If you give more than 20k€ to a private person over the course of X years, you have to pay 20% gift tax on the amount above 20k€. Something like that, the numbers may be wrong. I don't know if there are similar rules when you give money to a company.
- matt4077 10y ago
  "Donate" sounds strange, but yes, you can pay any bill from any account – including your personal one, or cash in your wallet. Technically, this would be regarded as a loan to the company, and you can later pay it back to yourself. As long as it's a business-related expense and the company's name is on the bill (above a certain threshold), you can claim those expenses on the business' taxes if you later make any revenue. What may make this a bit complicated (and make the advice given above sound) is that one of the condition triggering bankruptcy is having more liabilities than assets. If you start the company with 1 Euro, and then go for coffee with the notary spending 10 Euros with the intent to claim it as a business expense, you're 9 Euros underwater. Not sure if this is something you have to monitor throughout the year or if it only becomes relevant when you actually do the bookkeeping at the end of the year. Contrary to popular opinion (and the article) this stuff is quite easy to sort out as long as it doesn't involve real money, so I wouldn't worry about it. I know some people start companies with a bit of money for this reason, or even use something physical (i. e. their notebook) as an initial deposit into the company. And just in case people are wondering "but why": these rules are supposed to protect vendors. Limited liability companies shield the founders from financial responsibility, so the rules are written in such a way that founders/owners are on the hook for at least 25,000 Euro (GmbH), or – nowadays – that the risk is clearly communicated to vendors. You can start a personal company much easier (basically a form with an address field and three questions) if you don't need limited liability.

tobltobs 10y ago

I incorporated a Limited in the past in Switzerland, Germany and France. Switzerland is a snap, Germany is unnecessary time consuming. France is hell. Clarification: Setting up a SARL in France is comparable to Germany, but the red tape to run it is hell.

thibaut_barrere 10y ago
Curious to know when you incorporated in France exactly? It didn't seem too hard to me when I did it, and sites like https://www.legalstart.fr/fiches-pratiques/creer-sa-societe/ https://www.legalstart.fr/fiches-pratiques/creer-sa-societe/ mention that you need 5 admin procedure and 7 days to start one, where the average of the G20 countries is 7.6 admin procedures and 22 days on average. So I really wanted to know more about when and how you incorporated etc, out of curiosity. EDIT: more data, here is a report from 2013 with the data I mentioned above (table at page 8) http://www.ey.com/Publication/vwLUAssets/EY-G20-country-report-2013-France/$FILE/EY-G20-country-report-2013-France.pdf http://www.ey.com/Publication/vwLUAssets/EY-G20-country-repo...
- charlesdm 10y ago
  Belgium is probably similar. One "trick" I've discovered for bureaucratic countries is that certain lawyers will be able to set up entities blazingly fast, in comparison to doing it all yourself. That's because they have the contacts to get it all done (bank account, notary visit, required reports, etc) in a day or two, instead of 1-2 months.

thomasbachem 10y ago

And there's the BAFA INVEST program (http://www.invest-wagniskapital.de http://www.invest-wagniskapital.de, German language only) that refunds/grants 20% to any EU-based angel investor who invests in German startups. It's actually a really great and pretty unbureaucratic program.

pmoehring 10y ago
... if you invest more than 10K. But yes, it's a good setup.
- dx034 10y ago
  I wouldn't consider someone who gives €100 to a startup an angel investor.
  - helge5 10y ago
    €100 Hm? 10k = ~10.000+. I'd consider that an angel investor (10..100k).

therealmarv 10y ago

3 words: Don't do it! Unless you are focused on Germany and German market and you are forced to live in Germany.

blsquare 10y ago

Germany is one of the worst options in Europe to incorporate, except you reside in Germany. My top 10 list of why not to incorporate in Germany: 1. Yearly accountant costs of a limited (UG/GmbH) is around €2,000; you need this accountant, he is kind of an API to the German tax system which is super complicated and even native Germans wouldn't be able to handle its requirements or to file in all the paperwork themselves; AND it's not so easy to find good accountants/tax consultants, once you found one you are locked-in and they happily charge you for every extra things; the pricing is regulated but still they find ways to get all your money 2. 'Protection money', you have to pay to IHK which should help business owners (but they nothing) and to ARD/ZDF which are Germany's public TV stations; the costs depend on your headcount and are not that high but once ARD/ZDF have your name they never ever again let you out, so it's impossible to cancel this 'subscription' and you might pay additional fees for you 'personal self'; it's a mafia which creates additional mental clutter and mail 1. + 2. Just the operating costs of a limited which doesn't make any money is €2,500 to €3,000 3. Germany has probably the most friendly labor law; at the end of the day employees have in Germany super powers; e.g. if you have more the ten headcount it's impossible to lay off people (there are many, many more, I could give you 20 more examples); 30% of your time is spend on how to work around German labor law with German lawyers at €300/h 4. They try to get everybody to pay into their social system, once you are under 49% shares you must join them leaving most of your personal salary to the state; the only benefits is an ok health system and an ok unemployement insurance 4.a) Having freelancers is risky because the state always suspect you to circumvent their social system; one mistake and the freelancer can blackmail you 5. Super strong consumer protection but which is applicable to all European countries; consumers get it all (money-back guarantee, ...) 6. Setup of the limited is unnecessary slow and bureaucratic, takes 6 to 8 weeks and all the momentum out of the founding team 7. You need at least €12,500 share captial for the GmbH, forget about the UG, doesn't have any reputation and to migrate to a GmbH later is a PITA 8. Taxes are cluttered, you have VAT, corporate tax and 'Gewerbesteuer' 9. German labor is ok but not as good as e.g. US labor; non-tech labor is in general too expensive and education is limited, especially English skills are not on par with other Northern European countries, still better than southern European countries; tech labor is good but expensive compared to rest of Europe, but cheap again compared to the US; still it's very hard to find affordable native German devs so people look for foreign tech talent which are good and easy to attract in bigger cities (Berlin) 10. Political situation is ok and stable compared to US and UK but could tip with elections in summer, right wing is strong but not as strong as in other countries Some more: 11. Shutting down your limited takes one year 12. Insolvency is covered in its own law and is super complicated, don't apply to early, don't apply to late 13. In general all German laws are very cryptic written and even for native German hard to understand without experts; even simple tax stuff is hard to grok and other countries have much more accessible laws (just look at gov.uk as an example); calling your tax guy helps here and there but costs money; researching stuff yourself takes days 14. You have to save documents and even mail which led to business for 10 (!!!) years; after few years you need to rent a space just for all the folders Who knows about better options in Europe? Happy to hear alternatives, also from a relocation perspective, so which country is founder-friendly AND nice to live?

stephanos2k 10y ago

Are there any (German) resources on how to do the tax reports yourself? I can't find anything. I did incorporate too early and now have nothing but a few payments to declare. Don't want to spend 500€+ on the accountant :-/

hhstartuper 10y ago

Anyway, I don't understand what I do wrong, if: 1. I have a job in Germany and live in Germany 2. I have opened a company in Estonia (owner) 3. I do consultancy through USA services (like Upwork) for USA or UK clients and money is earned by a company in Estonia 4. How an estonian's company income (not a income of a person) be taxed by germany? 5. If i want to get money from company - it will be dividents with taxation in Estonia and rest in Germany Is something wrong in this situation?

helge5 10y ago
Nothing about that seems wrong at all. 1. doesn't matter. It sounds like this is your day job unrelated to the hypothetical company. 2. this is OK, you can do that. 3. this is where it becomes a little more difficult. since you are presumably working from Germany, the value is created in Germany and therefore is going to be taxed there. sounds like the obvious (and fair) thing to do to me. 4. income is taxed where it is created, not where you originate from. Consider it like this: If I'm a German and live more than 6 months in the US, my primary taxation point is the US. My origin doesn't matter, it is where I live (and in essence whose state services (what taxes pay for) I use). The same goes for companies. If the company is registered in Estonia, fine, you can do that. But if the company is actually _operating_ in Germany, well, you have to pay taxes over there _just for the business you do over there, NOT for business you do from Estonia_. 5. yes, this is personal income. You'll pay taxes in Estonia which you can match up to your taxes in Germany. In no circumstance you pay twice. Again sounds very correct to me. To be honest I'm not entirely sure this is the actual situation, but nothing about it seems wrong :-)