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Doing Business in Germany 2015 Doing Business in Germany 2015 IMPORTANT DISCLAIMER: This book is not intended to be a comprehensive exposition of all potential issues arising in the context of doing business in Germany, nor of the laws relating to such issues. It is not offered as advice on any particular matter and should not be taken as such. Baker & McKenzie, the editors and the contributing authors disclaim all liability to any person in respect of anything done wholly or partly in reliance upon the whole or part of this book. Before any action is taken or decision not to act is made, specific legal advice should be taken in light of the relevant circumstances and no reliance should be placed on the statements made or documents reproduced in this book. This publication is copyright. Apart from any fair dealing for the purposes of private study or research permitted under applicable copyright legislation, no part may be reproduced or transmitted by any process or means without the prior permission of the editors. Doing Business in Germany Contributors Christian Atzler Michael Bartosch Christoph Becker Claudia Beuter-Brinkmann Christian Brodersen André Buchholtz Vanessa Dersch Ulrich Ellinghaus Silke Fritz Wolfgang Fritzemeyer Joachim Fröhlich Marc Gabriel Thomas Gilles Tobias Gräbener Heiko Haller Caroline Heinickel Christian Horstkotte Philipp Jost Martin Kaiser Benjamin Koch Hagen Köckeritz Lara Link Nicole Looks Holger Lutz Ghazale Mandegarian Jochen Meyer-Burow Julia Pfeil Christian Port Christian Reichel Jörg Risse Juliane Sassmann Matthias Scholz Oliver Socher Peter Stankewitsch Florian Thamm Katharina Weiner ii Doing Business in Germany CONTENT 1 GERMANY – AN OVERVIEW 1 2 LEGAL FORMS OF DOING BUSINESS 5 2.1 Limited Liability Incorporated Entities 5 2.1.1 GmbH 5 2.1.2 AG 6 2.1.3 Societas Europaea 8 2.2 Unlimited Liability Entities 10 2.2.1 OHG 10 2.2.2 KG 11 2.3 Branch 13 3 ESTABLISHING AND OPERATING A LIMITED LIABILITY COMPANY (GMBH) 17 3.1 Formation of a GmbH 18 3.1.1 One or more Forming Shareholders 18 3.1.2 One - Euro Capital Formation 20 3.1.3 Name of the GmbH 20 3.1.4 Registered Office 21 3.1.5 Object Clause 21 3.1.6 Capitalisation 22 3.1.7 Shares 23 3.1.8 Fiscal Year 25 3.1.9 Other Rules in Articles 26 3.1.10 GmbH Stationery 28 3.2 Operation of a GmbH 28 3.2.1 Powers of Management 28 3.2.2 Prokurist 29 3.2.3 Shareholders' Meetings 30 3.2.4 Thin Capitalisation = Interest Barrier 31 3.2.5 Capital Increase / Capital Reduction 31 3.2.6 Approved Capital 33 3.2.7 Upstream Loans, Cash Pool 33 Baker & McKenzie 3.2.8 Piercing of Corporate Veil 34 3.2.9 Annual Accounts and their Publications 35 3.2.10 Distributions 37 3.2.11 Co-determination 38 3.2.12 Liquidation / Cancellation / Insolvency / Salvage Measures 40 4 ACCOUNTING, REPORTING AND AUDITING 47 4.1 Books and Records, Annual Financial Statements – General 47 4.2 Accounting, Auditing and Reporting Requirements for Corporations and Certain Partnerships 48 4.2.1 Categories 48 4.2.2 General Accounting, Auditing and Reporting 49 4.3 Consolidated Annual Financial Statements 50 5 PRINCIPLES OF GERMAN TAXATION 55 5.1 Resident and Source Taxation 55 5.2 Foreign Income / Double Taxation 56 5.2.1 General Overview 56 5.2.2 Double Tax Treaties 57 5.3 Taxable Income – All Business Operations 58 5.3.1 Financial and Tax Accounting 58 5.3.2 Special Rules for Tax Accounting and Valuation 59 5.3.3 Capital Gains and Rollover 59 5.3.4 Arm's Length Criteria and Transfer Pricing 60 5.3.5 Intercompany Charges 60 5.3.6 Tax Rulings 61 5.3.7 Loss Carry Forwards and Minimum Taxation 61 5.3.8 Interest Barrier 62 5.4 Trade Tax 63 5.5 Taxation of Partnerships 64 5.6 Taxation of Corporate Entities 65 5.6.1 Taxation System 65 5.6.2 Tax Rate Illustration 65 5.6.3 Taxation of Dividends and Capital Gains 66 5.6.4 Constructive Dividends 66 5.7 Real Estate Transfer Tax 67 5.8 Value Added Tax (VAT) 68 iv Doing Business in Germany 5.8.1 VAT Rate 68 5.8.2 Taxable Persons 68 5.8.3 Taxable Activities 68 5.8.4 Special VAT Regimes / Exceptions 69 6 BANKING & FINANCE 73 6.1 Granting Loans - Requirement of a Banking License in Germany 73 6.2 Securing Loans 74 6.2.1 Asset Security 76 6.2.2 Personal Security 79 6.2.3 Financial Assistance and Capital Maintenance 80 6.2.4 Cash Pooling 82 7 EMPLOYMENT 87 7.1 Terms of Employment 87 7.2 Working Conditions in Germany 88 7.2.1 Fixed-Term Employment 88 7.2.2 Part-Time Employment 88 7.2.3 Working Hours 89 7.2.4 Base Salary 89 7.2.5 Christmas and Vacation Payment 90 7.2.6 Bonus 90 7.2.7 Overtime Pay 90 7.2.8 Commission 91 7.2.9 Company Car / Car Allowance 91 7.2.10 Reimbursement of Expenses 92 7.2.11 Public Holidays 92 7.2.12 Paid Annual Leave 92 7.2.13 Sick Pay 93 7.2.14 Maternity Protection Leave and Parental Leave 93 7.2.15 Confidentiality and Restraints against Competition 94 7.2.16 Suspension from Work; Garden Leave 94 7.3 Equal Treatment and Discrimination 94 7.4 Integration of Disabled Employees 96 7.5 Termination of Employment 96 7.5.1 Protection against Termination 97 Baker & McKenzie 7.5.2 Reasons Based on the Employee's Person 98 7.5.3 Reasons Based on the Employee's Conduct 98 7.5.4 Compelling Business Requirements 98 7.5.5 Special Termination Protection 99 7.5.6 Mass Dismissals 99 7.5.7 Works Council Participation 100 7.5.8 Termination Disputes 101 7.6 Employee Representation 101 7.6.1 Works Councils 102 7.6.2 Other Employee Representation 104 7.7 Collective Bargaining Agreements 105 7.8 Social Security 106 7.8.1 Accident Insurance 106 7.8.2 Statutory Old Age Pension Insurance and Unemployment Insurance 106 7.8.3 Health Insurance and Nursing Care Insurance 107 7.9 Pensions 107 7.10 Immigration Requirements 108 8 COMMERCIAL 113 8.1 Freedom of Contract 113 8.2 Direct Selling to Consumers 113 8.2.1 Definitions of the Terms Entrepreneur and Consumer 113 8.2.2 Consumer Protection Laws 113 8.2.3 Information Requirements 114 8.2.4 Withdrawal 114 8.2.5 Inertia Selling 115 8.3 Standard Contracts and General Terms & Conditions 115 8.4 Sales via Intermediaries 116 8.4.1 Commercial Agents 116 8.4.2 Distributors 116 8.4.3 Commissionaires 117 8.4.4 Franchising 117 8.4.5 Typical Issues 118 8.4.6 Termination Indemnity 118 8.4.7 Competition Law 119 vi Doing Business in Germany 8.5 Warranty, Manufacturer's Guarantee and Product Liability 119 8.5.1 Warranty 119 8.5.2 Manufacturer's Guarantee 119 8.5.3 Product Liability 120 9 COMPETITION / ANTITRUST 123 9.1 Merger Control 124 9.1.1 EU Merger Control Rules 124 9.1.2 Applicability of EU Merger Control Rules 125 9.1.3 EU Notification and Review Procedure 126 9.1.4 Decision/Appeal under EU Merger Control Rules 127 9.1.5 German Merger Control Rules 127 9.1.6 Applicability of German Merger Control Rules 127 9.1.7 German Notification and Review Procedure 128 9.1.8 Decision/Appeal/Violations under German Merger Control Rules 129 9.2 Prohibition of Cartels and other Restrictive Agreements 129 9.2.1 Horizontal Agreements 129 9.2.2 Vertical Agreements 131 9.2.3 Exempted Agreements 131 9.3 Abuse of a Dominant Position 132 9.4 Self-assessment 133 9.5 Authorities’ Powers 133 9.5.1 Appeal 133 9.5.2 Leniency 134 10 CUSTOMS & DUTIES 137 10.1 Introduction 137 10.2 Clearance for Free Circulation 138 10.2.1 Community Customs Tariff 138 10.2.2 Customs Value 139 10.3 Special Procedures 140 11 EXPORT CONTROLS 143 11.1 Export of Military Items 143 11.2 Export of Dual-Use Items 144 11.3 Technical Assistance 145 11.4 Embargos and Sanctions 145 Baker & McKenzie 11.5 Early-warning Lists 146 11.6 Export Licenses 147 12 INTELLECTUAL PROPERTY 151 12.1 Patents and Utility Models 151 12.1.1 Patents 151 12.1.2 Obtaining Patent Protection 152 12.1.3 Key Features 152 12.1.4 The German Patent Court System 152 12.1.5 Patent Enforcement 153 12.1.6 Utility Models 153 12.2 Employee Inventions 153 12.3 Trademarks 154 12.4 Design Protection 155 12.5 Copyright 156 12.6 Unfair Competition 157 12.7 Customs Seizure 158 12.8 Enforcement 159 12.9 Technology Transfer 160 12.9.1 Licensing vs. Transfer 160 12.9.2 Compliance with Antitrust Laws 161 12.9.3 Insolvency Law 161 12.9.4 Research and Development Contracts 161 13 DATA PROTECTION 165 13.1 Main Principles of the Federal Data Protection Act 165 13.2 Legal Requirements for Processing Personal Data 166 13.3 International Transfer of Personal Data 167 13.4 Employee Data Protection 168 13.5 Data Protection Officer 168 14 REAL ESTATE 171 14.1 Ownership of Real Estate 171 14.2 Acquisition of Real Estate 172 14.2.1 Notarial Sale and Purchase Agreement 172 14.2.2 Transfer of Legal Title – Conveyance of Title 173 14.2.3 Acquisition Costs 173 14.2.4 Real Estate Transfer Tax 173 viii Doing Business in Germany 14.2.5 Real Estate Investment Trust 174 14.3 Real Estate Liability 174 14.4 Real Estate Leases 175 14.5 Construction of Sites 176 14.5.1 Planning Law 176 14.5.2 Building Law 177 14.5.3 Permits for Construction 177 14.5.4 Separate Building Permit 177 14.5.5 Immission Control Permit Issued under the Federal Immission Control Act 178 15 ENVIRONMENTAL LAW 181 15.1 Air and Noise Emissions 181 15.2 Water and Waste Water 183 15.3 Waste 183 15.4 Liability for Environmental Contamination 184 15.4.1 Administrative Law Liability 184 15.4.2 Civil Law Liability 185 15.5 Product-related Environmental Compliance 185 16 LIABILITY 189 16.1 Contractual Liability 189 16.1.1 Main and Ancillary Obligations 189 16.1.2 Pre-Contractual Liability 190 16.1.3 Protection of Third Parties Under Contractual Liability Regime 190 16.2 Non-Contractual Liability (Tort Law) 191 16.3 Negligence or Intent Required 192 16.4 Damages 192 17 INSURANCE 195 17.1 Supervision of Insurance Companies
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