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Investment in Germany Investment in Germany A practical Investor Guide to the Tax and Regulatory Landscape in Germany 2016 International Business Preface © 2016 KPMG AG Wirtschaftsprüfungsgesellschaft, a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Investment in Germany 3 Germany is one of the most attractive places for foreign direct investment. The reasons are abundant: A large market in the middle of Europe, well-connected to its neighbors and markets around the world, top-notch research institutions, a high level of industrial production, world leading manufacturing companies, full employment, economic and political stability. However, doing business in Germany is no simple task. The World Bank’s “ease of doing business” ranking puts Germany in 15th place overall, but as low as 107th place when it comes to starting a business and 72nd place in terms of paying taxes. Marko Gründig The confusing mixture of competences of regional, federal, and Managing Partner European authorities adds to the German gift for bureaucracy. Tax KPMG, Germany Numerous legislative changes have taken effect since we last issued this guide in 2011. Particularly noteworthy are the Act on the Modification and Simplification of Business Taxation and of the Tax Law on Travel Expenses (Gesetz zur Änderung und Ver einfachung der Unternehmensbesteuerung und des steuerlichen Reisekostenrechts), the 2015 Tax Amendment Act (Steueränderungsgesetz 2015), and the Accounting Directive Implementation Act (Bilanzrichtlinie-Umsetzungsgesetz). The remake of Investment in Germany provides you with the most up-to-date guide on the German business and legal envi- ronment.* You will be equipped with a comprehensive overview of issues concerning your investment decision and business Andreas Glunz activities including economic facts, legal forms, subsidies, tariffs, Managing Partner accounting principles, and taxation. For a more detailed elabora- International tion on the investment potential, please also see our publication Business Business Destination Germany on our website. KPMG, Germany Please contact us for further information. We will be happy to advise you. April 2016 * based on published legal status as of January 1 2016. © 2016 KPMG AG Wirtschaftsprüfungsgesellschaft, a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. 4 Contents Preface ........................................................................................3 1 Germany – an outline 1.1 Geography and climate .............................................................11 1.2 Population and language ..........................................................11 1.3 Political system .........................................................................11 1.4 Legal system ............................................................................13 1.5 Economy and currency .............................................................13 1.5.1 General European background .................................................13 1.5.2 Monetary policy in the European Union ...................................14 1.5.3 General economic data .............................................................15 1.5.4 German exports to foreign countries .......................................16 1.5.5 Consumer prices.......................................................................16 1.5.6 Currency and exchange controls ..............................................17 1.6 Banking system and regulations ..............................................17 1.6.1 The German Central Bank and the European Central Bank .....18 1.6.2 German banking institutions .....................................................18 1.6.3 Banking regulations ................................................................. 20 1.7 Stock exchanges .......................................................................21 1.8 Foreign investment in Germany ...............................................21 1.9 Business regulations ............................................................... 22 1.9.1 Notification requirements ........................................................ 22 1.9.2 Regulated industries ................................................................ 22 1.9.3 Special business permits ......................................................... 23 1.10 Intellectual property ................................................................. 23 1.10.1 Patents ..................................................................................... 23 1.10.2 Utility models ........................................................................... 24 1.10.3 Trademarks .............................................................................. 24 1.10.4 Registered designs .................................................................. 25 1.10.5 Copyright and competition law ............................................... 25 1.10.6 Licenses ................................................................................... 26 1.11 Residence and work permits ................................................... 26 1.11.1 Residence permits ................................................................... 26 1.11.2 Work permits ........................................................................... 27 © 2016 KPMG AG Wirtschaftsprüfungsgesellschaft, a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Investment in Germany 5 2 How to invest in Germany 2.1 Investment options .................................................................. 29 2.1.1 Direct transactions/direct investments ................................... 29 2.1.2 Investment through a permanent establishment (permanent – dependent – representative) ............................. 30 2.1.3 Doing business as a sole proprietor in Germany .....................31 2.1.4 Investments through a company ..............................................31 2.1.4.1 Legal forms ...............................................................................31 2.1.5 Types of cooperation ............................................................... 34 2.1.6 Going public ............................................................................. 35 2.2. Opportunities for international investors ................................. 35 2.2.1 Federal and regional subsidies ................................................ 35 2.2.1.1 “Joint Task Improving the Regional Economic Structure” (“Gemeinschaftsaufgabe – Verbesserung der regionalen Wirtschaftsstruktur” – GRW) .................................................. 36 2.2.1.2 Loan programs ......................................................................... 38 2.2.2 European subsidies.................................................................. 38 3 Importing to Germany 3.1 Customs duties ........................................................................ 42 3.1.1 Customs tariff .......................................................................... 42 3.1.2 Customs value – transaction value .......................................... 42 3.1.3 Origin of goods and preferences ............................................. 43 3.1.4 Customs regimes to avoid, reduce, or defer duty payment ............................................................. 44 3.2 Anti-dumping and countervailing duties.................................. 45 3.3 Special import duties ............................................................... 46 3.3.1 Other excise duties .................................................................. 46 3.3.2 Import value added tax ............................................................ 46 3.4 Outlook .................................................................................... 46 4 Accounting and reporting 4.1 German accounting principles ................................................. 49 4.1.1 Financial statements ................................................................ 49 4.1.2 Consolidated financial statements .......................................... 55 4.2 International Financial Reporting Standards (IFRS) ................. 58 4.2.1 Consolidated financial statements .......................................... 58 4.2.2 Financial statements ................................................................ 59 5 Company law 5.1 Limited liability companies and stock corporations ................ 63 5.1.1 Formation ................................................................................. 63 5.1.2 Registered share capital .......................................................... 66 © 2016 KPMG AG Wirtschaftsprüfungsgesellschaft, a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. 6 5.1.3 Management ........................................................................... 68 5.1.4 Supervisory board.................................................................... 69 5.1.5 Shareholders’ or general meetings ......................................... 70 5.1.6 German Corporate Governance Code ......................................71 5.1.7 Business register (Unternehmensregister) ............................. 73 5.1.8 Insolvency ...............................................................................
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