Benefits of a German company (UG, AG or GmbH)
With the separate entity approach, you can benefit as follows by forming a new German company:
- Shielding effect for profits and losses generated in Germany
- The new German company is eligible for benefits according to tax treaties
- If you already have a foreign parent company, futher beneifts apply:
a) In the case your foreign entity is an EU based company, you can make a German company a wholly owned subsidiary of your European parent company.
Net dividends can be disbursed tax free in Germany according to the EU regulation 2011/96/EU (mother-daughter directive).
b) In such cases where your foreign entity is located outside of the EU, you can benefit from tax treaties which oftentimes reduce the tax on net dividends to a low amount of on average 5%. The only requirement will be that your foreign parent company needs to hold a minimum of stakes in the new German company you're forming. We'll discuss the tax treaty applicable to you in a free, initial tax consultation. Contact us today!
- At your parent company, you can treat the setup cost towards forming your new German company as an investment
- Tax-effective lease, loan and employment agreements are possible, even with the shareholders
Transfer prices between related companies must be agreed at arm’s length.
What is the difference if I form a German Branch of my foreign company?
The tax results are the same as when forming a new German company. The major difference of a German branch is that dealings between the German branch and headquarters need to be recorded even if not invoiced as the German branch and its head office form two separate tax subjects. This requires more extensive recording to abide by the at arm’s length principle.
A German branch doesn't have any attraction for your global sales. If the German branch supports your sales activities, this will however result in German tax nexus of such activities.
Free initial tax consultation!
We'll explain the differences in a free, initial consultation. Contact us today!