Germany is a country that encourages foreign investment and it is recognized as a very attractive destination for registration of holding companies. German holding companies represent an instrument for shareholders that want their profits distributed in an advantageous manner while financing other companies.
The most employed types of German holding companies are the limited liability company (GmbH) and the joint stock company (AG). Other types of holding companies available for foreign entities that want to invest in Germany are subsidiaries, branch offices and partnerships.
The limited liability company in Germany is the most common type of company because it does not require a large amount of money invested the minimum share capital required for this type of entity is 25,000 euros. The joint stock company is designed for larger companies wanting to expand in Germany and it requires a minimum share capital of 50,000 euros. The same start-up shared capital of 50,000 euros is required in cases of limited partnerships.
The main advantage of opening a holding company in Germany is the tax incentives provided by the “national corporation tax privilege” based on the German Corporation Tax Act (Körperschaftsteuergesetz, KStG). Germany provides 100% participation exemption on dividends and capital gains without requesting a minimum holding amount of time or a minimum shareholding requirement for taxation purposes. It is also important to know that business expenses can be deducted in cases of German holding companies, even if tax exemptions apply. Germany’s double taxation treaties also offer an advantage for holding companies. In Germany there are no capital or stamp duties.
Foreign companies are subject to the German corporate tax that has a flat rate of 15%. A solidarity surcharge of 5.5% also applies that raises the corporate tax at 15.825%. German subsidiaries are also required to pay a withholding tax of 25%. The trade tax valued between 7 and 17% also applies and it calculated based on the tax base of 3.5%. Summing all the taxes applied to German companies the corporate tax is about 30%.
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