There are different types of companies in Germany and an entrepreneur can decide which one suits him better. A foreign company can open a subsidiary or a branch office in Germany considering factors like the German taxation system, the purpose of the establishment and the costs of opening a company in Germany.
In Germany all types of company structures are requested to register with the local Trade Office (Gewerbeamt).
Below you can read the main characteristics of branches and subsidiaries in Germany. For more details or assistance for opening one of these business forms, please get in touch with our lawyers in Germany.
The German branch office (Zweigniederlassung) is an establishment that will be connected to the parent company and it does not have assets or accounting system of its own. A branch office in Germany is allowed to conduct the same type of activities as its head office.
In Germany the branch office is not required to register with the Register of Companies, but has to register with the local trade office. In regards to taxation, the German branch office is considered part of the foreign company and will be subject to the German taxation system applicable to them.
A German subsidiary (Tochtergesellschaft) is usually considered a limited liability company and it must have its own share capital, management, and accounting system. The subsidiary is allowed to conduct business operations in name of the parent company.
A subsidiary in Germany is required to register with the local commercial register and the trade office. Subsidiaries are subject to the German taxation system as any other local business.
Unlike subsidiaries, branch offices may find it more difficult to obtain a bank account in Germany and clients may be reluctant in going into business with a branch office.
In certain cases both a subsidiary and a branch office may need special certificates or licenses in order to conduct business operations in Germany. In case of a branch office the headquarters will be held accountable for the liabilities and the branch office will also be affected by any change in the parent company.
The subsidiary will have limited liability and if any changes occur in the parent company they will not affect the subsidiary’s activities. However, the fastest, easiest and cheapest way to start a business in Germany is through a branch office.