Due to the fact a a GmbH company requires a share capital of €25,000 this has lead a lot of people to form branches.
While a branch office does not require share capital, there will be fees incurred through the translation and notarisation of the parent company’s statutes.
There are many disadvantage relating to a branch office as stated below and in most cases it is advisable to incorporate a UG company, also known as a mini GmbH as the disadvantages below do not apply, nor does the company require any share capital.
Disadvantages of a Branch Office
- Branches of foreign companies often have more difficulty in obtaining bank accounts in Germany
- Clients and customers may be less keen to do business with a branch of a foreign company
- A branch may well be excluded from a number of areas of business where a license is require
- The parent company is fully liable for the liabilities of the branch
- The representatives of the branch may be held jointly and severally liable for tax debts
- The financial statements of the parent must be lodged at the Trade Register
- The obligations of the branch are the same as those of the parent, including filing VAT returns, employee returns and corporation tax returns – meaning that there are few savings in administering a branch
In terms of administrative ease, if your company is to sign contracts in front of a notary on a regular basis, it makes more sense to form a new one rather than establish a branch office.
Features of a branch office in Germany
Foreign enterprises can establish a branch (“Zweigniederlassung”) to carry out business in Germany. The branch has to be registered with the trade register in which it has its registered office and has to notify the local district administration when starting business operations.
From a tax point of view, branches are permanent establishments of non-resident companies, and a German branch is not a separate legal company from its parent.
A branch of a non-resident company must appoint a resident individual or a company to represent it in its dealings with the tax authorities.
To register a branch, evidence of the existence of the parent has to be provided, as well as certified copies of the Articles or Statutes, the names of the directors, the share capital, the registered office, and the names of the representatives who will act for you.
Documents needed to register a branch office
- A certified copy of the charter, statutes or memorandum and articles of the company, or other instrument constituting or defining the constitution of the company
- A copy of the certificate of incorporation of the company
- Copies of the latest accounting document
Various documents will need to be translated, including:
- your parent company’s registration certificate
- your company’s articles of association
- the names of the company’s directors and secretary
After your branch is registered
All stationery, order forms and similar documents used by your branch are required to show:
- The place of registration of the parent
- The number with which it is registered
- The legal classification of the company
- The address of its registered office
- The place of registration of the branch, and its registration number
Also, the following must be shown at the branch office:
- The company name
- The name of the country in which the company is incorporated
- The parent of the branch having limited liability
If you would like to proceed with the registration of a branch office please email us at: email@example.com