Germany is one of the most attractive and stable business locations in Europe. Many foreign companies and corporate groups choose to establish a subsidiary in Germany, most commonly in the legal form of a GmbH (limited liability company). However, setting up and operating a German subsidiary involves several legal, tax, and administrative steps that must be carefully planned.
This article provides an overview of the most important aspects to consider when founding a subsidiary in Germany in 2025.
1. Why a GmbH is the Standard Legal Form
The Gesellschaft mit beschränkter Haftung (GmbH) is the most common legal form for subsidiaries of foreign groups due to:
- Limited liability (limited to the company’s share capital)
- Clear and well-established German corporate law
- Flexibility in structuring shareholders and management
- Good reputation and acceptance in the German business environment
2. Steps to Set Up a GmbH in Germany
The standard formation process involves the following steps:
a) Preparation of Articles of Association
- The founding shareholders prepare the Articles of Association (Gesellschaftsvertrag) outlining the company name, registered office, share capital, business purpose, and management structure.
b) Notarization
- The incorporation deed and Articles of Association must be notarized by a German notary.
c) Share Capital Contribution
- The minimum share capital is €25,000, of which at least €12,500 must be paid in before registration.
- Contributions can be made in cash or, under certain conditions, as contributions in kind.
d) Registration with the Commercial Register (Handelsregister)
- The GmbH is only legally established after registration with the Commercial Register.
3. Tax Registration and Other Formalities
After incorporation, the new GmbH must:
- Register with the tax office (Finanzamt) to obtain a tax number and VAT ID.
- Register with the relevant trade office (Gewerbeamt).
- Set up payroll registrations if employees will be hired.
- Register for social security contributions (if applicable).
4. Ongoing Compliance Obligations
Once established, the GmbH must:
- Keep proper accounting records according to German GAAP (HGB).
- Prepare annual financial statements and file them with the German Federal Gazette (Bundesanzeiger).
- File corporate income tax, trade tax, and VAT returns.
- Hold annual shareholders’ meetings and properly document resolutions.
5. Common Questions from Foreign Companies
Is a physical office required?
- Yes, the GmbH must have a registered office in Germany.
Can foreign individuals act as managing directors?
- Yes, foreign nationals can be appointed as managing directors (Geschäftsführer) of a GmbH. However, practical issues such as residence, visa, and work permits must be considered.
Can the subsidiary be part of a tax group?
- Under certain conditions, the German GmbH may become part of a German corporate tax group (Organschaft) with other German entities.
6. Special Aspects in 2025
In 2025, no fundamental changes to the GmbH law have been introduced. However:
- The German company register is now fully digital.
- Anti-money laundering compliance and transparency register requirements are being enforced more strictly.
- German tax authorities continue to intensify their scrutiny of cross-border group structures and transfer pricing.
7. WW+KN Services for Foreign Investors
At WW+KN, we regularly assist foreign companies and corporate groups with:
- Structuring and setting up subsidiaries in Germany
- Preparing incorporation documents and coordinating notarial procedures
- Handling all tax registrations and compliance requirements
- Providing ongoing accounting, tax, and payroll services
- Working closely with corporate lawyers from Baker Tilly for legal structuring and contract drafting
Important Note
This article provides general information only and does not constitute legal advice. Please consult an advisor for an individual assessment of your situation.
If you have any questions regarding the formation and administration of subsidiaries in Germany, please feel free to contact us.
We are WW+KN, a Baker Tilly Company.
You can reach us at info@wwkn.de.
