DOING BUSINESS IN GERMANY STARTER KIT SRAI EL EODITNI · SRAI EL EODITNI. INTRODUCTION With its...

DOING BUSINESS IN GERMANY STARTER KIT

ISRAEL EDITION

I N T RO DUC T I ON

With its booming business environment, more than 82 million consumers, and only a four-hour flight away from Israel, Germany presents major opportunities for Israeli companies from all sec-tors. Germany has one of the most highly devel-oped economies in the world and the largest and most stable economy in Western Europe. With a gross domestic product of more than 3.2 tril-lion euros in 2017 and a positive future growth forecast, Germany is a global driving economic force with a high standard of living. Additionally, by sharing borders with all leading economies in Central Europe, Germany provides the perfect access point to enter both established markets in Western Europe and growing markets in Cen-tral and Eastern Europe.

Germany has a diverse economic landscape. While Berlin has earned a reputation as the hub for much of Europe’s culture and tech scene, Frankfurt, home to the European Central Bank and more than 200 banks (of which 161 are for-eign), has become a center for global fintech. Other German cities, such as Hamburg and Dus-seldorf, also have a great deal to offer, including innovative start-up scenes, universities with top talent, and entrepreneurial support programs plugged into powerful industries. There are also entry points to the German market outside of major metropolitan areas. Some examples in-clude industry-leading companies in the health, manufacturing, and cosmetic fields based in small towns across Germany.

German institutions are investing an immense effort to expand their technological abilities. They have built various successful incubators and accelerators to promote start-up business models, which provides promising opportunities as well as capital. In general, Germany’s start-up landscape is expected to continue evolving into a sustainable and diverse sector of the economy, supported by an expanding and maturing tech base, growing investment flows, and vibrant cross-segment tech activity.

יותר הכוללת המשגשגת העסקית סביבתה עם גרמניה,

מ-82 מיליון צרכנים, וכל זה במרחק של 4 שעות טיסה מישש

ראל, מציגה אפשרויות רבות לעסקים ישראליים בסקטורים

שונים. הכלכלה שלה היא אחת הכלכלות המפותחות ביותר

אירופה. לגר ביותר בכל מערב והיציבה והגדולה שבעולם,

מניה נרשם תוצר לאומי גולמי של כ-3.2 טריליון יורו בשנת

2017. צפוי לה עתיד חיובי לפי תחזית הצמיחה. גרמניה היא

שמדינה עם רמת חיים גבוהה והיא מנוע כלכלי עולמי רב עו

צמה. מיקומה של גרמניה והגבולות המשותפים עם כלכלות

מובילות במרכז אירופה הופכים אותה לנקודת גישה מצוינת

להיכנס לשוק הן לשווקים המבוססים של מערב אירופה והן

לשווקים מתעוררים במרכז ובמזרח אירופה.

המוניטין את הרוויחה ברלין רחב. כלכלי מגוון לגרמניה

לעומת פרנקפורט, והטכנולוגיה. התרבות בתחומי שלה

-200 בנש כזאת, הפכה למרכז הפיננסי הגדול ביותר, יש בה

קים שונים )161 מתוכם זרים( והיא הבית של הבנק המרכזי

האירופי. ערים אחרות, כמו המבורג ודיסלדורף, גם להן יש

שהרבה להציע, כולל חברות סטארט אפ חדשניות, אוניברסי

טאות עם כשרונות מובילים ותוכניות תמיכה ביזמות בתחומי

שתעשייה מרכזיים. ישנה בנוסף גם נקודת כניסה לשוק הגר

מני בערים הקטנות. למשל, ישנן חברות מובילות בתעשיית

הבריאות, הייצור והקוסמטיקה שנמצאות בעיירות הקטנות

ובכפרים יפים ברחבי גרמניה.

היכולות בהרחבת רב מאמץ משקיעים גרמניים מוסדות

ואקסלרטורים אינקובטורים מגוון נבנו הטכנולוגיות שלהם.

אפ, הסטארט בתחום עסקיים מודלים לקידום מצליחים

שפותחים אפשרויות חדשות ומבטיחות והון רב. באופן כללי,

ששוק הסטארט אפ בגרמניה צפוי להמשיך להתפתח לסק

טור כלכלי יציב ומגוון בתמיכת הבסיס הטכנולוגי המתרחב,

הגידול בזרימת ההשקעות ופעילות טכנולוגית בין-תחומית

תוססת.

ממשיכה גרמניה ושקופה, יציבה השקעה לסביבת הודות

להיות אחד היעדים האטרקטיביים ביותר להשקעות נדל"ן

2017 סך ההשקעה בנדל"ן הגיע לשיא, וגש באירופה. בשנת

שרמניה התברגה כיעד נדל"ן מוביל באירופה. מחזורי ההש

קעות השנתיים הגיעו ליותר מ-50 מיליארד יורו בשנת 2017,

שהייתה שנה שישית ברציפות של צמיחה.

F P SLEGAL A DVICE. MA DE FOR YOU.

ISRAEL EDITION — 0302 — FPS DOING BUSINESS IN GERMANY – STARTER KIT

Thanks to a stable and transparent investment environment, Germany also continues to be one of the most attractive targets for real estate in-vestment in Europe. Seeing its second-highest year of investment on record in 2017, Germany has cemented its position as a top European real estate destination. Annual investment volumes soared to over 50 billion euros in 2017, marking the sixth successive year of growth.

Across the board, from small and medium-sized enterprises to major multinational corporations, German companies have actively sought coop-eration with Israeli start-ups in the technology sector. When it comes to innovation, Germany looks to Israel. According to a recent study by Hebrew University, more than half of the com-panies on the DAX, Germany’s blue ribbon stock index, now have outposts in Israel, either study-ing or developing technology. Israeli companies can be certain to receive a warm welcome in Germany.

For almost two decades, FPS has advised Israeli entrepreneurs, investors, financial institutions, and companies looking to raise capital, develop markets, protect their intellectual property, make investments, and leverage business opportuni-ties in Germany. Our broad range of expertise and knowledge of differences in terms of legal structures, regulations, and practices governing business operations has proven to be of great value to our Israeli clients doing business in Germany as well as our German clients aiming to access the Israeli market. Our clients also ben-efit from our excellent worldwide network and our strong ties to major multinationals, financial institutions, municipalities and politicians, real estate developers, and family offices.FPS LEGAL ADVICE. MADE FOR YOU.

If you want to do business in Germany, there are many things to keep in mind. To help you get started, we have put together some key infor-mation about German business culture and an overview of current legal issues that we have found to be of interest to our international cli-ents. This is by no means a complete list and should not replace personal consultation with a lawyer. The idea, rather, is to give you some initial pointers and to get you one step ahead of your competitors.

So, when will you explore Germany’s busi-ness opportunities?

הן עסקים קטנים ובינוניים והן תאגידים רב לאומיים גדולים

חברות עם פעולה לשתף פעיל באופן מחפשים מגרמניה

מגיע כשזה בטכנולוגיה. העוסקות ישראליות אפ סטארט

לחדשנות, גרמניה נושאת את עיניה אל ישראל. לפי מחקר

שנערך לאחרונה על ידי האוניברסיטה העברית, יותר מחצי

שמהעסקים של מדד שוק המניות הגרמני הקימו נציגויות בי

שלהן. הטכנולוגיה תחום את לפתח או ללמוד כדי שראל

חברות ישראליות יכולות להיות בטוחות שהן יתקבלו בברכה

בגרמניה.

משקיעים, ליזמים, מייעצים שאנו עשורים שני כמעט כבר

להגדיל שמעוניינים מישראל וחברות פיננסיים מוסדות

לבצע שלהם, הרוחני הקניין על להגן שווקים, לפתח הון,

השקעות ולמנף הזדמנויות עסקיות בגרמניה. ל-FPS, מגוון

ב מבנים משפטיים, על ההבדלים וידע מומחיות רחב של

בתקנות ובנהלים המסדירים את הפעילות העסקית, שהוכח

כבעל ערך רב ללקוחות הישראליים שלנו אשר עושים עסקים

בגרמניה, כמו גם ללקוחות הגרמניים שלנו שמטרתם להגיע

העולמית מהרשת גם נהנים לקוחותינו הישראלי. לשוק

לאומיות רב חברות עם החזקים ומקשרינו שלנו המצוינת

נדל“ן יזמי פוליטיקאים, עיריות, פיננסיים, מוסדות גדולות,

ומשרדים משפחתיים עם נכסים פרטיים.

FPSייעוץ משפטי – במיוחד בשבילך

כאשר אתה רוצה לעשות עסקים בגרמניה, יש הרבה דברים

ששכדאי לקחת בחשבון. כדי לעזור לך להתחיל בצורה מסו

דרת, אספנו בשבילך מידע חשוב הנוגע לתרבות העסקית

שהגרמנית וסקירה כללית של עניינים משפטיים עדכניים שב

דרך כלל חשובים ללקוחותינו הבינלאומיים. זוהי בשום אופן

אינה רשימה מלאה והיא אינה תחליף להתייעצות אישית עם

עורך דין. הרעיון הוא לתת לך תובנה ראשונית ולהציב אותך

צעד אחד קדימה לפני המתחרים שלך.

–אז מתי תגיע לגלות את ההזדמנויות העסקיות שלגר

מניה יש להציע לך?

04 — FPS DOING BUSINESS IN GERMANY – STARTER KIT ISRAEL EDITION — 05

C O N T E N T

01 Access Germany .......................................................... PAGE 08

02 Getting Started ............................................................. PAGE 10

03 How Well Do You Know German Business Customs? ... PAGE 14

04 Employment Law ......................................................... PAGE 16

05 General Data Protection Regulation (GDPR) .................. PAGE 20

06 Real Estate ................................................................... PAGE 22

07 Overview of German LLCs – GmbH and UG ................. PAGE 24

08 Funding Programs ........................................................ PAGE 28

09 Interview ...................................................................... PAGE 30

10 Tax Checklist ................................................................ PAGE 32

11 Strategic Insight ............................................................. PAGE 34

12 Contact ........................................................................ PAGE 37


BERLIN

FRANKFURT

HAMBURG

DUSSELDORF

TEL AVIV

A C C E S S G E R M A N Y O P P O R T U N I T I E S F O R I S R A E L

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GERMANY’S LANDMASS:

357,022 KM²

“MADE IN GERMANY”: GERMANY HAS A REPUTATION FOR MANUFACTURING EXCELLENCEFACT

TEL AVIV — DUSSELDORF 5:40

€3.2€3.3

82,600,000

TEL AVIV — BERLIN 4:03

TEL AVIV — FRANKFURT 4:15

TEL AVIV — HAMBURG 6:05


G E T T I N G S TA R T E D 0 2

Get a German website with the necessary disclosures and information.

FPS PRO TIP: While many Germans speak English, they usually feel more comfortable and will trust a company or product more when their questions are answered in German. German law requires com-mercial websites to include certain information about the company. Failure to do so may constitute a violation of competition law and result in fines or other penalties.

Locate suitable office or industrial premises.

FPS PRO TIP: Germans will trust your company more if you have a German business address. If you decide to rent office space in Germany, the lease agreement will be subject to German tenancy law on commercial leases. Commercial tenancy laws are less re-strictive than residential tenancy laws and allow more room for negotiation. When negotiating your lease, it is important to consider a number of issues. One example is the length of the lease term, as it is possible to structure a lease with a flexible end date. Simi-larly, you should consider the intended use of the property, as plan-ning laws in Germany are strict. If your intended use is not permit-ted, it is possible to petition for a change in the permitted use, but this is something that should be addressed before a lease is signed. Additionally, German leases usually contain a rent index clause (which means the rent will automatically go up on an annual basis). Also, it is standard to request a deposit for a lease. It may be ad-visable to purchase a bank guarantee from a German bank instead of making a direct deposit with the landlord.

Explore your opportunities in Germany on a business trip.

FPS PRO TIP: A Schengen visa permits a 90-day stay in Germany (per six-month period starting from the initial date of arrival) during which you can take the steps necessary to establish a business. However, Israeli citizens may stay in Germany up to 90 days without any visa. A visa is required only when entering Germany for a long-term stay or if you intend to work in Germany (e.g. self-employment or other gainful employment).

Obtain more information on a specific business location.

FPS PRO TIP: We are happy to tap our excellent network to help you make the necessary connections. Several of our lawyers hold positions on the board of the German-Israeli Business Association, a partner organization of the German-Israeli Chamber of Commerce, and can provide you with first-class insights. Our regularly host-ed events provide an additional opportunity to meet key business people.

Decide on the type of business you wish to establish.

FPS PRO TIP: ״דע עם מי יש לך עסק״ – Know who you’re doing business with! The German economy is decentralized and there are various business hubs: Frankfurt is great for fintech, Berlin is the place for creative start-ups, and Southern Germany is home to the most prominent technology and engineering companies. You will benefit from synergies by interacting with local companies and understand-ing the business culture.


Settle any residency issues.

FPS PRO TIP: If you intend to run your business on-site or to have Israeli employees working in Germany, they will require a residence permit (Aufenthaltserlaubnis) or a settlement permit (Niederlassungserlaubnis). Each of these residency permits has its own require-ments and legal consequences. Immigration law in Germany is highly complex and very fact-specific with a number of unique ex-ceptions (for example some Israelis may be eligible for citizenship based on their historic connection to Germany). FPS can help you navigate the immigration process and help you identify the option(s) that best suit(s) your needs.

Get a good tax advisor as well as a good lawyer.

FPS PRO TIP: It has been said that the majority of legal literature in the world is written in Germany. The problem is that it’s probably true. There are thousands of laws, regulations, and court decisions that you need to comply with when doing business in Germany, not to mention European law, which also applies in Germany. Therefore, it is extremely important to partner with experts who will help you navigate the bureaucratic jungle.

DEPENDING ON THE BUSINESS TYPE YOU CHOOSE, THE FOLLOWING STEPS MAY BE REQUIRED:

Choose the right corporate form. There are various corporate forms to choose from, which differ in terms of the liability of their owners and capitalization requirements. Certain companies require that you set up articles of association (Gesellschaftsver-trag) and register your company with the Commercial Register (Handelsregister).

FPS PRO TIP: Learn how to incorporate the most common German legal entity – a GmbH and its “little sister,” the UG (haftungsbeschränkt) – in our checklist in this booklet.

Register your business with the Business Regulatory Authority (Gewerbeaufsichtsbehörde).

Notify the German tax authorities of your new business.

FPS PRO TIP: Find more information in our Tax Checklist in this booklet.

Register your company with the German Social Security Office (Sozialversicherungsbehörde).

Open a business and / or private bank account.

Find qualified staff.

FPS PRO TIP: An employer’s ability to (unilaterally) terminate an em-ployment agreement is severely restricted by the German Wrongful Termination Act (Kündigungsschutzgesetz – KSchG). This statute is applicable in all business operations regularly employing more than ten employees. For this reason, it can be helpful to avoid reg-ularly employing more than ten employees in a business operation. For the purpose of efficiency, a company should use standard em-ployment contracts for all employees and amend them only as nec-essary, particularly for management staff. FPS can provide you with a draft standard employment contract for your company.

Finding an apartment for yourself or your staff.

FPS PRO TIP: If you decide to stay in Germany for an extended time period or intend to have your employees stay in Germany for ex-tended time periods, it might make sense to rent an apartment. German laws on residential leases are highly complex and very tenant-friendly. For example, short-term leases are permitted only under very limited circumstances. In general, three months’ notice is required for cancellation or modification of a contract. As with commercial leases, it is important to know whether there is a rent index clause (which will automatically raise the rent each year). As with commercial leases, a deposit is usually required for an apart-ment rental, and it may be advisable to make the deposit in the form of a bank guarantee instead of cash.


H O W W E L L D O YO U K N O W G E R M A N B U S I N E S S C U S T O M S ?

TRUE OR FALSE? 01. Germans are interested in short-term

relationships. True False

02. After about 1 year of working together, Germans call each other by their first names.

True False

03. For a German, quality means everything from good packaging to the best product.

True False

04. Germans value brief presentations. True False

05. In Germany, marketing campaigns are expected to include a certain amount of “hype” and exaggeration.

True False

06. Germans prefer conducting business in English over German.

True False

07. People never greet each other in the elevator.

True False

08. Hierarchies are generally fairly strict. True False

09. Putting everything in writing is a must. True False

10. Excursions are part of corporate culture. True False

0 3

ANSWERS 01. False. All in all, you can rely on the German tendency to be interested in long-term

relationships. Once they have made a commitment, they will try to develop a mutually beneficial relationship based on trust. Once you have acquired a German customer, there is a good chance you will have a client for life. German customers are very loyal.

02. False. First names are rarely used in the workplace. Use last names until first names are offered by your German business partners.

03. True.

04. False: If you are pitching a project, present all facts as thoroughly as you can. Germans like to analyze and review information in detail before making a decision. Make sure you have plenty of facts and information prepared for this process and to support the points that you are trying to make.

05. False. In serious marketing, exaggeration is not well received and may even be interpreted as dishonest.

06. False. Even if Germans speak English well, they will appreciate someone who speaks German.

07. False. Germans greet each other when they enter an elevator and they also say good-bye, or rather “Tschüss,” when they get off.

08. True. Hierarchies are expressed daily through language, as German has two forms of saying “you” – “du” (informal) and “Sie” (formal). It’s safe to start out with “Sie” with everyone until you’re told otherwise.

09. True. Keeping a written record of pretty much everything is still a very important habit in German offices. What is written on paper will always trump whatever other decision was made without leaving a written record.

10. True. Many Germans clearly separate work and personal life. Still, office excursions are regularly organized to allow employees to socialize and get to know each oth-er better. Taking part in those excursions, known as the “Betriebsausflug,” is a way of showing your interest in the team or the company. On those days, people should avoid discussing business topics.

ROTATE THE PAGE FOR THE ANSWERS!


E M P L OY M E N T L AW0 4

Under German labor and employment law, relations between

German employers and employees are highly regulated.

German labor and employment law strongly favors the protec-

tion of employees and is probably best thought of as “employ-

ee protection law.” Set out below are certain cornerstones of

German labor and employment law:

Although employment contracts in Germany are usually for a unlimited term, it is possible to agree on an employment contract with a limited term (and employers are increasingly making use of this possibility). However, employment contracts for a limited term are subject to restrictions under German labor and employment law. Generally, an employment contract may be for a limited term only if there is a valid reason for limiting the term of employment (e.g., substitution in case of illness, project work). However, an employer may always enter into (but not renew) an employment contract for a limited term of up to two years without restrictions.

For a five-day week, the average working time is between 35 and 40 hours. Daily productive working time generally may not exceed eight hours. Daily productive working time of up to ten hours is permitted provided that over a period of six months the average daily working time does not exceed eight hours.

Working on Sundays and public holidays is generally prohibited. How-ever, German law on working time provides for several exceptions to this general rule. If an exception applies, working on Sundays and public holidays is permitted (although prior approval by governmental authorities is required under certain circumstances).


Under German labor and employment law, employees who work a normal five-day work week have a right to 20 work days of vacation per calendar year (i.e., four weeks of vacation). However, employees typically receive between 25 and 30 vacation days per calendar year, depending on seniority and the type of business.

German labor and employment law generally requires that employers continue to pay salaries in the full amount for a period of up to six weeks if employees are absent due to illness (under certain circum-stances, the employer is required to make continued payments for up to 12 weeks).

Female employees are entitled to fully paid maternity leave (starting no later than six weeks before the expected due date, depending on the mother’s and baby’s health situation and the work performed by the woman, and ending eight weeks after childbirth). All employees, both male and female, are entitled to a maximum of three years of parental leave per child. During this period, the employer has no ob-ligation to make any payments to the employee. However, the em-ployer may not terminate the employee. Employees have a legal right to work part-time (up to 30 hours per week) during parental leave. When parental leave ends, the employer must offer continued em-ployment to the returning employee in a position that is equivalent to the employee’s original position.

German employment law on termination is regulated by various stat-utes and is intended to provide employees with maximum protection against wrongful termination.

The employer must give written notice of termination to the employee. The notice must be signed by the employer. Notice of termination in any other form (i.e., notice given by verbal communication, email, or fax) is null and void.


G E N E R A L D ATA P R O T E C T I O N R E G U L AT I O N ( G D P R ) N E W L E G A L R E Q U I R E M E N T S

R E L A T I N G T O G D P R

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STATUTORY OBLIGATIONS FOR COMPANIES

Several disclosure obligations when collecting per-sonal data, e.g., storing personal data outside the EU (Israel).

Documentation obligation to prove compliance with the GDPR.

Obligation to comply with rights of data subjects, such as right to information or right to rectify data.

EU GENERAL DATA PROTECTION REGULATION (GDPR)

The provisions of the GDPR apply not only to companies domiciled in the EU, but also to businesses outside the EU that process data of EU citizens.

HIGH PENALTIES FOR DATA PROTECTION VIOLATIONS

Fines in an amount of up to:

4 % of the global annual sales of a business or

€20 million against decision-makers, such as managing directors and data protection compliance officers

TO DOS BEFORE STARTING YOUR SUCCESSFUL BUSINESS IN GERMANY

Update your compliance system to meet the documentation obligations and the assessment of data protection consequences (accountability).

Update your documentation to meet the requirements for con-sent and disclosure obligations.

Implement a data protection office or designate a data protection officer to file reports of data breaches.

Update your internal policies to include data security issues.

Update your agreements for the processing of third-party data.

Update the privacy policy on your website.


R E A L E S TAT E D I D Y O U K N O W . . .

0 6

Under German law, a real estate pur-chase agreement is valid only if a notary has read the agreement to the parties with all parties physically present at the time the agreement is read.

German law distinguish-es between the contract of sale and the contract that transfers ownership, and both exist separately with one having no effect on the other.

With very limited exceptions, a private lease agreement for an apartment that is concluded for a limited period of time is invalid.

Unless a tenant has waived his rights, under a lease for an in-definite term, a tenant must provide notice of termination at least three months in advance.

1.

3.

2.

4.

An oral commercial lease agreement with a term longer than one year will be automatically con-verted into a lease for an indefinite term, which substantially impacts the parties’ rights under the agreement.

You don’t have to wait for a new zoning plan to come into effect in order to petition for a building permit based on that plan. The Federal Building Code allows early permitting if certain requirements are met. Among other things, the city must have provided the public and other parties of interest with an opportunity to review the plan.

Many of the larger German cit-ies have recently instituted reg-ulations that protect certain neighborhoods from gentrifica-tion (“Milieuschutz”). In those areas, it will be harder to make upgrades aimed at substantial-ly raising the rent.

5.

6.7.


In Germany, incorporators can choose from among a variety

of corporate forms. The key criteria for selecting the appropri-

ate corporate form generally are the intended purpose of the

company, the position of the shareholders, liability, and taxa-

tion. The basic structure of each corporate form is governed

by law in Germany, which provides legal certainty. The rela-

tionship between the shareholders and the internal structure

of the company are governed by the articles of association

(the “Satzung”) and, in some cases, agreements between the

shareholders.

The simplest, most flexible corporate form is a limited liability

company (LLC). In Germany an LLC known as a Gesellschaft

mit beschränkter Haftung (GmbH) is the most widely used

corporate form. A rather new type of LLC is the UG (haftungs

beschränkt), which is sort of a “little sister” of the GmbH.

While the minimum required share capital of a GmbH is

€25,000.00, it may be as little as €1.00 for a UG (haftungs

beschränkt). In Germany, all types of LLCs must be recorded

in the Commercial Register (Handelsregister). The shareholders

of an LLC are not personally liable to creditors of the company,

provided that all capital contributions have been fully paid in.

O V E R V I E W O F G E R M A N L L C S – G M B H A N D U G ( H A F T U N G S B E S C H R Ä N K T )

0 7

A GmbH or UG (haftungsbeschränkt) may be incorporated by any German or foreign natural person or legal entity.

The next step in the incorporation process of a GmbH or UG (haftungsbeschränkt) is drafting the company’s articles of association. By law, the articles of association must include certain information, such as the corporate name, registered office, business purpose, registered share capital, shares, and managing directors of the company. But there is also plenty of room for contractual arrangements between the shareholders, so that the articles of association can take into account the specific requirements and needs of the shareholders.

Next, the articles of association and other incorporation documents must be recorded by a German notary (the “Beurkundung”).

Notarial certification is required for the articles of association and the record concerning the set-up of the company.


In addition to the aforementioned conventional model of incorporation, German law also makes available a simplified incorporation process for both a GmbH and a UG (haftungsbeschränkt) using standard articles of association with standard provisions. This makes incorporation easier and also saves costs. Again, the articles of association must be recorded by a German notary.

A GmbH must have share capital of at least €25,000.00. A UG (haftungsbeschränkt) must have share capital of at least €1.00.

Once the articles of association have been notarially recorded, a bank account must be opened for the company and, in the case of a GmbH, at least 50 % of the required share capital (i.e., €12,500.00) must be deposited in that account. Otherwise, the company cannot be recorded in the Commercial Register and will not have the status of a limited liability company.

FPS PRO TIP: Before a limited liability company is recorded in the Commercial Register, the company will be considered a partnership under civil law (Gesellschaft bürgerlichen Rechts – GbR) by operation of law. Partners of a GbR are fully and personally liable for all obliga-tions of the GbR. This means that shareholders of a GmbH or UG (haftungsbeschränkt) are fully and personally liable for any obligations the company enters into before it is recorded in the Commercial Reg-ister (for example, obligations under lease agreements or loan agreements).

Unlike a GmbH, a UG (haftungsbeschränkt) must accumulate the minimum share capital of a GmbH, i.e., €25,000.00, over the course of time. Until its share capital has reached that amount, a UG (haftungsbeschränkt) is not permitted to distribute all of its profits among the shareholders, but rather must allocate 25 % of its net profit for the year to its statutory reserves.

Once it has been verified that the required capital contributions have been paid to the company’s account, the managing director(s) will apply to have the company recorded in the Commercial Register. All signatures must be certified by a German notary. The notary will then electronically file the application for entry of the company in the Com-mercial Register with the local court (Amtsgericht) of competent jurisdiction.

The costs of incorporation depend on the amount of share capital and company goodwill. Stamp duty must be paid to the notary in accord-ance with the statutory fee schedule. If the services of an attorney are retained, e.g., for drafting customized articles of association or shareholder agreements, additional costs may be incurred.

Both a GmbH and a UG (haftungsbeschränkt) must have two governing bodies: the managing director(s) and the shareholders’ meeting. The articles of association may provide for additional governing bodies, e.g., a supervisory board. FPS PRO TIP: Unlike France and the UK, Germany has no “board sys-tem.” Both a GmbH and a UG (haftungsbeschränkt) must have at least one managing director who is recorded in the Commercial Register as the legal representative of the company. A supervisory board is optional.

Managing directors must be natural persons. They may be German citizens or foreign nationals who are permanent residents of Germany. Shareholders, too, can be appointed managing director(s) (“managing shareholders”).

The managing director(s) represent(s) the company in dealings with third parties and is / are responsible for managing the company’s busi-ness. Under German law, the authority of the company’s managing director(s) to represent the company in dealings with third parties may not be limited. The managing director(s) is / are obligated to comply with instructions issued by the shareholders’ meeting.


0 8 F U N D I N G P R O G R A M S ( F Ö R D E R P R O G R A M M E )

Of course, both start-ups and well-established companies

have capital needs. In this respect, Germany is no different

from other economies. Funding options include equity capital,

mezzanine capital, loans, and various types of guarantees. But

Germany offers various forms of financial assistance to com-

panies tailored to the specific needs of each project and each

stage of development.

DID YOU KNOW THAT:

The EU, the German federal government, and local regions provide funding programs of all kinds to support new as well as established companies and businesses.

These programs are also available to companies outside the EU, not only to German or EU entrepreneurs.

These programs range from supporting start-up companies at the early stages to aiding small- and mid-size companies of certain sectors and industries.

Support may take various forms, from a one-time contribution to recruitment support for hiring people, to wage subsidies and public loans for various purposes, to equity capital from public VC funds and participation programs.


0 9 I N T E R V I E W

Where do you see the greatest potential for fintech start-ups in the coming years?

Maria: In the past quarter, investments in Israeli fintech start-ups jumped 40 %. Hot topics that both banks and investors are looking into are Artifi-cial Intelligence, big data, forex risk, and regulatory solutions.

Do you have any tips for Israeli entrepreneurs that are seeking to enter the German market?

Maria: Build a good reputation and network a lot. The German market, while being big, is also very tightly interconnected. One person you meet might introduce you to your next big customer. Ram: Be patient. The sales cycles in Germany can be relatively long, but in the end it will be worth it, because when Germans adopt a solution, you have a long-term stamp of quality.

Interview with Ram Shoham from Israel and Maria Pennanen

from Finland, founders of Accelerator Frankfurt, who leverage

Israeli companies looking for new markets in Germany and

come to Israel on scouting trips every six weeks.

You decided to open the first business accelerator in Frankfurt. How come?

Ram: Frankfurt has a great deal of potential, especially for start-ups with a focus on B2B (business-to-business) solutions. There is a lot of wealth here, large banks, real estate companies, and insurance companies, and it’s an attractive market from which to start entering Europe. Fintech and cybersecurity decision-makers are based here, making it an ideal location to accelerate your sales and grow your company.

What do Israeli start-ups cherish about Germany?

Maria: Germany is a very liberal and diverse country with a strong econ-omy. Steve Jobs once said: “The only way to do great things is to love what you do”. We attract passionate entrepreneurs both from Israel and from Germany. When you mix Israeli out-of-the-box thinking with German attention to detail and its process-oriented way of doing business, great things happen!

How do start-ups benefit from your accelerator?

Ram: As the first accelerator in town, we have done a great deal of the hard work in showing that start-ups have a place at the table. We develop a product wish list by talking to local banks and large corporates and in-volve those contacts in identifying start-up applicants with relevant tech-nologies. We bring added value not only to the start-ups but also to corporations by matching start-up solutions to corporate needs.


10 TA X C H E C K L I S T

FIRST STEP: DECIDE ON HOW TO MAKE BUSINESS IN GERMANY.

Formation of GmbH / UG? Partnership? Permanent establishment (PE)?

German corporations (GmbH, UG) are subject to corporate income tax (15 %) and trade tax (13 – 20 % depending on municipalities); dividends are subject to (corporate) income tax at the level of the shareholder but are also subject to withholding tax (25 %) at the level of the company. Shareholders may be exempt from investment income taxes or may qualify for a refund.

German partnerships (KG, oHG, GbR) are subject only to trade tax but profits are also subject to German (corporate) income tax at the level of the partners (up to 45 %).

All companies can be established from scratch or can be acquired as shelf companies that are already registered in the Commercial Register.

Acquisition of a German corporation, partnership or PE? Share deal vs. asset deal?

A share deal gives you a better tax position for a future exit.

Important for acquisition of a start-up: Loss carryforwards may be lost pro rata if more than 25 % of the shares in a German corporation are acquired and may be lost completely if more than 50 % of the shares are transferred.

An asset deal gives you a stepup of the acquired assets and allows for higher tax depreciation.

NEXT STEP: START YOUR BUSINESS IN GERMANY.

Register your business and your company with the local tax authorities

Meet bookkeeping and accounting requirements!

File tax returns

Value-added tax (VAT) returns must be filed monthly by the 10th day of the following month. An annual VAT return must also be filed.

Corporate income tax, income tax, and trade tax returns must be filed by May 31st of the following year. The filing period is automat-ically extended to December 31st of the following year if a tax advisor files the returns.

Withholding tax returns on dividend distributions must be filed by the 10th day of the month following the month in which dividends are distributed.

Payroll tax and social security contributions must be withheld by the employer, and tax returns must be filed by the 10th day of the fol-lowing month. Payroll tax also applies to salaries of managing direc-tors, and social security contributions must be withheld if a managing director does not hold a majority of the shares in the company.

Quarterly pre-payments are assessed with regard to (corporate) income tax and trade tax

Real estate transfer tax returns must be filed only if German real estate or at least 95 % of the shares / partnership interests in a company (directly or indirectly) holding German real estate are transferred

Taxes may be subject to 6 % interest in case of late filing or late payment

LAST STEP: EXIT / REINVESTMENT

A sale of shares in a German corporation (share deal) may be taxed on the basis of 5 % of the capital gains only if the seller is a corpo-ration as well

If shares or assets are sold by a German corporation (GmbH / UG), the capital gains may be retained by the corporation for reinvest-ment without final taxation at the level of the shareholders


11 S T R AT E G I C I N S I G H T L O C A L K N O W L E D G E W I T H A G L O B A L R E A C H

For almost two decades, FPS has been supporting a wide range

of cross-border transactions between Germany and Israel. We

advise Israeli entrepreneurs, investors, financial institutions, and

companies looking to raise capital, develop markets, protect their

intellectual property, make investments, and leverage business

opportunities in Germany. In cooperation with Israeli law firms,

we also advise German companies looking to enter the Israeli

market, partner with Israeli companies, or tap into Israeli exper-

tise. We regularly accompany high-profile business delegations

to Israel. This is one of many ways in which we have developed

a strong network of business contacts, which our clients can

leverage in both countries.

ISRAEL DESK

Our Israel Desk includes lawyers who have lived in Israel or have family ties there. We have a deep understanding of Israeli business and legal culture. Our broad range of expertise and knowledge of differences in terms of legal structures, regulations, and practices governing business operations have proven to be of great value to our Israeli clients doing business in Germany. We advise a large number of Israeli clients in real estate, corpo-rate, and IP / IT matters. We believe that this expertise along with our strong commitment to Israel have contributed to our long and successful track record with Israeli clients.

STRATEGIC INSIGHT WITH A PERSONAL TOUCH

FPS is your one-stop shop for doing business in Germany. FPS is not a typical law factory with layers of bureaucracy and hierarchies, but a na-tionally organized firm with a broad partnership structure. As an FPS client, you will benefit from this state-of-the-art, efficient, and cost-conscious advisory structure. We use the latest legal technology to ensure that you don’t just get good advice, but that you get it fast. We are passionate about our clients’ businesses, and we love to see their ideas grow into successful enterprises. Many of our clients have been with us from the beginning of their entrepreneurial journey – becoming friends over the years.

Our lawyers work across our offices and form client teams depending on the requirements of the matter at hand. This ensures that clients will benefit from the firm’s collective legal expertise. A deep understanding of a particular industry and the appropriate entrepreneurial approach com-plement our expert legal solutions.

With over one hundred lawyers in four offices across Germany, we cover the entire spectrum of business law with eleven practice areas:

Banking and Finance

Commercial Law

Corporate / M&A

Employment Law

Energy Law

Intellectual Property / IT Law

Litigation and Dispute Resolution

Notarial Services

Public Law

Real Estate

Tax Law


ISRAEL-RELATED ADVISORY WORK

Our Israel-related advisory work is concentrated in the following areas:

Real estate transactions, including legal due diligence reviews

Regulatory compliance (i.e. GDPR)

The licensing and sale of technology

Protection of intellectual property, competition, and copyright law issues, trademarks, utility models, and design patents

Formation of companies, private equity, M&A, and joint ventures

Tax structuring and project financing

Infrastructure and energy projects

Employment law

For more information check out our website at

www.fps-law.de or contact our Israel Desk

HEAD OF ISRAEL DESK:

Dr. Nina Cohen LL.M. (UCLA)Attorney

Eschersheimer Landstraße 25 – 2760322 Frankfurt am MainT +49 69 95 [email protected]

The content of this brochure serves for general information purposes only and does not constitute legal advice or a legal opinion.

C O N TA C T12


INFORMATION IN ACCORDANCE WITH THE GERMAN REGUL A -T IONS ON THE DISCLOSURE OBLIGATIONS OF SERVICE PROVID -ERS (DL- INFOV )

FPS Fritze Wicke Seelig Partnerschaftsgesellschaft von Rechtsanwälten mbB is a partnership with limited professional liability under the German Partnership Act and is registered in the Partnership Register. Registered office and registration: Frankfurt am Main, Local Court of Frankfurt am Main, registration number PR 1865 VAT identification number: DE219074277 The list of registered partners is available in the “Legal Notice” via the link “Partners” at www.fps-law.de / en.

M U LT I - D I S C IP L I N A RY W O R K / P RO FES S I O N A L A S S O C I AT I O N S

The partners have associated in the form of a partnership for long-term profes-sional purposes. Some partners also work as notaries, tax advisors, and certified public accountants. Notarial services are provided exclusively at our offices in Berlin and Frankfurt am Main. Attorneys are prohibited from representing parties with conflicting interests under professional standards (sec. 43a para. 4 of the Federal Attorneys’ Act (BRAO)). Prior to accepting a matter, we will therefore always check whether there is a conflict of interest.

M E D I AT I O N

When disputes arise between attorneys and their clients, either party has the option of filing a request for mediation with the local German Bar Association. For attorneys of FPS, these are, depending on the office with which an attorney is affiliated, the German Bar Association in Berlin, Dusseldorf, Frankfurt am Main, or Hamburg (see sec. 73 para. 2 no. 3 in conjunction with sec. 73 para. 5 of the Federal Attorneys’ Act (BRAO)). Additional information is available on the website of each German Bar Association. As an alternative, a mediation request may also be filed with the mediation board for attorneys of the Federal Bar Asso-ciation (see sec. 191 et seq. of the Federal Attorneys’ Act (BRAO)). Additional information is available on the website of the Federal Bar Association at www.brak.de or may be requested by e-mail from [email protected]. For all additional information required to be provided in accordance with the German Regulations on the Disclosure Obligations of Service Providers (DL-InfoV), please refer to the legal notice on our website at www.fps-law.de.

© 2018 FPS Fritze Wicke Seelig Partnerschaftsgesellschaft von Rechtsanwälten mbB

38 — FPS DOING BUSINESS IN GERMANY – STARTER KIT

H A M B U R G

Große Theaterstr. 3120354 HamburgT +49 40 37 89 01-0F +49 40 36 62 [email protected]

B E R L I N

Kurfürstendamm 22010719 BerlinT +49 30 88 59 27-0F +49 30 88 59 27-100 [email protected]

D U S S E L D O R F

Königsallee 60 C (KÖ-Höfe)40212 DusseldorfT +49 211 30 20 15-0F +49 211 30 20 [email protected]

F R A N K F U R T / M A I N

Eschersheimer Landstr. 25 – 2760322 Frankfurt / MainT +49 69 95 957- 0F +49 69 95 957- [email protected]

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