StartingaCompanyinGermany—GuideforForeignEntrepreneurs

Can a non-EU citizen be the sole director of a German GmbH?

Yes — a German GmbH can have a non-EU citizen as its sole Geschäftsführer (managing director). The director does not need to be a German resident. However, if the director physically works from Germany to manage the company, they need a valid German residence permit allowing self-employment (§21 AufenthG). For non-resident directors managing the company remotely from abroad, no German permit is required.

What is the minimum investment to start a business in Germany?

Absolute minimum: UG (Unternehmergesellschaft) can be formed with €1 share capital. Total formation cost including notary and court fees: ~€1,500–€2,000. For a GmbH: €12,500 minimum capital paid-in + ~€2,000–€3,500 formation costs. For a sole trader (Einzelunternehmer): €15–50 registration fee only. The true minimum effective investment depends on your sector — many professional service businesses can start with under €5,000 total outlay.

What ongoing compliance does a German GmbH require?

Mandatory annual obligations: (1) Jahresabschluss (annual accounts per HGB) filed at Bundesanzeiger within 12 months of year end. (2) Annual tax returns for KSt, GewSt, and USt by 31 July (or 28 February with Steuerberater). (3) Monthly/quarterly Umsatzsteuervoranmeldung. (4) Monthly Lohnsteuer-Anmeldung if employing staff. (5) Transparenzregister notification if ownership changes. (6) Handelsregister update if director or address changes. Our Steuerberater team manages all filings.

How does profit distribution work in a German GmbH?

GmbH profits can be distributed to shareholders as Gewinnausschüttung (dividend). Distribution requires a shareholder resolution and is made from the Jahresüberschuss (annual surplus) or retained earnings per the Jahresabschluss. German GmbH does not have quarterly dividend payments — typically once per year after accounts are approved. Capital gains tax (Kapitalertragsteuer 25% + Soli) is withheld at source. DTA may reduce the rate for non-German shareholders.

Is a German GmbH a good structure for holding assets internationally?

Yes — a German GmbH holding company is highly efficient for international asset holding due to §8b KStG: dividends received from subsidiary companies are 95% exempt from corporate tax (effective rate ~1.5%). Capital gains on share disposals are also 95% exempt. Germany's extensive DTA network reduces withholding tax on incoming dividends. The structure must have genuine economic substance in Germany to avoid anti-abuse rules under ATAD and the Principal Purpose Test in DTAs.

Do I need a German address to start a company in Germany?

Yes - a German GmbH must have a registered Sitz (legal address) in Germany per Section 4a GmbHG. This can be a physical office, a virtual office, or a registered address service. Many foreign founders use a virtual office (approx. 500-1,500 EUR/year) in Düsseldorf, Munich, or Berlin that is accepted by the Finanzamt. The registered address appears in the Handelsregister and on all business documents. PO boxes are not accepted for Handelsregister registration purposes.

What banking options are available for a foreign-owned German GmbH?

Traditional German banks (Deutsche Bank, Commerzbank, HypoVereinsbank) require in-person visits and take 2-6 weeks. Online business banks with German IBAN: Penta, Qonto, Kontist, and N26 Business can generally be opened remotely via video ID. For the GmbH formation bank account (Gründungskonto) to deposit the share capital, many banks now accept EU citizens remotely; non-EU founders may need an in-person visit or use a formation-specialist bank.

What taxes does a foreign-owned German GmbH pay?

A German GmbH pays: (1) Körperschaftsteuer (KSt) 15% on profits, (2) Solidaritätszuschlag 5.5% on KSt = 0.825%, (3) Gewerbesteuer 14-17% depending on municipality Hebesatz, (4) Umsatzsteuer (VAT) 19% collected and remitted on taxable sales. Total effective tax on GmbH profits: approximately 28-30%. Dividends to non-German shareholders are subject to 25% German withholding tax, reducible under applicable DTA. Director salaries are deductible, reducing GmbH taxable profit.

What is a nominee director and when is it used for German GmbHs?

A nominee director (Treuhänder-Geschäftsführer) is a German-resident person who acts as the formal managing director of a GmbH while the actual beneficial owner retains control via a side agreement. This is used when the actual owner cannot obtain a German visa or needs a locally reachable director for Finanzamt registration. The nominee must be genuinely registered and contactable in Germany - Finanzämter can reject GmbH tax registrations where the director is unreachable. Nominee arrangements must be transparently documented.

How does a foreign company open a German branch instead of forming a GmbH?

A Zweigniederlassung (branch office) is a simpler alternative to a new GmbH. The foreign parent company registers its branch at the local Handelsregister (Amtsgericht). Required documents: certified copy of parent company articles and registration, German business address, appointed branch manager, and German-language translations. The branch has no separate legal personality - the parent bears all liability. German branch profits are taxable in Germany. Branches can be registered faster and more cheaply than a GmbH formation.