Why Set Up a Joint Stock Company in Germany


The Federal Republic of Germany (“Germany”) is a federal parliamentary republic located in central-western Europe. It has Denmark bordering to the north, Poland and the Czech Republic to the east, Austria to the southeast, Switzerland to the south-southwest, France, Luxembourg, and Belgium lies to the west, and the Netherlands to the northwest. Germany’s location in the middle of Europe offers great business opportunities.

Germany is certainly a place for anyone who is considering in expanding their company operations internationally. It is one of the main players in the EU, and one of the strongest economies worldwide.

According to the Doing business report put together, by the World Bank, Germany is having the largest economy in Europe; 35 % of the European Union’s GNP is generated in this country. Germany’s population of more than 82 million people is the largest in the European Community.

Following are some of the advantages of company formation in Germany.

  • It offers a large domestic market and easy access to the growing markets in the enlarging European Union.
  • Germany is the world’s number one exporter
  • It is based upon a free market economy, combined with regulative measures from the state.
  • Germany is one of Europe’s most cost-effective locations and still, keeps its high productivity rates and quality standards.
  • Transportation infrastructure makes Germany Europe’s number one logistics market.

A stock corporation (Aktiengesellschaft, AG) generally enjoys a high market reputation among business partners.

A German stock corporation (Aktiengesellschaft, AG) has a legal personality separate from its shareholders
(Aktionäre). The shareholders are not liable to third parties for acts of the company.

Its advantages are the easy transferability of the shares and the option to finance the company not only by debt but also by equity. Shares of an AG can either be listed on the stock exchange or transferred by contract. In contrast to a partnership, the AG is managed by an executive board, which is controlled by the supervisory board.

Articles of association, authenticated by a court or notary, are initially required to set up an AG, and it only becomes a legal entity when it has been entered in the Commercial Register. The name of the AG is usually taken from the purpose of the enterprise and it must show the words “Aktiengesellschaft (AG).”

In the case of a German joint-stock company the minimum capital required is 50.000 €, as a result, this type of company is mainly chosen by larger companies. The capital must be deposited during the incorporation procedures

The tax system in Germany is quite friendly to corporations or individuals, It .features a corporate tax rate of around 31% on average.

The corporate tax rate includes a corporate income tax of 15%, solidarity surcharge 0.825% and a regional trade tax. The local tax for trade varies between 14-17.15%. The local German tax is not deductible as a business expense.

Germany has a 19% VAT rate on services and goods delivered in Germany. Within the European Union, VAT is 0% between VAT companies. Corporations may claim back VAT.

As you can see Germany is one of the most attractive countries in Europe for foreign investments. Its central location, easy access to other EU markets and its good infrastructure and highly qualified workforce recommend it for business investments.