When foreign investors have to meet market and increasing administrative requirements in Germany often the demand for a stronger presence of the enterprise in Germany will increase as well. In many cases, establishing a fixed place of business or a facility represents the only way to support investors to meet these requirements and to serve the business operations in Germany. Typically, this would be addressed by the formation of a permanent establishment in Germany.
One benefit of the formation of a permanent establishment in Germany is that there are no conditions under company law to be met. A permanent establishment only has to be registered with the district municipality where it has been opened. The municipality will then share the details of the establishment with the regional tax office. Income that has been generated in Germany is qualified as commercial income and therefore subject to non-resident tax liability in Germany. As a permanent establishment has no legal personality in Germany, also the economic risk will be taken solely by the foreign head office.
A second benefit to mention is that the establishment, as well as the liquidating is easier and therefore more flexible than incorporating or liquidating a regular legal entity in Germany. Due to this fact a permanent establishment may already be profitable even though a foreign investor would like to enter only in a short period of business engagement in Germany.
At some point in time a representative in Germany might become necessary instead of a fixed place of business or facility to successfully continue the business operations of a foreign enterprise in Germany. In many cases also the incorporation of a new business is required to support the business growth strategy in Europe.
Consultinghouse can support foreign investors to evaluate an individual business model and will provide guidance to identify and establish the right investment option in order to successfully touch ground in Germany and Greater Europe.