Taxation in Germany for Startups

Find out more about how taxation works for startups in Germany...

Start-ups (Existenzgründungen) have the same burdens as described on the freelancers page. However, there are some points which should be taken into consideration.

Tax and Other Obligations

Start-ups, be they a business, a partnership or a corporation, must notify the tax authorities about their plans. An abbreviated finance plan must be prepared.

Keep in mind that start-ups should generally prepare a business and marketing plan. First, the entrepreneurs get an overview of what needs to be done and which costs have to be accounted for. Second, they acquire a better understanding of the nature and type of the business and market conditions, including what needs to be done in order to survive the crucial first years. Third, any bank or business angel will want to see a well-prepared business plan before lending money.

Start-ups in Germany may be granted financial aid from the authorities, planning supervision and seminars as well as the arrangement of networking events. Offers can be obtained from the local Chamber of Commerce and City Council. Also, should the startup plan to create jobs, the local Jobcentre may (co-)fund an employee.

The UG is the cheapest way of setting up a corporation. Using a sample contract will allow for reduced notary costs, but it cannot be personalised.

A start-up has to fulfil many potential obligations: registration at the local professional register, the commercial register (which is done by the notary in the case of a corporation), joining the local chamber of commerce, registration at the social and pension security insurance and health insurance as well as casualty insurance, registering employees, registering with the tax authority, filing all relevant tax returns (Steuererklärungen), organising and upholding accounting, and more.

Starting a business in Germany is burdensome, but also lucrative.

Disclaimer: Tax law is a complex matter. Any information provided on this website is intended as a summary and not to be more than a general overview. A specific client-advisor relationship does not arise from any information shown herein. Neither the author nor the publisher are responsible for any liability, especially for actions taken on the basis of information contained in this summary, nor for any errors, omissions etc. This text is not intended to render legal, accounting or tax advice.

Due to the complexity of tax law in any country and especially the interaction of multiple tax systems it is always recommended and encouraged to seek professional advice concerning specific matters before making any decision.

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