Germany | MHR & Partners

Challenges and Solutions for Opening a Bank Account in Germany

MHRPartner — Sun, 02 Mar 2025 10:41:51 +0000

Mehmet Akif Özmen | Sworn Financial Advisor - CPA | Founder, CEO

Starting a business in Germany is an exciting step filled with opportunities. However, for Turkish entrepreneurs, opening a bank account in Germany can sometimes be a complex and challenging process. Even if you’ve established your company in Berlin and secured your residence permit, you might still face obstacles when trying to open a corporate bank account. So, how can you overcome these challenges? In this article, I’ll share key tips and solutions to help you navigate the process more smoothly.

Tips for Quickly Opening a Bank Account in Germany

Entrepreneurs frequently ask about the difficulties of opening a bank account in Germany. Many encounter issues — for instance, a managing director who has set up a company and obtained a residence permit may still struggle to open an account. As someone who has helped numerous Turkish entrepreneurs establish companies in Germany and the Netherlands, I’d like to outline practical solutions to help you overcome these barriers.

1. Presenting a Comprehensive Business Plan

German banks typically want to review a detailed business plan. Your company should prepare a plan that demonstrates sustainability and growth potential. The bank will assess your financial stability and future payment capacity based on this document. A well-prepared business plan not only facilitates opening a bank account but also strengthens your position when seeking investors or business partners.

2. Establishing Strong Communication with Banks

To open a corporate account, your company’s director must hold a residence permit. If not, connecting with Turkish banks in Germany — such as Kuveyt Türk or İş Bankası — can be beneficial. These banks often understand the needs of Turkish firms better and may offer account services for a fee. Having a reference from a Turkish bank can also speed up the process.

3. Meeting Bank Account Requirements

German banks meticulously check the required documents, especially for foreign firms. Essential paperwork includes company registration details, a tax number, a business plan, and income statements. Obtaining a German tax number (Steuernummer) is crucial, as banks won’t open an account without it. Submitting incomplete or incorrect documents can delay or even result in rejection, so accuracy is key.

4. Maintaining a Strong Financial and Credit History

German banks assess both the company’s and directors’ financial history (schufa). They may review personal credit records, so having a clean financial track record is advantageous.

5. Considering Initial Capital and Transaction History

Banks evaluate a company’s financial health based on previous business activities and capital reserves. Initial capital is a critical factor, as it signals financial stability and business seriousness. A solid transaction history also influences long-term credit applications.

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6. Seeking Support from Local Financial Advisors

I recommend that Turkish firms seek help from local financial consultants or accountants. These professionals assist with document collection, proper application submission, and compliance with legal requirements.

7. Leveraging Digital Banking Services

Digital banking solutions in Germany can simplify the process. Platforms like N26 or Revolut offer faster account setups, lower fees, and flexible financial options, reducing bureaucracy compared to traditional banks.

8. Choosing the Right City for Business

Banking challenges vary by city. While major cities like Berlin and Munich may have more complex processes, smaller cities or regional banks might offer easier solutions. Cities like Cologne, Düsseldorf, and Aachen are often more flexible and business-friendly.

9. Adapting to German Business Culture

Understanding and aligning with German business culture is essential. Banks not only consider your financial status but also your professionalism and business approach. Adopting values like transparency, punctuality, and reliability can foster stronger relationships with local banks.

Conclusion and Final Thoughts

Although opening a bank account in Germany may seem daunting, the right knowledge, planning, and strategy can make it manageable. Turkish entrepreneurs can successfully navigate the process by building strong communication with banks, submitting complete and accurate documents, and showcasing financial stability. Leveraging local consultants and digital banking platforms can further streamline the experience. With the right city choice and a solid business plan, you can turn banking processes into a strategic advantage and take a significant step toward growing your business in Germany.

What Can We Do For You?

As MHR & Partners, we are directly and indirectly active in more than 20 countries worldwide. We aim to operate with 10 branches in 100 countries in 10 years. We offer you end-to-end consultancy and support services in establishing a company, obtaining a residence permit, and in all operational processes abroad, primarily financial issues.

Our priority is to provide consultancy services to companies with a growth vision and business strategy abroad. We attach particular importance to the uninterrupted continuation of our services with the assurance of MHR & Partners (Mühür YMM AŞ) after the company establishment stages. Our core mission is to be a safe harbor and provide sustainable services.

We want to be a bridge to our customers’ business plans for growth and development, even in the most remote parts of the world.

To establish a business in Turkey or Europe (Germany, The Netherlands, Belgium, UK, Romania, Bulgaria, Montenegro), you can contact Sworn-in Certified Public Accountant Mehmet Akif Özmen directly (+90 542 830 3408 or akif.ozmen@mhrpartner.com).

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Germany Tax System for Companies

MHRPartner — Sat, 08 Feb 2025 16:54:33 +0000

Mehmet Akif Özmen | Sworn Financial Advisor - CPA | Founder, CEO

Germany stands out as one of the most attractive business destinations in Europe with its strong economy, central location and opportunities for entrepreneurs. However, it is of great importance to have information about the tax system for entrepreneurs who want to establish a company or do business here. Although the tax system in Germany may seem complicated with its varying practices depending on the type of company, various tax types and obligations, it is possible to benefit from the advantages of this system with the right roadmap.

In this article, we have brought together the most up-to-date and necessary information on the German tax system for entrepreneurs who want to do business in Germany. When stepping into the business world full of opportunities in Germany, you can make an advantageous start with a solid tax knowledge.

Basic Principles of the German Tax System

The German tax system offers a comprehensive structure for both individuals and companies based on the principles of fairness, transparency and efficiency. Progressive taxation according to income, different tax rates according to the type of business and international tax treaties are the key elements of the system. Tax liability is applied equally to all, while exemptions and exceptions set by law are clearly defined. Under the principle of fairness, taxpayers with higher incomes pay more tax, while individuals with similar economic status have similar tax obligations. The ability to pay tax principle ensures that taxpayers are taxed according to their income, wealth and consumption levels.

One of the cornerstones of the system is the principle of legality of taxation; taxes can only be determined by law and cannot be changed arbitrarily by the administration. In calculating the tax base, the principle of netting is applied, taking into account business expenses and other deductions. At the same time, the principle of tax neutrality aims to ensure that tax policies do not directly influence economic decisions. While the transparency and comprehensibility of the tax system helps taxpayers to fulfil their obligations easily, the principle of continuity enables long-term planning by ensuring that tax rules do not change frequently.

While tax collection in Germany is carried out in a cost-effective manner, international co-operation and information sharing are of great importance. In line with the principle of social state, higher income groups pay more tax, contributing to the reduction of income inequalities. In addition, sustainable development is supported by applying carbon emission and energy taxes within the scope of environmentally friendly policies. Tax administration accelerates processes through digital systems and prevents tax evasion through audits. Taxpayers, on the other hand, have the right to object to tax decisions and to apply for judicial remedy.

The taxation process is generally based on self-declaration (Selbstveranlagung), i.e. taxpayers are obliged to declare their income and gains. In Germany, the tax authorities (Finanzamt) ensure the proper functioning of the system by supervising the tax obligations of businesses and individuals. Tax administration is shared between federal, state and local governments, which allows the system to be shaped according to regional differences rather than a centralised structure.

An important feature of the tax system in Germany is the various advantages and double taxation agreements provided for international companies and investors. This system, which is in line with European Union regulations, provides a predictable and reliable business environment for both domestic and foreign entrepreneurs.

Main Types of Taxes in Germany for Companies

Corporation Tax (Körperschaftsteuer)

Companies operating in Germany are liable to pay corporate tax on their profits. The corporate tax rate is 15%, plus a solidarity surcharge (Solidaritätszuschlag) of 5.5%. Thus, the total corporate tax rate is calculated as 15.825%.

Trade tax (Gewerbesteuer)

Business tax is a tax levied by local authorities in Germany and is calculated on the profits of companies from their business activities. The rate of trade tax varies from municipality to municipality and usually ranges between 7% and 17%. Trade tax is deductible from corporate income tax.

Important Note: The effective tax rate for companies in Germany is calculated by combining the federal corporate tax rate (15%) with additional taxes imposed by the municipalities, such as the trade tax (Gewerbesteuer) and the solidarity surcharge (Solidaritätszuschlag). Together with these additional taxes, the total effective corporate tax rate is usually around 30 per cent. However, this rate may vary depending on the region in which the company operates and other factors.

VAT (Mehrwertsteuer or Umsatzsteuer)

Value Added Tax (VAT) is a tax levied on goods and services sold in Germany. The standard VAT rate is 19%, with a reduced rate of 7% for certain goods and services (e.g. food, books, hotel services). Small businesses with an annual income of less than EUR 22,000 may be exempt from VAT under the Kleinunternehmerregelung. Companies are obliged to pay VAT to the government for VAT received from their customers and can deduct VAT received from suppliers.

Withholding tax (Quellensteuer)

In Germany, withholding tax is levied on certain types of payments. For example, withholding tax is withheld on income such as dividends, interest payments and licence fees. The standard withholding tax rate is 25%, which increases to 26.375% with the solidarity surcharge. Under double taxation agreements, lower rates may apply for some countries.

Property Tax (Grundsteuer)

In Germany, property owners are obliged to pay property tax. Property tax rates may vary depending on the municipality where the property is located. Property tax is usually calculated annually on the value of the immovable property.

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Taxation of Individual Enterprises in Germany

Individual enterprises refer to persons who run their businesses in Germany on their own behalf. In Germany, individual enterprises (Einzelunternehmen) are generally subject to income tax (Einkommensteuer) and value added tax (Mehrwertsteuer/Umsatzsteuer). Individual entrepreneurs declare their business earnings directly as their personal income and pay progressive income tax on this income.

Income tax rates vary between 0% and 45% depending on annual earnings. For small businesses, a regulation called Kleinunternehmerregelung allows entrepreneurs with an annual turnover of less than EUR 22,000 to be exempt from VAT. However, if this exemption is not preferred, individual entrepreneurs are obliged to apply the standard VAT rates (19% or 7%).

Individual entrepreneurs may also be required to pay trade tax (Gewerbesteuer), which varies according to the municipality in which they are located. However, there is a trade tax exemption for earnings up to EUR 24,500 per year. In Germany, it is recommended that individual entrepreneurs file regular tax returns and manage their accounting processes meticulously.

The ability to deduct losses incurred by companies in their early years from profits in the following years (Verlustvortrag and Verlustrücktrag) is also an important tax advantage. Furthermore, R&D expenditures, investment incentives and regional support programmes offer additional opportunities to reduce the tax burden of companies. Therefore, it is recommended that newly established companies work with a tax advisor to make the best use of tax advantages.

Reading Advice

Explore our comprehensive guide for all the details on starting a business and opening a branch in Germany!

Additional Tax Liabilities for International Companies Operating in Germany

International companies operating in Germany are subject to similar tax obligations as local companies, but may also face additional obligations arising from their international activities. These obligations relate to double taxation, transfer pricing, VAT and other special regulations. Here are important additional tax obligations for international companies operating in Germany:

Double Taxation Agreements (Doppelbesteuerungsabkommen – DBA)

Germany has entered into agreements with many countries to avoid double taxation. Through these agreements, international companies can avoid taxation of the same income both in Germany and in another country. Companies can claim tax refunds or obtain tax exemptions in accordance with the terms of the agreements.

Transfer Pricing (Verrechnungspreise)

International companies must comply with transfer pricing rules for intra-group transactions (e.g. purchase and sale of goods or services, licence fees). Germany has adopted the OECD transfer pricing guidelines. Companies are obliged to prepare transfer pricing documentation and submit it to the tax administration.

Taxation of Foreign Earnings

Companies resident in Germany are liable to tax their worldwide earnings. Earnings from foreign branches or subsidiaries may be subject to double taxation treaties. In some cases, tax exemptions or deductions may apply to foreign earnings.

VAT and Intra-EU Transactions

Germany applies special VAT rules for transactions within the European Union (EU). For supplies of goods and services within the EU, VAT declaration and Intrastat notification may be required. For transactions with countries outside the EU, export and import VAT rules must be observed.

Foreign Capital Rules (Fremdfinanzierungsregeln)

Germany has introduced limitations on interest paid by companies on financing from foreign sources. Interest payments are tax deductible within certain rates and conditions. In case of excessive borrowing, interest payments can be added to the tax base.

Controlled Foreign Company Rules (Hinzurechnungsbesteuerung)

German resident companies may be taxed on the passive income (e.g. interest, rent, licence fees) of their foreign subsidiaries. This rule aims to prevent profit shifting abroad for tax purposes.

Tax on the Digital Economy and Digital Services

Germany may apply special tax rules for international companies offering digital services. Regulations such as the EU’s digital services tax may affect international companies.

Tax Investigations and Documentation

International companies may be subject to more frequent tax inspections in Germany. Comprehensive documentation on transfer pricing, foreign earnings and other international transactions must be prepared.

Permanent Representation (Betriebsstätte)

When foreign companies open a permanent establishment (e.g. branch or office) in Germany, they can be taxed on this establishment. The permanent establishment is considered an independent taxpayer and must file its own tax returns.

EU Tax Harmonisation Rules

Germany has harmonised with the EU’s tax harmonisation directives. For example, the ‘Anti-Tax Avoidance Directive’ (ATAD) seeks to prevent hybrid mismatches, earnings deferral and other tax avoidance methods.

Tax Planning and Structuring

When tax planning in Germany, international companies should comply with the law and avoid aggressive tax avoidance methods. When fulfilling their tax obligations in Germany, they must comply with both local and international regulations. Tax declarations, documentation and payments must be made on time.

Professional tax advisory services help companies to comply with the law and minimise tax risks. By cooperating with tax advisors and lawyers, it is possible to optimise the company’s tax burden.

How to Make a Tax Declaration in Germany?

The tax declaration process in Germany is of great importance for businesses to fulfil their legal obligations. Companies must declare their income and earnings through the Finanzamt (tax office) every year. The tax declaration process is usually carried out via digital platforms and the ELSTER (Elektronische Steuererklärung) system allows companies to submit their declarations online.

Here are some of the main points to be considered when making a tax declaration:

– Annual Tax Declaration: Companies subject to corporation tax and trade tax must file their annual tax return each year within the deadline set after the close of the financial year.

– Value Added Tax (VAT) Declaration: Companies subject to VAT are obliged to file VAT returns on a monthly or quarterly basis. For small businesses, this process can also be carried out annually.

– Advance Tax Payments: For companies with high revenues, prepayments may need to be made during the year based on the estimated tax amount. This practice is applied to prevent the accumulation of large tax debts.

The timely and complete submission of tax returns is important to avoid possible criminal sanctions. In addition, since tax audits are carried out regularly in Germany, companies are required to keep their financial records meticulously and act in accordance with legal regulations. Due to the complexity of the tax process, it is recommended that businesses work with a tax advisor or financial advisor.

Tax Deductions and Incentives for Companies in Germany

Germany offers various tax advantages to support the growth of companies and innovation. The country, which attaches particular importance to R&D activities, provides significant tax deductions to companies working in this field. A portion of the expenses incurred to develop new products, processes or services can be deducted from the tax base. In addition, patent protection expenses can also benefit from tax advantages.

Investment incentives are another factor that attracts companies in Germany. There are additional tax deductions especially for investments made in the eastern regions and in the renewable energy sector. Incentives for environmentally friendly technologies also support companies in achieving their sustainability goals. There are also special tax breaks and grant programmes for SMEs.

Companies in Germany can also benefit from funds and grants from the European Union. In particular, the EU supports companies investing in areas such as digitalisation, green energy and innovation. These incentives encourage entrepreneurs to develop more sustainable and innovative business models in Germany.

Advantages and Challenges of the Tax System in Germany

The tax system in Germany offers several advantages for both domestic and foreign entrepreneurs. Firstly, the system is transparent and predictable, making it easier for companies to carry out long-term financial planning. Tax regulations are clearly defined and digital tax filing systems (such as ELSTER) make transactions fast and efficient. Furthermore, R&D incentives, investment incentives and special tax advantages for certain sectors make it attractive to start a business in Germany. In particular, double taxation agreements provide a significant advantage for businesses operating internationally.

However, Germany’s tax system brings some challenges. High tax rates can increase costs, especially for small and medium-sized enterprises (SMEs). Corporate tax, value added tax (VAT) and income tax rates are higher than in other European countries. Moreover, the complexity of tax legislation may cause businesses to incur additional costs and bureaucratic burdens in the harmonisation process. As financial transactions and accounting records need to be meticulously maintained, companies often need professional tax advisors.

In general, while the tax system in Germany provides a stable and reliable business environment, high tax rates and complex legal processes are among the elements that need to be considered for businesses. Therefore, it is important for entrepreneurs planning to do business in Germany to make strategic planning with expert support in order to make the most of the opportunities offered by the tax system.

Tax Audits and Criminal Sanctions in Germany

The tax system in Germany is highly regulated and tax evasion is considered a serious offence. Therefore, the tax authorities regularly audit companies. During audits, the financial records of companies are examined in detail and it is checked whether the tax base is calculated correctly. Companies caught in tax evasion may face serious consequences.

Both administrative and criminal sanctions can be imposed as penalties for tax evasion. Administrative sanctions include additional tax, delay interest, tax penalties and tax assessment. Criminal sanctions are more severe and may result in imprisonment, fines and ban from commercial activity.

Being prepared for tax audits helps companies minimise the risks they may face. Companies can protect themselves by keeping detailed and up-to-date records, following tax legislation and getting support from a tax advisor.

What Can We Do For You?

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Starting a Business or Acquiring One in Germany?

MHRPartner — Sat, 14 Dec 2024 16:49:50 +0000

Mehmet Akif Özmen | Sworn Financial Advisor - CPA | Founder, CEO

Germany, known as the economic engine of Europe, is an attractive destination for investors thanks to its strong industrial infrastructure, stable legal framework, and high profitability potential. The stock of foreign direct investment (FDI) in Germany rose to €1,240 billion in 2022. The largest sectors for FDI in 2022 included manufacturing, finance and insurance, as well as wholesale and retail trade.

If you’re considering starting a business in Germany, you have two main options: establish a new business from scratch or acquire an existing company. In this article, we will evaluate both options in terms of costs, capital, market entry speed, risks, and opportunities. By providing a comparative summary, we aim to help you decide which business model suits you best.

Starting a Business in Germany: Building Your Dreams from Scratch

Each year, more than 300,000 new businesses are established in Germany. Small and medium-sized enterprises (SMEs), known as “Mittelstand,” make up 99.6% of businesses in the country and generate more than half of the economic output. Starting a company from scratch in Germany offers the chance to shape your vision entirely according to your goals. However, this journey comes with both advantages and challenges.

Advantages:

Bringing Your Vision to Life: Everything is under your control. Your business model, products, or services are entirely shaped by your strategy.
Brand Identity: Building a brand from scratch ensures long-term independence and a unique position in the market.
Cost Control: From the outset, you can plan your expenses and create a capital structure tailored to your needs.
Tax Advantages: When starting a company in Germany, you can benefit from government incentives and support programs in specific sectors. Additionally, reduced VAT rates for small businesses can help lower costs during the initial years.

Disadvantages:

High Risk: Most new businesses face challenges in the first five years and may fail for various reasons. Establishing a foothold in the market can take time.
Longer Market Entry: Adapting to the market and building a customer base often takes longer compared to acquiring an existing business.
Legal and Bureaucratic Processes: Establishing a business in Germany requires “Gewerbeanmeldung” (business registration), tax office registration, and applications to local chambers of commerce, all of which can take time. Foreign investors may also need to navigate additional procedures like visas and residence permits.

Reading Advice

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Acquiring a Business in Germany: A Quick Start

The transaction value in Germany’s Mergers & Acquisitions (M&A) market is projected to reach USD 58.26 billion in 2024. This market is expected to grow at an annual rate of 13.97%, reaching a total of USD 66.40 billion by 2025.

Acquiring an existing business in Germany is an attractive option for investors looking for a faster market entry. This business model offers a ready-made infrastructure and customer base, thereby reducing certain risks to a degree.

Advantages:

Fast Market Entry: With the existing customer portfolio and brand recognition of the acquired company, you can start generating revenue from day one.
Lower Risk: The financial performance and market position of the acquired company are already known, allowing you to manage risks more effectively.
Ready Infrastructure: Compared to starting a business from scratch, you benefit from operational infrastructure, equipment, supply chains, and experienced employees that are already in place.
Labor Law Advantages: When you acquire an existing business, employee rights and contracts are protected under German labor law (Betriebsverfassungsgesetz). This can streamline workforce management processes.

Disadvantages:

High Capital Requirement: Acquisition costs can be significantly higher compared to starting a new business.
Cultural Integration Challenges: It may take time to align with the existing team and operations.
Limited Flexibility: You may have to adapt to the current structure of the acquired business, and restructuring could incur additional costs.
Hidden Liabilities: Special attention must be paid to the “Due Diligence” process when acquiring a business in Germany. The acquired company may have outstanding debts or legal issues from the past.

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Cost Comparison

Establishing a company in Germany generally requires lower initial costs. However, as the market entry process extends, operational expenses may increase. For example, setting up a GmbH (Limited Liability Company) requires a minimum capital of 25,000 Euros. Acquisitions, on the other hand, demand much higher initial investment costs; for companies with a large customer base, this cost can reach millions of Euros. Nevertheless, the existing revenue streams of the acquired company can quickly offset this expense.

Risks of Starting a Business in Germany

Starting a new company is an exciting step for many entrepreneurs, but it is also a risky process. When establishing a business from scratch in Germany, you should be aware of the following risks:

Difficulty in Market Adaptation: Starting a new company in Germany begins with a lack of market recognition. Building a customer base, creating brand awareness, and gaining trust takes time.
High Competition: The competitive environment in Germany is intense. In many sectors, you may have to compete with established companies and strong brands.
Bureaucratic Barriers and Processes: The process of starting a business in Germany involves various bureaucratic procedures, such as registering with the trade registry, obtaining residence permits, and completing tax processes.
Uncertainty in Investment Returns: It may take some time for a new company to establish itself in the market and achieve profitability. During this period, you may face challenges in managing cash flow and meeting capital requirements.
Risk of Non-Compliance with Regulations: Germany’s business laws are highly stringent and regulated. Failing to meet tax obligations or neglecting employee rights can lead to serious legal consequences.

Risks of Acquiring a Business in Germany

Although acquiring a business often carries less risk, there are still certain risks to watch out for:

Hidden Debts and Financial Obligations: The acquired company may have outstanding debts or financial liabilities from the past. Such situations can directly impact the financial health of the company.
Legal Disputes: You may encounter legal disputes or litigation processes related to the acquired company, leading to financial burdens after the acquisition.
Cultural Integration Challenges: Aligning with the existing employees, business practices, and company culture may take time, making it difficult to implement new management strategies.

Lack of Strategic Fit: If the operational structures or market strategies of the acquired company do not align with your objectives, this can result in wasted time and resources.

Opportunities of Starting a Business in Germany

There are also numerous opportunities for entrepreneurs looking to start a business from scratch in Germany:

Innovation and Freedom: You have the chance to design your own business model, build your brand from scratch, and implement a unique marketing strategy.
Germany’s Incentive Programs: Germany offers various incentive and subsidy programs to support entrepreneurs. You can benefit from tax reductions, financial aids, and EU funds.
Control Over Investment: By starting a business, you can directly shape your investments according to your goals, which is advantageous for long-term planning.
Creating a Brand from Scratch: Building your own brand allows you to establish a profitable business model and carve out a unique position in the market.

Opportunities of Acquiring a Business in Germany

An acquisition allows you to leverage the existing infrastructure and customer network of an established business:

Utilizing an Existing Customer Base: Acquiring a company provides direct access to its existing customer base, allowing for faster integration into the market.
Achieving Profitability in a Short Time: Thanks to the financial stability and operational infrastructure of the acquired company, you can achieve profitability faster compared to starting from scratch.
Ready Infrastructure: Without having to deal with production facilities, employees, or supply chains, you can focus directly on your business.
Ease of Legal Processes: By acquiring an existing business, you face fewer bureaucratic hurdles in managing employee contracts and ongoing business relationships.

Which Option Suits You Best?

Every entrepreneur has different goals and strategies. When making your choice, you should ask yourself the following questions:

What Is Your Goal? Are you aiming to build a long-term brand, or do you want to benefit from an existing market share?
What Is Your Financial Situation? Can you afford a significant initial investment?
What Is Your Risk Tolerance? Are you comfortable dealing with uncertainties?
Are You Familiar with Legal Processes? Do you have knowledge of Germany’s trade and labor law regulations, or do you have access to a consultant who can assist you in this area?

The Importance of Researching the German Market

Conducting comprehensive market research is essential for entrepreneurs aiming to establish or acquire a successful business in Germany. Steps such as competitive analysis, target audience analysis, and examining market trends are crucial to developing a business model and minimizing risks.

Given Germany’s dynamic economy and strict regulations, it is equally important to have in-depth knowledge about business establishment processes, tax legislation, and labor laws. Additionally, factors such as distribution channels, marketing strategies, and cultural differences should also be evaluated as part of the market research process.

By doing so, entrepreneurs can seize opportunities specific to the German market and ensure their businesses remain sustainable in the long run.

The Importance of Working with a Consultant

Whether you are planning to establish a company or acquire an existing one in Germany, working with an experienced consultant throughout the process provides a significant advantage.

In particular:

Due Diligence Processes: Professional expertise is needed to evaluate the financial health, legal status, and operational suitability of the company you intend to acquire.
Tax Regulations and Labor Law: Consulting a specialist on Germany’s complex legal framework helps minimize potential risks.
Time and Resource Management: Professional guidance prevents unnecessary delays and directs you toward the most effective steps.

Collaborating with a consultant not only reduces risks but also accelerates the processes, paving the way for success.

The Importance of Understanding German Business Culture

Doing business in Germany requires understanding the dynamics of the local business culture in a country with a rich history and cultural heritage.

Key aspects of German business culture include:

Formality and Hierarchy: Rules and hierarchical structures are significant in the German business world, where clarity and professionalism in communication are expected.
Direct Communication: The business environment favors open and straightforward communication, which provides an opportunity to build trust-based, long-term relationships.
Quality and Reliability: German business culture places high importance on quality and attention to detail, making it easier for entrepreneurs to establish trustworthy partnerships.
Bureaucracy: Company establishment and regulatory processes can be time-consuming due to detailed bureaucratic requirements.

Understanding and adapting to German business culture offers entrepreneurs a competitive edge. By seeking support from local business partners and consultants, they can navigate these cultural differences more effectively and build a successful business.

For more detailed information on German Business Culture, feel free to explore our in-depth article.

Support for Entrepreneurs in Germany

Germany is a country that wholeheartedly supports entrepreneurs. In addition to government institutions such as the Federal Ministry for Economic Affairs and Climate Action (BMWi), financial organizations like the KfW Bankengruppe provide various forms of assistance to entrepreneurs. Moreover, incubators and innovation parks in major cities like Berlin, Munich, and Hamburg offer office space, mentorship, and networking opportunities. Platforms such as Business Angels Network Deutschland (BAND) connect entrepreneurs with angel investors. The entrepreneurial ecosystem in Germany is constantly evolving and strengthening.

Conclusion and Evaluation

Starting or acquiring a business in Germany comes with its own set of advantages and disadvantages. When considering these options, it is crucial to take into account Germany-specific legal regulations and the investment climate, in addition to factors like cost, risk, and capital. With the right strategy and business model, you can make a successful investment in this attractive market. By choosing the option that best aligns with your goals, you can make the most of the opportunities that Germany offers.

What Can We Do For You?

We want to be a bridge to our customers’ business plans for growth and development, even in the most remote parts of the world.

You might like to see these contents also:

The post Starting a Business or Acquiring One in Germany? first appeared on MHR & Partners.

Comparing Company Formation in Germany, the Netherlands, and Bulgaria

MHRPartner — Mon, 08 Jul 2024 19:17:18 +0000

Mehmet Akif Özmen | Sworn-in CPA | Founder, CEO

Establishing a company abroad offers significant opportunities for entrepreneurs but also comes with its own set of challenges. Germany, the Netherlands, and Bulgaria are three key countries in Europe that attract entrepreneurs due to their advantages and favorable business environments. However, before setting up a business in these countries, it is crucial to consider various factors such as tax rates, legal regulations, cultural differences, and market dynamics.

When deciding whether to establish a company in Germany, the Netherlands, or Bulgaria, what criteria should you pay attention to, and what advantages should you look for? Sometimes a single advantage may suffice, while at other times, it is more prudent to consider multiple advantages together and make a decision based on a comprehensive evaluation.

In this article, we will discuss practical information and strategies you need to consider during the company formation process in Germany, the Netherlands, and Bulgaria, so you can build your business on a solid foundation in the international arena.

A Comparative Application Example When Making an Investment Decision

Comparative Tax Rates

From a corporate tax perspective, Bulgaria is advantageous with a rate of 10%. In the Netherlands, tax rates are 15% on earnings up to 200,000 Euros and increase to 25% thereafter. In Germany, both local and central taxes total between 30-40%.

If tax rates are important to you but the location of your company headquarters is not, Bulgaria, the Netherlands, and Romania may be suitable options.

Language Options in Meetings

It is easier to communicate in English in the Netherlands. In Germany, knowing German is a priority. In Bulgaria, you can easily conduct your business by finding a Bulgarian Turk.

Invoicing and Logistics Alternatives

While the regions where your customers are concentrated can determine your focus, sometimes this may not be crucial. You can ship goods from Turkey to Singapore and issue invoices from the Netherlands or Germany.

Sometimes you can source raw materials from where your customers are concentrated, process them in a customs area, and ship them duty-free to different countries, thereby increasing your power by adding value.

Alternatively, you can transfer goods to a warehouse in Bulgaria and circulate them within the Schengen area as European Union goods without paying customs duties.

Residence-Holding Managers and Partners

The most challenging and meticulous stage when establishing a company is opening a bank account for your company. We have observed that there are no issues in opening a company bank account if the partners or managers hold residence permits in that country. The tax office, especially in Germany, pays close attention to this matter.

In Bulgaria, you need to have 5 employees to obtain residence. In Germany or the Netherlands, you can obtain these opportunities later by employing 3 employees with an investor visa.

Manageability of Logistics

The location of your logistics center often provides you with an advantage. From a cost perspective, Bulgaria sounds appealing.

Countries with Sector-Specific Advantages

For software developers, Estonia and the Netherlands are more suitable in terms of tax rates and incentives.

For manufacturing companies, Germany may be the center due to ease of management, while the Netherlands may be more suitable for real estate investments. For hospital and healthcare investments, the UK and Germany are significant centers.

What Can We Do For You?

We want to be a bridge to our customers’ business plans for growth and development, even in the most remote parts of the world.

Okuma Tavsiyesi

Do you want to read about the big mistakes entrepreneurs make when setting up a company in Europe from the lived experience of an expert? Discover this article!

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The post Comparing Company Formation in Germany, the Netherlands, and Bulgaria first appeared on MHR & Partners.

Dynamics to Consider When Establishing a Company in Germany and the Netherlands

MHRPartner — Mon, 08 Jul 2024 10:49:05 +0000

Mehmet Akif Özmen | Sworn-in CPA | Founder, CEO

Every entrepreneur’s dream is to establish a new company and grow their business abroad. For more than five years, I have been working with entrepreneurs in Turkey on establishing and investing in the European market. We established our own company in Germany. As the Chairman of the Board of MHR & Partners, I have coordinated the establishment stages of many companies in countries such as Germany, the Netherlands, Belgium, Montenegro, Romania, Bulgaria, and the UK, together with our business partners for the last three years. I have met with many business people, financial advisors, and business partners in Europe and made many business trips. I want to summarize the warm experiences I have gained from these contacts and businesses by combining them with our professional experience of more than 25 years.

What should you consider when establishing a company in Germany and the Netherlands?

Germany and the Netherlands, with their strong and stable economies, are among the countries preferred by entrepreneurs from all over the world to establish companies and make investments. In this article, we answer the following questions that business people are most curious about:

Which criteria should we consider, and which evaluations should we make when establishing a company in Germany and the Netherlands?
What individual and organizational factors should we investigate?

Entrepreneurial Dynamics

1. Your Workload and Time Management

One of the entrepreneurs’ most critical problems is time management. Our team and system can control the dynamics to manage this problem efficiently and effectively, which is crucial for growth and service diversification.

2. Your Customer Base Density

It would help if you correctly calculated which regions and sectors you are concentrated in, which sectors and regions you need to expand to, and the timing.

3. Regions with High Collection Rates

When expanding into new areas, you should assess the sectoral collection situation well. Financial revenues or reserve funds are essential in case of risk.

Reading Advice

Do you want to read about the big mistakes entrepreneurs make when setting up a company in Europe from the lived experience of an expert? Discover this article!

External Dynamics of Your Company

1. Language Skills of Managers

Using this language, you should evaluate the languages spoken in the country where you will invest and the presence of partners, teams, or partners.

2. Sectoral Density of Customers

Operating in customer-intensive areas, being close to the customer relaxes you and allows you to observe the change needs instantly.

3. Presence of Familiar People or People in Residence

The resident partner or employees will support you in difficult situations and help you get through the processes quickly. It is imperative to consult people who know the industry.

4. Proximity to production and market

Market and marketing activities are the most essential elements of a company. Although technical units produce, it is vital to have marketing and sales teams that will sell, grow, and reduce the pressure on the technical team.

5. Addressing the Customer Audience

It must be positioned according to the customer base and close to the market. Production companies should always be distribution and sales-orientated. Logistics companies need to establish a good coordination network in the field.

6. Marketing and Sales Network Structure

It is easy to grow your business, but the sales and marketing unit must ensure permanence in the field. In this regard, you need a responsible and active team.

7. Trends in the World

The world is changing quickly, and a team should follow these trends in direct contact with the customer.

8. Production Process and Channels

The production process is also changing rapidly. Wars, changes in production demands, and costs affect the market. Those who catch these changes instantly survive and grow.

9. Risk Analysis and Crisis Management

If you have a system that measures and evaluates risks, it will be easier to move forward. Having a team and a project system that considers these issues will make you more resilient in times of crisis.

What Can We Do For You?

We want to be a bridge to our customers’ business plans for growth and development, even in the most remote parts of the world.

You might like to see these contents also:

The post Dynamics to Consider When Establishing a Company in Germany and the Netherlands first appeared on MHR & Partners.

How Much Does It Cost to Establish a Company in Germany and the Netherlands?

MHRPartner — Thu, 18 May 2023 06:38:58 +0000

MHR & Partners Academy

With its strong and stable economy, Germany and the Netherlands are among the most preferred countries for entrepreneurs from all over the world to establish a company and invest. In this article, we address a striking issue that businessmen are most curious about: How much does it cost to start a company in Germany and the Netherlands? We answer all questions investors may have about the costs of setting up a company summarized in the table.

The Main Costs to Start a Company in Germany and the Netherlands

The cost of starting a company in Germany and the Netherlands varies depending on the type of company you are forming. It also depends on the location of your business. We outline all costs for starting a limited liability company (GMBH) in Germany and a private limited company (BV) in the Netherlands.

Reading Advice

For in-depth information about Dutch business culture, review our in-depth article!

Comparative Table: Company Formation Costs in Germany and the Netherlands

Topic Tittle	The Netherlands	Germany
How long does it take to set up a company?	1 Month	1 Month
How long to open a company bank account?	2 Weeks	2 Weeks
Required paid-up capital (for Limited Company)	1 Euro	25.000 EUR
Is a lease agreement required before incorporation?	Then required	Yes

Legal considerations
Is a resident manager required?	No	No
Is a resident shareholder required?	No	No
Minimum number of directors	1	1
Minimum number of shareholders	1	1
Is a resident company secretary required?	No	No
Permitted company director	Yes	Yes
Public register of shareholders and directors	Yes	Yes
Points to be considered about tax and accounting
Corporate tax rate	15%	%30 (Double taxing)
How long does it take to get a work permit approved?	1-2 month	1 month
Invoicing local customers is allowed	Yes	Yes
Average monthly net salary of unskilled labour	1.950 Euro	2.200 Euro
Office rental per square metre per month	20 Euro	12 Euro
Warehouse rental per square metre per month	30 Euro	20 Euro
Accounting Fee	100 Euro	100 Euro
Estimated Costs
Consultants participation fees	1.000 Euro	1.000 Euro
Company secretary and legal registered office fees	300 – 500 Euro	300 Euro
Corporate bank account opening	500 Euro	500 Euro
Notary Costs	1.200 Euro	1.000 Euro
Total company involvement set-up costs	2.500 Euro	1.500 Euro
Next Annual costs	3.000 Euro	3.000 Euro

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Reading Advice

What are the types of companies in the Netherlands? What does it take to set up a company and open a branch in the Netherlands? Where should foreign entrepreneurs start setting up a company in the Netherlands? Do a deep reading for the answers to all these questions!

What Can We Do For You?

We want to be a bridge to our customers’ business plans for growth and development, even in the most remote parts of the world.

You might like to see these contents also:

The post How Much Does It Cost to Establish a Company in Germany and the Netherlands? first appeared on MHR & Partners.

Taxation of Dividend Transfers Between Companies Established in Turkey and Germany

MHRPartner — Sun, 02 Apr 2023 09:20:53 +0000

MHR & Partners Academy

In this article, we deal with a highly technical taxation issue. Let us assume that a German resident company is a shareholder of a limited liability company established in Turkey. If the limited liability company established in Turkey wants to transfer its share of the profits to Germany, how will the taxation be for both companies?

Many entrepreneurs who own companies in Turkey establish companies in Germany. Sometimes the company established in Germany is a partner of the company in Turkey. Sometimes a foreign company resident in Germany establishes a company in Turkey and becomes a partner of this company. This article clarifies the taxation of dividend transfers between companies in different countries in such a partnership relationship.

In this article, we refer extensively to the relevant legislation when addressing the taxation of dividend transfers. In particular, the Corporate Tax and Tax Procedure Law in Turkey, as well as the agreement between the Republic of Turkey and the Federal Republic of Germany on the avoidance of double taxation and tax evasion in respect of taxes on income, constitute the decisive legal framework for this article. In addition, the methodology used to address the issue can be adapted to companies in Turkey in which other European resident companies are also shareholders. Although the issue has been explained in terms of limited liability companies, it can also be extended to other companies/institutions that are liable to corporate tax under the corporate tax law, such as joint stock companies. In this article, we also briefly mention the taxation of the dividends distributed by the company established in Germany in the event that a person or company resident in Turkey is a shareholder of a company established in Germany.

Summary / General Provisions Regarding the Taxation of a Limited Liability Company Established in Turkey According to the Turkish Tax System

How is a Limited Company Established in Turkey Taxed?

A “Limited Liability Company” established in Turkey is subject to corporate tax as a capital company in accordance with Article 1 and Article 2 of the Corporate Tax Law No. 5520. Pursuant to Article 3 of the same law, a limited liability company established in Turkey is subject to taxation as a “full taxpayer” corporation. Pursuant to Article 3 of the Corporate Tax Law, full taxpayer corporations are taxed on all of their earnings both inside and outside Turkey.

Pursuant to Article 6 of the Corporate Tax Law, limited liability companies established in Turkey are subject to corporate tax, and corporate tax is calculated on the pure corporate income of the taxpayers in an accounting period. In the determination of pure corporate income, the provisions of Income Tax Law No. 193 on commercial income are applied.

What Does Narrow Liability Corporate Income Consist of?

On the other hand, companies that are within the scope of “narrow taxpayership” as per the same article of the law (among the institutions listed in Article 1 of the law, those whose legal and business centres are not both located in Turkey) are taxed only on the earnings obtained in Turkey. In limited taxpayers, corporate income consists of the following gains and revenues

a) Commercial gains derived by foreign corporations having a place of business or permanent representative in Turkey in accordance with the provisions of the Tax Procedure Law No. 213 dated 4/1/1961 and numbered 213, from the works carried out in these places or through these representatives (Even if they meet these conditions, the gains arising from sending the goods purchased by the corporations in Turkey for export to foreign countries without selling them in Turkey are not considered to be obtained in Turkey. The meaning of selling in Turkey is that the buyer or seller or both of them are in Turkey or the sales contract is concluded in Turkey).

b) Earnings derived from an agricultural enterprise located in Turkey.

c) Earnings derived from self-employment in Turkey.

d) Income derived from the rental of movable and immovable property and rights in Turkey.

e) Income from movable capital obtained in Turkey.

f) Other gains and revenues obtained in Turkey.

The relevant provisions of the Income Tax Law dated 31/12/1960 and numbered 193 shall apply to the earnings or revenues and income elements mentioned in the narrow taxpayer status and to the issues of obtaining the income elements in Turkey and having a permanent representative in Turkey.

What is the Legal Headquarters and Business Centre for Companies?

Legal Centre: The headquarters of the taxable corporations indicated in their establishment laws, presidential decrees, by-laws, main statutes or contracts.

Business Centre: It is the centre where the transactions are actually gathered and managed in terms of business.

How does a limited liability company established in Turkey file a declaration?

Pursuant to Article 14 of the Corporate Tax, a limited liability company established in Turkey shall submit a declaration for all of its taxable income. The corporate tax return is submitted to the tax office to which the taxpayer is affiliated from the first day of the fourth month following the month in which the accounting period is closed until the evening of the twenty-fifth day. In accordance with Article 24 of the same law, corporate tax is paid until the end of the month in which the declaration is submitted. In accordance with Article 32 of the same law, corporate tax is applied as 20% to the net corporate income obtained in an accounting period. (23% will be applied to the earnings of 2022 in accordance with the Presidential decree, unless otherwise decided, 20% will be applied to the earnings of 2023)

VAT Liability of Limited Liability Company Established in Turkey

Pursuant to the Value Added Tax Law No. 3065, the deliveries of goods and services made domestically by a “limited liability company” established in Turkey are subject to value added tax as a general rule. However, pursuant to Articles 1/1-a and 12/2 of the Value Added Tax Law, services performed for customers abroad are exempt from value added tax. The term “customer abroad” refers to the buyers whose domicile, workplace, legal and business centre is abroad and the branches of a domestic company operating independently on its own behalf abroad. In order for a service to be considered as a service performed for customers abroad, the following conditions must be fulfilled.

– The services must be performed for a customer abroad.

– The service must be utilised abroad.

Pursuant to Article 1/1-a and 12/2 of the Value Added Tax Law, a limited liability company established in Turkey is exempt from value added tax in the event that the service to be provided abroad is provided to the customer abroad and the service is utilised abroad. VAT will not be calculated in the invoices to be issued for the services provided.

Tax liabilities arising from the Double Taxation Avoidance Agreement between Germany and Turkey in the event that a limited liability company established in Turkey distributes its profits to its German resident partner as dividends

Legislative Infrastructure

In the second paragraph of Article 3 of the Corporate Tax Law No. 5520, it is stated that, among the institutions listed in Article 1 of the Law, those whose legal and business centres are not both located in Turkey shall be taxed only on the income generated in Turkey; In the third paragraph, the income elements of the corporate income in limited taxpayers are listed and in subparagraph (a), commercial gains derived by foreign corporations having a place of business in Turkey in accordance with the provisions of the Tax Procedure Law or having permanent representatives, from the works carried out in these places or through these representatives, and in subparagraph (d), movable capital income derived in Turkey shall be taxed as corporate income; In the fourth paragraph, it is stipulated that the relevant provisions of the Income Tax Law shall apply to the earnings and revenues mentioned in this article and the income elements obtained in Turkey.

According to paragraph (6) of the first subparagraph of Article 7 of Income Tax Law No. 193, in order for the income from movable capital to be deemed to be derived in Turkey, the capital must be invested in Turkey.

In subparagraph (4) of the second paragraph of Article 75 of the same Law, the remaining portion of the corporate income before deducting deductions and exemptions from the corporate income before deducting deductions and exemptions, after deducting the calculated corporate tax, of limited taxpayer corporations submitting annual or special declarations in accordance with the Corporate Tax Law, regardless of their source, is defined as securities income.

According to the general provisions of the Turkish tax system (in the absence of a double taxation avoidance agreement between the two countries) Within the scope of Article 94 of the Income Tax Law No. 193 and Articles 15 and 30 of the Corporate Tax Law No. 5520;

“Except for those who obtain dividends through a place of business or permanent representative in Turkey, tax deduction at the rate of 10% should be made on dividends distributed to limited taxpayer corporations and limited taxpayer real persons.”

In Article 30 of the Corporate Tax Law, it is ruled that corporate tax deduction will be made by those who pay or accrue these earnings and revenues in cash or on account, including advances, over the earnings and revenues of the institutions subject to limited taxpayers, In the sixth paragraph of the same article, it is stipulated that corporate tax deduction at the rate of 10% will be made on the amount transferred to the head office by the limited taxpayer corporations submitting annual or special declarations from the amount remaining after deducting the calculated corporate tax from the corporate income before deducting discounts and exemptions.

How will the taxation be done?

Accordingly, the shareholder of the Limited Liability Company will be considered as a limited taxpayer due to the fact that he/she is a resident abroad and does not have a legal and business centre in Turkey. According to the sixth paragraph of Article 30 of the Corporate Tax Law, withholding tax is required to be withheld on the amounts of the corporate income obtained by the Limited Liability Company established in Turkey and transferred to the limited taxpayer resident abroad.

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Makaleyi keşfedin!

Dividend Taxation in the Context of Double Taxation Agreement with Germany

As of 1 January 2011, there is an Agreement between the Republic of Turkey and the Federal Republic of Germany for the Avoidance of Double Taxation and Tax Evasion in Taxes on Income. The provisions of the double taxation avoidance agreement between the Republic of Turkey and the Federal Republic of Germany will be taken into consideration in the taxation of the dividends to be obtained by the non-resident limited taxpayer corporation from the company established in Turkey.

In Article 10 titled “Dividends” of the “Agreement between the Republic of Turkey and the Federal Republic of Germany for the Avoidance of Double Taxation and Prevention of Tax Evasion in Taxes on Income

“Dividends paid by a company which is a resident of one Contracting State to a resident of the other Contracting State may be taxed in that other State.

However, such dividends may also be taxed in and in accordance with the law of the Contracting State in which the company paying the dividend is a resident of that State, provided that, if the beneficial owner of the dividend is a resident of the other Contracting State, the tax so levied shall be

a) 5 per cent of the gross amount of the dividend if the beneficial owner of the dividend is a company (other than a partnership) holding directly at least 25 per cent of the share capital of the company paying the dividend

b) in all other cases, not exceed 15 per cent of the gross dividend amount.”.

Article 23 of the Agreement guarantees that undertakings of one State shall not be subjected to taxation in the other State which is heavier than the taxation and related obligations faced by the undertakings of the other State under the same conditions.

Considering the provision of subparagraph 2/a of Article 10 of the Treaty, it is seen that Turkey is entitled to levy a maximum of 5% tax on dividend payments made by a company resident in Turkey to real beneficiaries resident in Germany who have at least 25% of its capital share.

Within the framework of these provisions, in the event that the German resident company holds at least 25% of the capital shares of the company established in Turkey, the rate of 5% should be taken into consideration in the taxation to be made in Turkey over the dividend payment to be made to the German resident company from the remaining portion after deducting the calculated corporate tax from the corporate income of the company established in Turkey before deducting deductions and exemptions, instead of the 10% rate in our domestic legislation.

In the case where Article 7 and Article 10, paragraph 2, subparagraph (a) of paragraph 2 of Article 10 entitles Turkey to levy tax, an income arising in Turkey will be excluded from the base for the calculation of German tax in accordance with Article 22, paragraph 2, subparagraph (a) of Article 22 of the Agreement titled “Avoidance of Double Taxation”. In cases where Article 12 of the Agreement entitles Turkey to levy tax, the tax paid in Turkey shall be offset against the tax payable in Germany in accordance with subparagraph (b) of paragraph 2 of Article 22 of the Agreement.

In this sense, in the dividend distribution of the company established in Turkey to the company resident in Germany, which is the shareholder of the company, the tax deduction of 5% will be deducted by the company resident in Germany from the tax to be paid in Germany.

In cases where the provisions of the Agreement are amended according to the domestic legislation, in order to benefit from the provisions of the Agreement, it is necessary to prove that the enterprise resident in Germany is a full taxpayer in Germany and is taxed in this country on all world earnings with a document (residence certificate) to be obtained from the competent authorities of Germany and the original of this document and a copy of its Turkish translation certified by a notary public or Turkish consulates in Germany must be submitted to the tax authorities or the relevant tax office.

Taxation of Dividends Distributed by a Company Established in Germany in the Event that a Person or Company Resident in Turkey is a Shareholder of a Company Established in Germany

In accordance with the reciprocity principle of the double taxation agreement mentioned above, in the reverse case, if the company resident in Turkey has at least 25% capital share of the company established in Germany, the rate of 5% should be taken into consideration instead of the taxation rate in the domestic legislation in the taxation to be made in Germany over the dividend payment to be made to the company resident in Turkey from the remaining portion after deducting the calculated corporate tax from the corporate income of the company established in Germany before deducting discounts and exemptions.

In this sense, in the dividend distribution of the company established in Germany to the Turkish resident company, which is the shareholder of the company, the 5% tax deduction will be deducted by the Turkish resident company from the tax to be paid in Turkey.

Evaluation and Conclusion

If we briefly summarise the issues we have explained in detail in the above sections of our article;

A “Limited Liability Company” established in Turkey is subject to corporate tax as a “full taxpayer” capital company. Full taxpayer corporations are taxed on all of their earnings both inside and outside Turkey.

For limited liability companies established in Turkey, corporate tax is calculated on the net corporate income of the taxpayers in an accounting period. In the determination of pure corporate income, the provisions of Income Tax Law No. 193 on commercial income are applied. On the other hand, companies which are within the scope of “limited liability” as per the same article of the law (companies which do not have both their legal and business centres in Turkey among the institutions listed in Article 1 of the law) are taxed only on the earnings obtained in Turkey.

As of 1 January 2011, there is an Agreement between the Republic of Turkey and the Federal Republic of Germany for the Avoidance of Double Taxation and Tax Evasion in Income Taxes. The provisions of the double taxation avoidance agreement between the Republic of Turkey and the Federal Republic of Germany will be taken into consideration in the taxation of the dividends to be obtained by the non-resident limited taxpayer corporation from the company established in Turkey.

In accordance with the double taxation avoidance agreement, in the event that the German resident company has at least 25% of the capital share of the company established in Turkey, the rate of 5% instead of 10% in our domestic legislation should be taken into consideration in the taxation to be made in Turkey over the dividend payment to be made to the German resident company from the remaining portion after deducting the calculated corporate tax from the corporate income of the company established in Turkey before deducting deductions and exemptions. On the contrary, in accordance with the reciprocity principle of the double taxation avoidance agreement, in the taxation to be made in Germany over the dividend payment to be made to the Turkish resident company, which is the partner of the company resident in Germany, the rate of 5% should be taken into consideration instead of the taxation rate in the domestic legislation.

In the distribution of dividends between the two countries, the amount of 5% to be deducted from the taxes to be paid in their own countries can be deducted from the taxes to be paid in their own countries.

In cases where the provisions of the Agreement are amended according to the domestic legislation, in order to benefit from the provisions of the Agreement, it is necessary to prove that the enterprise in Germany is a full taxpayer in Germany and is taxed in this country on all world earnings with a document (residence certificate) to be obtained from the competent authorities of Germany and the original of this document and a copy of its Turkish translation certified by a notary public or Turkish consulates in Germany must be submitted to the tax authorities or the relevant tax office.

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The post Taxation of Dividend Transfers Between Companies Established in Turkey and Germany first appeared on MHR & Partners.

German Business Culture for Entrepreneurs or Employees

MHRPartner — Fri, 31 Mar 2023 18:01:54 +0000

Mehmet Akif Özmen | Chairperson at MHR & Partners

Germany is one of the most preferred countries for foreign entrepreneurs and talents with its attractive business opportunities. People who want to establish a company in Germany, invest in Germany, work in a German company and live in Germany should first of all know the German business culture. In order to quickly adapt to the German business world, to get successful results and to be in a safe communication and interaction, it is extremely important to get to know the German business culture closely. In this article, we discuss the most prominent features of German business culture, especially for those who want to establish a company, invest or work in a company in Germany.

German business culture is known for its strong emphasis on punctuality, efficiency, work discipline and precision. Meetings and negotiations are often formal, detail-oriented and well organised. Open and direct communication is favoured. Decision-making processes can be slow due to the search for consensus. Care is taken to maintain a work-life balance. In business life, hierarchy is respected and work is taken seriously. Respect for human dignity, fairness, loyalty, quality, professionalism, reliability and transparency are fundamental German values. In general, in the German business mentality, negotiations are conducted fairly and it is rare for agreements to be changed or broken at the last minute. Ethics, like corporate social responsibility, is at the centre of everyday German business practices. Let us now take a closer look at the characteristic features of German business culture.
Translated with www.DeepL.com/Translator (free version)

What are the Main Characteristics of German Business Culture?

Punctuality: Being punctual is extremely important in German business culture. Being late for appointments and meetings is seen as disrespect. If you think you will be late for work or a business meeting, call early to let the person you are meeting with know in advance. Any changes to appointments must be made at least one day in advance.

In Germany, punctuality is a sign of reliability and you can be judged harshly if you are late even once. We therefore strongly recommend that you arrive for any appointments earlier than the agreed time.

Open and Direct Communication: German business culture places a strong emphasis on open and direct communication. In meetings, communication is formal and employees speak to each other in a polite but effective manner. It is a common standard to wait for a person to finish speaking before speaking and to treat everyone with respect and dignity.

Germans have a direct way of speaking to each other and are not overly friendly or animated in their communication. This style can sometimes confuse foreigners. It is normal for your manager to speak to you briefly and should not be considered rude. Germans like to get the job done rather than waste a lot of time talking about something. For this reason, communication that seems short is actually very productive.

Germans care a lot about their language. They approach someone who speaks German more sincerely. Therefore, even if you do not speak German at all, starting a conversation by saying “Hello” in German in the first meeting creates an effect. In general, they are distant in the first meetings. They expect you to take the first step. Preferred topics of conversation are sports, travelling, current events, politics and the flow of work. They avoid talking about the second world war and genocide. They do not like to be asked about their private life. Asking about their salaries and income is a taboo.

Shaking hands and greetings: If you have just arrived in Germany, the safest thing to do is to shake hands strongly and confidently with every new person you meet. When shaking hands in Germany, shake hands with your right hand, but make sure that your left hand is not in your pocket. Because this can be perceived as rude. Make eye contact when shaking hands. Shaking hands is common not only in the business world but in all areas of life. Any contact other than a handshake is not considered normal.

Always greet business partners, German colleagues and customers of German origin by shaking hands and using official titles. This is particularly important when meeting for the first time, for example in a new workplace. They like to speak by adding prefixes to their surnames, such as Mr and Mrs. In German business culture it is common to maintain formalised communication even though they have been working together for many years. The first name is often preferred among family friends and close colleagues.

Work Attire: Formal dress is worn in most workplaces in Germany. Men usually wear dark suits and ties, while women wear simple trouser or skirt suits. Women generally avoid wearing expensive and flashy jewellery. Simplicity is valued. In young or emerging sector companies such as advertising agencies or new technology companies, especially those located in more cosmopolitan cities such as Berlin, it is also common to see people dress informally for work.

When going for a job interview, always opt for more formal and high quality clothing when attending a job negotiation for your company. It is definitely frowned upon to show up to your first day in trainers and casual clothes when you should be wearing a suit.

Formalities in Negotiations: Meetings and negotiations are usually formal and business attire is expected. If you are trying to offer a service or product to the German business community, make sure you justify everything you say. Germans do not appreciate flamboyant behaviour and emotional language. Make sure you have the data to prove what you claim.

Germans negotiate in a fair, open and transparent manner. Claims should be supported by data and appropriate prices should be offered or requested. Germans are not used to excessive price negotiations. They want to know clearly what a product is worth and what you want for it in order to be able to plan.

Consensus orientated: German companies place great importance on consensus in decision-making. Since it takes time to build consensus among team members and stakeholders, decision-making processes are often slow. It is important to be late, to be well thought out at once, but to be solid and lasting.

Germans always conduct business in a civilized manner, preferring to find a compromise between the two parties rather than aggressively or oppressively imposing their views on the other party.

Work – Life Balance: In German culture, private life is highly valued and there is a strict separation between private and professional life. Most offices close from Monday to Thursday at 17:00 and on Friday at 16:00. Friday afternoon appointments should not be requested. Working hours are shorter and holiday entitlements are higher than in the rest of the world.

However, Germans focus only on their work during working hours and avoid activities that distract them from their work. They do not use social media and do not talk about personal life issues. At the end of the working day, they are uncomfortable being called and written to about work. The German work ethic means that employees always go to work on time and do their work all day and are rewarded with fair pay and good working conditions.

Hierarchical Organisational culture in Germany is hierarchical and as a meritocracy, those who reach the top are to be respected as individuals who have worked hard. Most large organisations are led by a CEO or Board of Directors with a strong management team underneath. With regard to decision-making, decisions largely come from the top and employees in Germany are expected to do what they are asked to do. However, your manager gives you responsibility for a task or a project and expects everything to be done in a favourable time. He or she expects you to take the initiative and accomplish the task. When problems arise, you must provide feedback in a timely manner.

Fairness and Loyalty: Germans tend to operate fairer business practices than you may encounter in other countries and cultures. This sense of fairness includes equal pay, good working conditions and fair disciplinary practices. Employees are often loyal to their employers and share their desire to create high-quality products and provide reliable services.

German companies also reward loyalty to both their employees and their customers. A business in Germany is likely to choose the same customer for many years, taking advantage of the benefits offered by loyalty rather than continually seeking cheaper services elsewhere.

German businesses tend to focus on building long-term relationships with customers, suppliers, employees and partners.

Diversity, Equality and Respect for Human Dignity: The first article of the German Constitution begins: “The honour and dignity of man is inviolable. All state power is obliged to respect and protect it.”

Article 3 continues as follows: “All human beings are equal before the law. Men and women have equal rights. The State shall encourage the realisation of the equality of men and women and shall endeavour to remedy any disadvantages. No one shall be victimised and no one shall be privileged on account of sex, ancestry, race, language, nationality and origin, creed, religion or political opinion. No one shall be victimised because of disability or handicap.”

In Germany, there tend to be more women on boards of directors than in most other countries. In 2015, government guidelines were issued recommending that at least 30 per cent of non-executive boards should be female. This improved gender balance tends to translate into a more nuanced and people-centred approach to problem solving and less oppressive or authoritarian practices.

Quality: German businesses are known for their high quality products and services and place great emphasis on quality control. Everyone in Germany wants every job, big or small, to be completed optimally, on time and with high satisfaction for the end consumer. Germans attach great importance to the quality of their products and services. Therefore, if you want to work for a German company or do business with a German company, you must take your work very seriously and not compromise on quality.

Productivity: German businesses value efficiency and productivity and aim to minimise waste and inefficiency. One of the main characteristics of German business culture is the early start of the day. People set off for work at 6:00 in the morning.

Precision: Attention to detail is highly valued in German business culture. Decisions are usually made after good research, meticulous information gathering and careful deliberation.

Transparency: Transparency is very important in a German company. This means that corruption is rare. Giving compliments and gifts to get you a good deal is frowned upon. They do not like it when you try to buy their preferences.

When doing business in Germany, you need to obey the law and carefully avoid unregistered transactions. Tax justice is one of the most sensitive issues.

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