As an company or business established outside of the EU, how can you establish a presence within the EU without having to make a large investment?
Answer: A branch office.
In the case of Germany, a branch (or Niederlassung) can be established by a firm or entrepreneur, with very little cost.
So what do you need?
- A nominated/authorised individual must register the branch with the German Commercial Court, in the region where the Branch will be established. This person does not need to have a residence permit or a work visa, if the administration of the branch can be carried out remotely (and therefore spends only a short amount of time in Germany – i.e. during infrequent business trips).
- A fixed business address – where official correspondence can be sent to the branch. A true business center can offer just such a business establishment address (or Firmensitz, or Geschäftsadresse) – often in the form of a “Virtual Office” contract. It is important to note that there are firms offering postal addresses for business – but these are not strictly legal under German Law. The business center must provide access to real office working space (for example rented office space on a hourly basis) and a system to ensure that correspondence is forwarded to the authorised branch representative.
- A Public Notary – because the application to the German Commercial Court must be duly notarised and supported by documents such as the Articles of Incorporation of the Company, and a Company Resolution authorising the Representative to act on behalf of the Branch.
Is there anything else I should know?
A Branch is not a separate legal entity
A Branch Office does not have a separate legal identity of its own – it is an extension of the Company. BUT, and this is a big but, the Branch must comply with German Law.
What does this mean in practice?
It means the Company must take German (& EU) Law into consideration, especially in respect of it’s dealings with the Branch. The Directors of the Company will be responsible for the actions of the Branch.
The debts and liabilities of the Branch are the debts and liabilities of the Company, as a whole, not just of the Branch.
The Profits of the Branch are taxable in Germany
This means that the Branch will need to prepare its own set of accounts (in German, and under German Generally Accepted Accounting Principles) to quantify its liability to tax. A German Tax Accountant can provide all of these services – and it will not be money wasted.