When does a foreign company need a branch in Germany?

A foreign company in Germany can without branch be active, but in certain cases the Establishment of a branch or permanent establishment required. This depends on business, tax and legal factors from.

1. when is a branch in Germany required?

A branch is required if a foreign company:
Regular business activities in Germany (e.g. warehouse, distribution)
Employees in Germany
A physical office or place of business operates
Long-term customer contracts in Germany have
Taxable in Germany is (e.g. through sales tax or trade tax)
Must be present locallyto meet customer or regulatory requirements

Tip: If the company only offers occasional sales or services in Germany, a VAT registration without a permanent establishment.

2 What types of branches are there?

a) Permanent establishment (simple presence without legal personality)

-No separate legal personality (belongs to the parent company)
-Must Pay income tax/business tax in Germanywhen profits are generated locally
 No entry in the commercial register necessary

➡ Suitable for: Companies that are permanently active in Germany but do not want to set up an independent company.

b) Branch office (part of the foreign company with its own management)

-Has own accounting & administration
-Must in the Registered in the commercial register become
-Partially independent for tax purposes from the parent company

➡ Suitable for: Companies that operate locally but wish to remain closely linked to the main company.

c) Subsidiary (GmbH, UG or AG)

-Independent company with its own legal personality
-Full tax independence in Germany
-Liability limited to the company's assets

➡ Suitable for: Companies planning long-term expansion in Germany.

3. when is a simple VAT registration sufficient?

If a foreign company only sells goods or services in Germanybut does not have a physical presence, often a VAT registration from.

Example: An online store from the USA sells to German customers → VAT liability, but no branch required

4 What are the tax consequences of a branch office in Germany?

If a branch office exists in Germany, the following applies:

-Corporate income tax (15 % + solidarity surcharge) for profits of a subsidiary
-Business tax (depending on city 7-17 %)if a permanent establishment exists
-Sales tax liability (19 % or 7 % depending on the product)