Your responsibilities when selling to German consumers will differ depending upon whether you are selling from a fellow EU member state or from a country outside of the EU. Of particular relevance here are the EU E-commerce Regulations, which provide that the ‘country of origin’ principle does not apply to inter-EU consumer contracts. In effect, these regulations mean that any EU-based e-commerce seller must abide by the consumer laws of every member state where it is the case that that state’s consumers can buy its products. Thus, if you are selling to German consumers from an EU member state, you will need to be familiar with and abide by German consumer laws. Whilst this might sound burdensome, the EU’s desire to create a level playing field across its members means that there are largely common rules operating across all member states, in fact making inter-EU trade easier and reducing the transaction costs involved. By comparison, if you are selling to German consumers from a country outside of the EU you will continue to be bound by your own domestic legislation. In this case, strict customs procedures must be complied with and customs duties will become payable. Please see our Logistics page for further information.
The EU directive on the VAT System, in effect from January 2015, is set to make a notable impact on anyone selling to EU-based consumers, irrespective of where they are trading from. This legislation provides that online merchants are now required to pay VAT on digital products sold according to the location of the consumer. Therefore if you are selling to German consumers you will need to be registered for and pay VAT in Germany. The administrative burden resulting from these new rules is somewhat alleviated by VAT MOSS (Mini One-Stop Shop), which eliminates the need to register for VAT in every country to which you sell, enabling you to register for all in one place.
A number of options exist if you wish to establish a physical presence in Germany without setting up a distinct legal entity. Whilst in contrast to many other jurisdictions German commercial law does not recognise representative offices, it does offer the option to register a dependent branch office. This will be the case where an office is being used for foreign commercial activities in Germany. In these circumstances, your existing legal entity will remain liable for any debts or obligations incurred by this German office. Alternatively, you may wish to operate via a franchising agreement, commercial agency or distribution agreement. In all cases it is crucial to consult specific legal advice before contracting.
Should you decide to ring-fence your new venture by setting up a distinct legal entity in Germany, there are a number of corporate forms available to choose from. These include; Limited Liability Companies (GmBH), Limited Liability Entrepreneurial Companies (Mini GmBH), Stock Corporations (AG), General Partnerships (OHG) or Limited Partnerships (KG). The most popular is the GmBH. The regulations imposed on your business entity will depend on the corporate form you choose , and naturally once you set up as a legal entity in Germany you will be subject to all German laws. Seeking expert legal advice is essential to ensure you’re compliant.
Whilst establishing such an entity may sound complex, both German consumers and local suppliers often show a preference for dealing with locally incorporated entities, therefore providing you with greater market access. German law also takes a notably relaxed approach to foreign investment and so makes no distinction between foreign invested and domestic companies. The only restrictions that may apply relate to foreign policy, foreign exchange and national security and so are rarely imposed.
Importantly, Germany offers a particularly favourable trading environment for SMEs, and as such SMEs make up the majority of entities registered in Germany.
|Corporation Tax||15%||The corporate profits tax rate is 15% for all companies. A 5.5% solidarity surcharge on the corporation tax due is also charged, thus giving an actual corporation tax rate of 15.825%.|
|Capital Gains Tax – For Companies||15%||Capital gains are subject to tax at the normal corporation tax rate.|
|Withholding Tax – Dividends||0% – 25%||The withholding tax rate is 25% for resident and non-treaty corporations. For corporations with an EU parent, there is 0% withholding tax. Tax treaties may reduce or eliminate this rate for other countries around the world.|
|Withholding Tax – Other Interest||0%-25%||No withholding tax is charged on interest paid between associated companies of EU member states providing certain conditions are met. Withholding tax is charged at 25% for interest paid into non-treaty corporations. Tax treaties may reduce or eliminate this rate for other countries around the world.|
|Value Added Tax||7%-19%||The standard rate of VAT is 19%, which is charged on goods sold and services rendered. A reduced rate of 7% is charged on certain food items as well as books.|
|Social Tax on Employee’s Salaries||19.175% Employer||Social security contributions on gross earnings are charged on all earnings up to a monthly limit. Relevant charges include:
• Pensions insurance: 9.35%
• Unemployment insurance: 1.5% up to a maximum monthly salary of $6,910 (€5,950), or $5,800 (€5,000) in Eastern Germany.
• Health Insurance: 7.3%
• Invalidity insurance: 1.025% up to a maximum monthly salary of $4,698.
|Currency Exchange Control – Cash||$11,607 (€10,000)||Individuals are permitted to carry a maximum of $11,607 (€10,000) in cash into and out of Germany without the need to declare it. There are no limits for travel to and from other European Union (EU) member states.|
|Currency Exchange Control – Bank Transfer||N/A||There are generally no restrictions on payments to foreign entities or individuals through normal banking channels.|
The primary legislation governing the protection of privacy in Germany is the Federal Data Protection Act (Bundesdatenschutzgesetz (BSDG)). This Act regulates the collection, processing, transference and use of personal data. The provisions oblige data controllers to ensure that they obtain the express consent of data subjects, notify them as to the purpose for the collection and only use collected data for the stated specified purpose. The data collected should be limited to the least amount required to achieve the stated purpose and must be erased if it is no longer necessary. Data subjects have the right to access any data stored that relates to them and may request the correction or deletion of such data. Organisations must also ensure that they take all necessary measures to ensure the security of any data stored and to prevent unlawful access or disclosure.
Key privacy provisions are further supplemented by both individual German states, which have their own data laws, and by sectoral laws for specific industries. Organisations should seek advice to ensure they meet all applicable regulations.
The sending of unsolicited electronic communications in Germany is regulated by the Unfair Competition Act (Gesetz Gegen den Unlauteren Wettbewerb (UWG)). These regulations state that the sending of unsolicited communications is illegal unless the recipient has expressly provided their consent in advance, though exceptions exist where the recipient’s contact information was obtained in the course of a previous transaction. Regardless, recipients must always be made aware of ‘opt-out’ options, and all marketing e-mails must contain mechanisms to ‘unsubscribe’.
The protection of intellectual property rights (IPR) in Germany requires the registration of any marks with the patent office, Deutsches Patent. Importantly, German law is harmonised with international agreements both at an EU and international level.
In order to protect your IPR, it is highly recommended that you ensure it is registered in Germany before exporting your goods. Equally, you must check that you are not infringing the IPR of other parties; this is necessary to avoid being implicated in any counterfeiting or illegal parallel importing claims. Germany is a member of the WTO and a signatory to the Madrid Protocol, the International Trademark System, which offers a one-stop solution for registering your trademarks all in one place, for one set of fees, ultimately protecting your mark in the territories of all its members across the world. Alternatively, EU-wide protection is available by registering your trademarks with the Office for Harmonisation in the Internal Market (OHIM).
National legislation enacted in Germany brings its domestic laws in line with the provisions set out in the EU Consumer Rights Directive (CRD). General provisions make it obligatory for all pre-contractual information to be detailed, transparent and displayed clearly, and – specifically in relation to e-commerce websites – there must be no ambiguity for a consumer when they are taking an action which gives rise to an obligation to pay. In this regard, companies cannot charge consumers using pre-ticked boxes as the basis for the conclusion of a contract, and consumers must be told which methods of payment are accepted and whether any delivery costs or restrictions apply. The Directive also prohibits the imposition of unreasonable surcharges for the use of particular payment methods.
Where no agreement has been made in relation to the date of delivery, the CRD dictates merchants must deliver goods within 30 days. Consumers additionally have the right to withdraw and cancel any purchase made within a period of 14 days. Where they are not informed of this right, this period is extended to 12 months. On withdrawal, the consumer must return any goods delivered within 14 days and the merchant must then provide a refund within 14 days.
Germany boasts a well-developed e-commerce environment therefore giving German consumers the option to be picky when purchasing from online stores.
German consumers are traditional in their online payment methods, favouring direct debit or online bank transfer mechanisms.
The German logistics market is the most developed in the world and ranks first in the World Bank’s 2014 International Logistics Performance Index.