DOING BUSINESS IN GERMANY MARCH 14, 2018 IN HELSINKI Marc Lehnfeld Director for Finland, Estonia, Latvia, Lithuania www.gtai.de
1. ABOUT GERMANY TRADE & INVEST WHO IS GERMANY TRADE & INVEST AND WHAT ARE MY BENEFITS OF USING THE COMPANY S SERVICES? Germany Trade & Invest www.gtai.de 2
Who we are & what we do Germany Trade & Invest (GTAI) is the economic development agency of the Federal Republic of Germany. Foreign trade and inward investment agency of the Federal Republic of Germany Shareholder Location Marketing Investor Consulting Export Market Information Promotion of the New Federal States Germany Trade & Invest www.gtai.de 3
Our teams for your support Germany Trade & Invest concentrates its market knowledge within a range of industry teams to best support the investor. Energy, Building & Environmental Technologies Chemicals & Healthcare Mechanical & Electronic Technologies Digital & Service Industries Germany Trade & Invest www.gtai.de 4
Our Investment Project Consultancy Services Complete your project management needs from our range of investment and one-stop project consultancy services. Strategy Project Management Assistance Evaluation Decision & Investment Business opportunity analysis and market research Market entry strategy support Project partner identification and contact Joint project management with regional dev. agency Coordination and support of negotiations with local authorities Location Consulting/Site Evaluation Identification of projectspecific location factors Cost factor analysis Site preselection Site visit organization Final site decision support Support Services Identification of relevant tax and legal issues Project-related financing and incentives consultancy Organization of meetings with legal advisors and fin. partners Administrative affairs support Accompanying incentives application and establishment formalities Germany Trade & Invest www.gtai.de 5
Germany Trade & Invest serves as a one-stop consultant to the investing company Investment consultancy services Discussion on the market/industry and competition in Germany and Europe Information on tax and legal issues in Germany Information on available incentives and the financing of the project Assistance with incentives applications Discussion of location proposals/site evaluation incl. site visits Joint project management with regional economic development agencies Germany Trade & Invest www.gtai.de 6
Typical project case GTAI delivers valuable services Confidential free of charge First contact with Germany Trade & Invest and the German-Finnish Chamber of Commerce Investment volume? Hiring employees? Location analysis, transport connections, cluster and research landscape Meeting at GTAI office Berlin Office rental search, liasing with Hessen Analysis: labor law, labor cost and availability analysis Analysis: investment grants Site visits with Finnish management Office opening Germany Trade & Invest www.gtai.de 7
Investment promotion in numbers: In 2017, Germany Trade & Invest accompanied about 180 investment projects which have been handed over to the Economic Development Agencies of the Federal States and are to create approx. 4,000 new jobs in Germany. Germany Trade & Invest www.gtai.de 8
2. UNDERSTANDING GERMANY WHAT TO KEEP IN MIND WHEN SETTING-UP A BUSINESS IN GERMANY? Germany Trade & Invest www.gtai.de 9
No. 1 Investment Location Leading Economy Quality of Life 10 1 2 Global Player Secure Investment Environment 9 3 High Productivity Competitive Tax Conditions 8 4 Excellent Workforce Inviting Incentives 7 6 5 Power of Innovation First-Class Infrastructure Germany Trade & Invest www.gtai.de 10
Where is my customer? Households with a strong purchasing power can be found in Munich, Frankfurt and Hamburg. Forecasted Purchasing Power 2018 in Euro, German average: 22,992 Euro Administrative District Annual Purchasing Power (per capita) Index (German Average = 100) 2 5 9 7 1 8 4 3 10 6 1 Starnberg (rural) 33,102 144,0 2 Hochtaunus (rural) 32,137 139,8 3 Munich (rural) 31,687 137,8 4 Munich (urban) 30,998 134,8 5 Main-Taunus (rural) 29,665 135.6 6 Ebersberg (rural) 30,179 131,3 7 Fürstenfeldbruck (rural) 28,574 124,3 8 Dachau (rural) 28,156 122,5 9 Erlangen (urban) 27,875 121,2 10 Miesbach (rural) 27,553 119,8 3.1m inhabitants (2.5m in Munich area) Source: GfK GeoMarketing 2017 Germany Trade & Invest www.gtai.de 11
Cooperation Potential: German Mittelstand Small and medium-sized companies are the social and economic backbone of the German economy. 99.6 % With about 3.7 million registered small and medium sized companies (SME), the German Mittelstand comprises 99.6%* of all enterprises. These companies each employ a staff of less than 500 employees. 79.0 % Almost 22 million people in Germany work for SMEs. With a share of 79.0%** of all employees, the German Mittelstand is a major employment driver. 56.5 % German SMEs contribute strongly to the national economy s success. Their share of net value added amounts to 56.5% 1. Notes:*ifm estimation for 2014; **as of December 2013, including apprentices in dual vocational training; 1) as of 2012; Source: IfM Bonn 2015 Germany Trade & Invest www.gtai.de 12
Industry: Where is my customer/ partner? The numerous clusters all over Germany show the large cooperation potential but also the challenge of finding the right region/ cluster. Schleswig- Holstein Hamburg Kiel Schwerin Mecklenburg- Vorpommern German clusters are open for collaboration with suitable foreign companies along the cluster s value chain Düsseldorf Nordrhein- Westfalen Rheinland- Pfalz Mainz Bremen Niedersachsen Hessen Wiesbaden Hannover Erfurt Thüringen Sachsen- Anhalt Magdeburg Brandenburg Berlin Potsdam Sachsen Dresden The initiative Go-cluster (see map) unifies around 100 innovation clusters in Germany (incl. more than 5,500 SME, 1,300 big companies and approximately 1,500 universities and research institutions). Saarland Saarbrücken Baden- Württemberg Bayern Stuttgart München Source: Federal Ministry of Economic Affairs and Energy 2014 ( Go-cluster -initiative) Germany Trade & Invest www.gtai.de 13
The legal question: Branch office or Subsidiary? There are different ways for a Finnish company to establish a German market presence. Finnish Company Branch Office Subsidiary Registration of branch office sufficient. No new legal entity necessary. But: Full liability of Finnish company. Establishment of a new legal entity. Different legal forms are available (e.g. GmbH). German Market Presence Germany Trade & Invest www.gtai.com 14
Company Establishment The establishment procedure of a GmbH is straightforward with well defined steps. Drafting of articles of association (AoA) Notarization by a German Notary Opening a bank account & transfer of share capital Entry in commercial register Trade office notification; further licenses or registrations Establishment costs for a standard GmbH: EUR 800 Germany Trade & Invest www.gtai.com 15
Competitive Tax Conditions Germany offers one of the most competitive tax systems among the big industrialized countries. Overall Corporate Tax Burden (2015, in %) Poland UK Germany (minimum) Netherlands Canada (Ontario) Spain Germany (average) Italy Japan Belgium 19,00% 20.00% 2 22,83% 25.00% 2 26,50% 28.00% 2 29.83% 1 31.40% 3 32.79% 2 33.99% 2 France USA (New York) 38.00% 2 39.62% 2, 4 0,00% 5,00% 10,00% 15,00% 20,00% 25,00% 30,00% 35,00% 40,00% 45,00% 1) National German average. Lower overall tax rates in certain areas are possible, e.g. only 22.83% in certain municipalities. 2) Top corporate income taxation rate incl. local taxes; lower starting rates or other special tax rates available. 3) Based on standard rate of IRAP. 4) Local corporate income tax added. Source: Federal Ministry of Finance (BMF) 2016 Germany Trade & Invest www.gtai.com 16
Tax burden depends on municpality Income taxation of corporations consists of three taxation components. Income taxation of corporations consists of three taxation components: Corporate Income Tax: 15 % (Körperschaftssteuer) Solidarity Surcharge: 0.825 % (Solidaritätszuschlag) 15.825 % (Nationwide fixed rate) Overall Corporate Income Tax Rate German Average: 29.825 % Local Trade Tax: Rates vary locally (Gewerbesteuer) 7.0-17.5 % (In general) German Minimum: 22.825 % Germany Trade & Invest www.gtai.de 17
Tax burden depends on municpality Your location search should consider the taxation competition between German municipalities. Example: Berlin Municipal Trade Tax Multiplier: 410% Taxable Corporate Income (EUR): Trade Tax (3.5% x municipal multiplier): Corporate Income Tax (Tax Rate 15%): 1,000,000 EUR - 143,500 EUR -150,000 EUR Solidarity Surcharge (5.5% of the Corporate Income Tax): - 8,250 EUR Net Income (EUR): 698,250EUR Overall Tax Burden for Corporations: 30.18% Schönefeld: multiplier 240, average tax burden 24.23% Legend Municipal Trade Tax Multiplier (in %) Overall Corporate Tax Burden (in %) Grey areas: no data availabe Source: Destatis, Federal Statistical Office 2013, Map: Microsoft MapPoint 2013, 2014 Germany Trade & Invest GmbH. Germany Trade & Invest www.gtai.de 18
General Introduction Germany offers various public funding instruments for different business activities. Incentives in Germany Funding for: Investments Working Capital Research & Development Specific Purposes Personnel Financing supported by any of the following public funding instruments (combinations of instruments usually possible) Public funding instruments: Grants Loans Guarantees Equity Capital Mezzanine Capital Germany Trade & Invest www.gtai.com 19
Grants for Investments/Personnel The main funding instrument that significantly lowers investment project costs is the Investment Grant. Investment Grant ( Joint Task Program ) Objective Offered in Offered as Eligible costs Requirements Job creation by setting up new manufacturing or service facilities Specific regions throughout Germany Non-repayable cash grant, covering up to 40%¹ of the eligible costs Purchase or production costs of new buildings, machinery, and equipment and purchase costs of new intangible assets or salary costs for 2 years Creation of long-term quality jobs Subsidized equipment and positions must remain on-site for at least 5 years Funding for: Investments Working Capital Research & Development Specific Purposes Personnel Public funding instruments: Grants Loans Guarantees Equity Capital Mezzanine Capital Note: 1 depending on investment location, company size, investment volume, and respective Federal State Investment Grant regulation Germany Trade & Invest www.gtai.com 20
Grants for Investments/Personnel Germany offers grants ( Joint Task program ) of up to 40% to support new production or service facilities. Timeframe 01.07.2014-31.12.2020 Small enterprises Mediumsized enterprises Large enterprises Predefined C Region 1 max. 35% max. 25% max. 15% Border area to Poland Non-predefined C Region max. 40% max. 30% max. 20% max. 30% max. 20% max. 10% D Region max. 20% max. 10% max. EUR 200,000 Funding for: Investments Working Capital Research & Development Specific Purposes Personnel Public funding instruments: Grants Loans Guarantees Equity Capital Mezzanine Capital Note: 1 until 31.12.2017, aid intensity 2018-2020 five percentage points lower as in Non-predefined C regions Germany Trade & Invest www.gtai.com 21
German strengths evaluated by US Investors US investors appreciate Germany as an advanced business location attractive for investments. How do you evaluate each individual location criteria? Share of good/ very good assessments Results of AmCham Germany Business Barometers 2017 100% quality of workforce 91% research and development 94% supplier networks 70% infrastructure 63% sales potential Germany Trade & Invest www.gtai.com 22
General Information about Setting-Up Germany Trade & Invest provides compact information about settingup business operations in Germany: Click on cover to access free publication online Germany Trade & Invest www.gtai.com 23
Your contact for new business operations in Germany www.gtai.com Helsinki/ Finland Mr. Marc Lehnfeld c/o Deutsch-Finnische T +358 (0)9 6122 1235 Handelskammer M +358 (0)50 5111 168 Mikonkatu 25 marc.lehnfeld@gtai.com 001800 Helsinki www.gtai.de/finnland www.twitter.com/gtai_helsinki Berlin Friedrichstraße 60 10117 Berlin Bonn Villemombler Straße 76 53123 Bonn Germany Trade & Invest (GTAI) is the economic development agency of the Federal Republic of Germany. With more than 50 offices in Germany and abroad, and its network of partners throughout the world, GTAI supports German companies setting up in foreign markets, promotes Germany as a business location and assists foreign companies setting up in Germany. GTAI is supported by the Federal Ministry for Economic Affairs and Energy on the basis of a decision by the German Bundestag. Germany Trade & Invest All market data provided is based on the most current information available at the time of publication. Germany Trade & Invest accepts no liability for the actuality, accuracy, Germany or Trade completeness & Invest of the information provided. www.gtai.com 24