Under German law (see section 14 Gewerbeordnung, i.e. German Trade Regulation), the commencement of a business activity must be notified in writing (Gewerbeanmeldung) to the local Ordnungsamt (Trades Office), which is a department of the municipal government, for example the city of Munich. This notification obligation also applies to any change in the business (e.g. move, modification to the nature of the business or staff recruitment) and to the termination of the trade activity, which requires a termination notification (Gewerbeabmeldung). More information on the various options in terms of how to start a business in Germany is available here. For an overview of German company forms see here.
The business activity is recorded in the Gewerberegister (Trade Register), which must not be confused with the Handelsregister (Commercial Register or Company Register) which is kept by the District Courts and can be compared to UK Companies House. The two registers have entirely different functions. The purpose of the Commercial Register (Handelsregister) is to provide the general public with reliable information on the corporate data of a business, i.e. what is the registered capital, who are the directors, what is the official company address etc. The Trade Register (Gewerberegister), in contrast, is not meant for the general public but for the authorities. The mandatory trade register notification ensures that all competent German authorities (including the tax office) obtain current data on the existence and nature of businesses in a certain region. This enables the authorities to monitor and supervise the conduct of these trades and businesses. The nature of the trade or business must be described as accurately as possible to avoid queries or problems later on. Failure to notify or submitting incorrect information will lead to fines.
On notification of a trade, which is done by submitting a form “Gewerbeanmeldung” (download a sample here: sample_form_city_of_Munich), the Ordnungsamt also checks whether necessary permits (if any) have been obtained. For example a crafts trade (Handwerk) must produce the craftsman’s certificate issued by the Handwerkskammer (Chamber of Craft).
Together with the form “Gewerbeanmeldung” a number of documents must be submitted to the Trades Office, inter alia:
- proof of identity of the applicant (certified copy of ID card or passport); in the case of a director, board member or authorised signatory: extract from Commercial Register
- any permits required (e.g. craftsman’s certificate, broker’s licence etc);
- a non-EU foreign national must produce a residence permit issued by the German Ausländeramt (Immigration Office) which incorporates permission to engage in self-employment
- any company already entered in the Commercial Register must submit a certified copy of such entry (beglaubigter Handelsregisterauszug)
- companies registered in a foreign Commercial Register must produce the relevant registration documents (Certificate of Incorporation, Articles of Association, Certificate of Good Standing etc.), together with an official translation by a German certified translator
- foreign companies must nominate someone within Germany as their official representative, which is usually done by granting this representative a power of attorney; this ensures that official documents can be legally served to this person within Germany (on behalf of the company)
- the Trades Office may request to see a copy of the lease agreement as proof that the business premises actually exist
- if the trade is regulated by specific laws (e.g. financial services or crafts) the Gewerbeamt may request the submission of a business licence or information from the Central Trades Registry
Once the Trades Office has accepted the Gewerbeanmeldung as being complete and correct, it will forward the data contained in the trade register notification to the following authorities:
- Handelsregister (Commercial Register)
- Finanzamt (Tax Office)
- Arbeitsamt (Employment Centre)
- Industrie- und Handelskammer (Chamber of Industry and Commerce)
- Handwerkskammer (Chamber of Crafts)
- Berufsgenossenschaften (Trade Associations)
- Umweltamt (Environmental Standards Authority) and other offices
So, in essence, the trade register notification serves as an early heads up to all relevant German authorities that there is a new business which needs to be watched.
Last not least: a word on German Business Taxes
As described above, the Tax Office is automatically notified by the Trade Office (Gewerbeamt) and will send the trader a tax assessment questionnaire which also contains information on VAT procedures. If the business has employees it must deduct income tax from wages and salaries and forward it to the locally competent Tax Office. For this you should definitely engage an experienced accountant because the technicalities are quite complex. A general overview on German taxation (business tax, income tax and VAT) is available here.
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The law firm Graf & Partners (Germany) has been assisting entrepreneurs and businesses with their international expansion to Germany since 2003. We also have a network of professionals in the areas of tax, IT, marketing and business consulting. Do not hesitate to contact us by calling German solicitor Bernhard Schmeilzl on +49 941 785 3053 or send an email to: mail [at] grafpartner.com