The new year at Zartis.com started with a bang. Or more specifically – with a new office in Berlin. We previously went into the details of ‘Why’ Berlin. Here’s an overview of the ‘How’ and what to keep in mind when opening an entity in Germany.

UG vs GmbH

If you’re looking to register a company in Germany there are two main options – Unternehmergesellschaft (UG) and Gesellschaft mit beschränkter Haftung, (GmbH). The GmbH is the equivalent of the Ltd and it requires an initial capital of €25 000. This capital could be put into operation straight away.

The UG is a simpler and cheaper version of the GmbH – you can register it with an initial capital of €1.  A UG can become a regular GmbH over time – a percent of the annual profit of the UG needs to be contributed to its capital reserves and once that sum reached €25 000, it becomes a GmbH.

From a bureaucratic point of view, the registration procedure and cost for both are fairly similar. The choice comes down to initial capital.

Payroll

Starting out as an Irish company, the cost of employees in Germany came as a bit of a shock. To keep the same net level for employees, switching from Irish to German contracts, the cost for the company can be up to 50% higher.

This is quite important to take into account when relocating or hiring new employees, as well as when planning the long-term growth of a team. Amongst the benefits of the higher taxes for employees is a better healthcare coverage.

Accounting

The VAT in Germany is 19% and for the first two years after starting your business, you need to do monthly VAT declarations.

A few additional points

The minimum annual leave per year is 24 working days and the standard working week is 40 hours.