Challenges Foreign Companies Face
There are very few restrictions on which companies or service providers may do business in Germany. However, the country is well regulated, and it is recommended that you investigate the legal requirements and also restrictions before proceeding with an investment or entering the market in any form.
An important thing to remember is research and planning your target market and area. This is key to the success of your business. Germany is very well structured and most industries have trade organisations that can provide very good advice on any challenges you will encounter. Local chambers of commerce are also very good starting points.
Regulations and bureaucratic procedures
Businesses that are interested in expanding to Germany must do their homework thoroughly and make sure they know precisely which standards apply to their products and/or services and that they obtain timely testing and certification which is often required before trading any products or offering services.
- There are complex safety environmental standards that can complicate market access for foreign businesses.
- Germany’s acceptance of the EU’s Common Agricultural Policy and German restrictions on biotech agricultural products represent obstacles for some products considered for import and export.
The decentralized German market is very diverse. Interests and tastes will differ from one German state to another. Keep in mind that there are also cultural differences between the north and south and also between east and west. Ideally, talk to a local consultant that can guide you through the challenges of understanding regional differences and to find a point of entry that suits your requirements the best.
Tax rates and complicated business and tax laws
- Germany’s relatively high marginal tax rates and complicated tax laws may present a You must have a good tax consultant to guide you through this complexity and to avoid critical errors.
- Businesses that are considering the German market must also take possible deductions, allowances and write-offs in account. These benefits make the German effective tax rates in line with international competitive levels.
- Doing business in Germany is a challenge for foreign companies relating to the legal and tax structures and constraints.
- A team of local partners/consultants/lawyers can help to overcome these barriers. Ideally, find people that have a good understanding of local conditions and speak good English – which is not always the case compared to for example the Netherlands. Therefore, it is advised to have a lengthy conversation with prospective partners prior to entering into a working relationship.
The complex process of starting a business
- The World Bank and International Finance Corporation (IFC) rank Germany in 106th in the world for ease of starting a business.
- There are several procedures and requirements for new companies
- Businesses are required to liaise with the local chamber of industry and commerce.
- The local commercial register.
- The local office of business and
- The professional association of the relevant trade.
- Tax consultant services are an essential but good starting point.
- Legal advice is critical and it is also essential that you understand legal boundaries, requirements and obligations.
- Doing Business in Germany without a valuable cross-cultural awareness is not advised.
- Knowledge of both the business landscape and the regional culture is essential.
- Hierarchy is valued in Germany and there are prescribed procedures and policies which can be frustrating for
Latest version updated
6th December 2017