An overview of important tax tips for startups in Germany
As the founder of a startup in Germany, you should be fully familiar with the types of taxes that you will be required to pay after starting your business. For this purpose, it is better to get help from a tax advisor in Germany. Here, we briefly mention ten important tax tips for startups in Germany:
1. After registering your business in Germany, complete the tax registration questionnaire and submit it to the tax office. Then, apply for a tax number.
2. Estimate the profit from your business in the first year for the tax office.
3. Read German tax paragraphs and learn about tax saving tricks.
4. Reduce your tax burden by forecasting your business expenses.
5. If you start your business in Germany after a period of unemployment, you can use German tax laws to optimize your business tax.
6. Take advantage of tax benefits for founders in Germany.
7. In the first two years after registering your business in Germany, you must calculate your tax monthly for the pre-registration of the tax return and report it to the tax authorities.
8. According to the amount of profit, the legal form and the size of your business in Germany, use the correct method of determining the profit.
9. Pay attention to corporate performance tax.
10. You can reduce your business tax burden by registering a Gewerbe business in Germany.
Part-time self-employment in Germany at a glance
Is it possible to be part-time self-employed while having a blue card residence and an employment contract in Germany?
Yes, the blue card holder can register a company in Germany and hand over its executive management to his spouse or trusted person until obtaining a permanent residence permit. They can also work part-time in this company.
If the blue card holder does not have a trusted person in Germany, they can still be self-employed part-time by registering a side business at the Trade Office. In this case, they should pay attention to the requirements of self-employment in the target city, which is included in the Zusatzblatt sheet. Also, their employment contract should not contain clauses that limit or prohibit them from starting a business.
With part-time self-employment in Germany, you can realize your business idea and have a reliable source of income through your primary job. In such a case, it will be easier to finance the new business, and the time investment and mental pressure to generate income will be less. As a result, you can safely test your business idea and increase your income if it is successful.
Before starting the activity, inform your employer that you intend to be self-employed part-time. In addition, you need to register your business, register with the tax office, and obtain the necessary permits and certificates.
A brief overview of due diligence before buying a business in Germany
A thorough evaluation and due diligence of a business before buying it in Germany is mandatory. It will help you understand the various financial, operational, legal, and strategic aspects of the business you want to buy.
To evaluate a business in Germany, you must carefully review various items such as financial statements, compliance with laws and regulations, employment contracts, tax issues, manufacturing and supply chain processes, relationships with customers and suppliers, intellectual property, IT infrastructure, environmental obligations, insurance, the quality of income and key management personnel of the company.
An overview of the requirements and the way to receive child benefits in Germany
If you have children and live in Germany, you can receive an allowance from the government to cover the costs of raising your children.
Your child must live with you and be under 18 to receive this allowance. If they are over 18 years old, they must be studying or completing vocational training. Also, enrollment in a school in Germany is necessary for children aged 6 to 16.
First, you must get the benefit application form from the family benefits office and fill it out accurately. Then, submit the completed form with the required documents to the relevant office. This office will approve your application after reviewing the documents and information provided. As a result, you can receive a monthly benefit for raising your children, which amounts to 292 euros in 2024.
• Choosing the right location can significantly impact the success of your business in Germany, specifically if the considered business depends on the presence of customers.
• If you do not do a proper location analysis before establishing your business in Germany, you may have to pay for it by moving the location, poor performance, or even bankruptcy of your business.
• When choosing the right location for your business in Germany, you should pay attention to demand, competition, tax costs, transport connections, related requirements, labor availability, financing opportunities, and working and living conditions there.
• If the cost of the chosen property is more than your budget, you can cover it using your savings or compensate for it by earning money from methods such as subletting, adding business partners, or holding events.
An overview of the usual tax terms and the tax system in Germany
Tax terms are often difficult to understand. Since the German tax system is very complex, it becomes more difficult to understand these terms, especially for expats. Therefore, to avoid possible mistakes when paying taxes in Germany, you should familiarize yourself with some of the most common terms. The most important are:
• Tax Office: Finanzamt
• Gross salary: Brutto
• Net salary: Netto
• Salary certificate: Wohnbescheinigung
• Tax declaration: Steuererklärung
• Tax identification number: Steueridentificationsnummer
• Tax number: Steuernummer
• Tax rate: Steuersatz
If you are not thoroughly familiar with German tax terms and laws, we recommend seeking help from a tax advisor to fill out your tax return.
• A small business in Germany can provide the prerequisites for moving towards self-employment. This type of business is attractive for founders who want to start without worries, with low capital, or as a side business.
• Business registration and obtaining a license is essential for starting a small business in Germany. Entering the commercial register is not required. However, depending on the business, some documents may be required.
• Accounting for a small business in Germany is simple and is done using surplus income accounting. Also, there is no obligation to keep accounts and publish annual financial statements in the Federal Gazette.
• You can use the legal forms of sole proprietorship, UG, GbR, or GmbH to set up your small business in Germany as an individual or a group. However, you should pay attention to things such as liability, requirements related to double-entry bookkeeping, and entry into the commercial register.
In recent years, we have seen significant growth and unprecedented promotion of entrepreneurship in Germany. The reason for that can be having a robust and dynamic startup ecosystem and a supportive business environment. Germany is known for advanced and reliable infrastructure, innovation, and excellence in engineering sciences. In this article from Wise Business Group, we will explain why Germany has become an attractive destination for entrepreneurs.