Publication //

Hurdles with regard to formation of german gmbh by foreign investors

In order to form a GmbH in Germany a multitude of legal steps are necessary.  Considering that this meticulous process is not without pitfalls for German founders, for foreigners additional aspects should also be kept in mind.

A – Legal Formation

1. Preparation of documents for formation of GmbH

The necessary documents (e.g., articles of association, shareholder agreement meeting, confirmation of future CEOs and related code of conduct, list of shareholders) need to be prepared bilingually for the use of German authorities (German) and the use of the client (English). The German version prevails.

2. Notarization

Once the documents are prepared to everyone’s satisfaction and needs, the formation takes place by holding a shareholder formation meeting in the presence of a German notary.  If a person present at the meeting does not speak German, the notary might insist that an interpreterparticipate in case comprehension matters arise.

3. Proof of Identity, Certification

For identification purposes all the people present at notary’s office need to present official identification documents unless already known in person by the notary.

Those absent and represented by power of attorney must have a signed power of attorneycertifiedby a German notary, a German Consulate abroad or other accepted authority.

If the future shareholder is a legal entity, proof of existence of such a legal entityis required in the form of certified copies of articles of association, formation, appointment of CEOs, shareholder list (or other, depending on country of origin), all of the before mentioned usually certified by respective ministry abroad, translated by a certified translator and certified by apostille or German Consulate.

The signatures of newly appointedCEOsduring the shareholder formation meeting regarding code of conduct must be performed in person; therefore representation during the meeting by power of attorney is not possible.  Confirmations must be signed in the presence of an accepted authority certifying signature by apostille or other certification process.

Note: The necessary, relevant documents, considered sufficient for proof of existence and identity, depends entirely on the decision of the judge at the commercial register in charge of the registration of the GmbH.  No final check-list exists.  Even prior requests will not lead to a final, reliable statement because a) only upon filing is the judge in charge determined and b) the judge will finally decide once the documents presented have been reviewed.

4. Opening a bank account for payment of share capital

Due to the Money Laundering Act (in force since 2017) some major German banks have (on a transitional basis?) completely terminated opening bank accounts for foreign people and entities (at least non-EU).  Smaller and local banks tend to reject non-German speaking clients at all.

Identification and certification processes are different for formation and bank account openingdepending on the requirements of the bank.  In a recent case – formation of GmbH by Indian and Thai nationals or alternatively a Thai corp – Deutsche Bank declined the opening of a bank account in the final stages, after having requested the submission of a myriad of legal documents, all translated and certified by the ministry of Thailand and/or the German Consulate.

Some advisors recommend opening a bank account in another European jurisdiction.  However, it is more than likely that the payment of the capital into such a bank account will not be accepted by the commercial registers.

Potentially, this issue might improve again once bank risk management has succeeded in implementing the Money Laundering Act in a practicable way.  However, the identification and certification process will remain to be a significant issue.


B – Registration for Tax Purposes/Compliance

The questionnaires available for the registration of the GmbH’s business with the tax authorities and issuing of the tax identification number are delivered by the respective state in charge for the new entity.  This is usually the head office of the business.  However, many of such questionnaires provided are not translated into English. 

This is also true for German Tax Returns which are also only issued in German.

As a result a major part of the work of the advisor is to translate everything for the client if the client cannot name a German speaking person of trust.

Special Case: Registration for German VAT number or VAT ID for a foreign entity or client (not a German GmbH):

The tax department in charge of VAT for a foreign entrepreneur is determined based on country of origin and an assigning regulation agreed upon between German tax departments (e.g., the tax department in Berlin is in charge for Chinese entrepreneurs, tax department in Saarbrucken is in charge for Luxembourg entrepreneurs). But again, questionnaires are not always available in English, only in German.


C – Documentation of all relations to foreign country relations.

For tax purposes documentation of transactionswith foreign countries (relationship (related parties), process, legal agreements, economical background, pricing factors (transfer pricing issues if appropriate) needs to be prepared.  Such documentation must generally be filed in German; even if first filed and accepted in English a translation can always be requested by the tax authorities.  Therefore, the preparation of such papers remains with the advisor if the client does not speak German; the review and validation of such documents, by the client, is therefore very limited.

Tax authorities may ask for the documents to be submitted within 60 days, where extraordinary transactions are concerned this may be reduced to 30 days.


D – Summary

The formation of a German GmbH by a foreign person or legal entity can be very time and money consuming.  One of the main triggers is whether the client can name a German speaking person of trust who will serve as a contact for the advisor, will translate and explain issues to the client, support the client to open a bank account and review the advisors work.  Depending on the country of origin of the founders the translation and certification process will be more or less time-consuming; documents to be presented for the legal formation and bank opening process might not be the same. Additional documents might be requested by the judge deciding upon the formation of the GmbH, a factor that cannot be determined or eliminated beforehand.  Therefore, the formation of a German GmbH should be planned well in advance and have a substantial economical background.


E – Exemplary list of cost-raising factors

  • Bilingual formation documents
  • Identification and certification during formation process for legal prerequisites
  • Identification and certification during formation for opening bank account
  • Interpreter for formation meeting
  • Provision of original signatures by newly appointed CEOs (extra step; slowing down process)
  • Correspondence with official authorities in German
  • Correspondence with tax authorities in German
  • Correspondence with banks not necessarily in English possible
  • User interface for online banking available only in German
  • Increased cost for compliance due to obligation for documentation regarding ties to foreign countries (in German)

For further information please contact:Katharina Schweitzer

Schackstrasse 1
80539 Munich

Tel : +49 89 360 4900

Fax :+49 89 360 49049