Germany

Ease of Doing Business Rank: 17 

Overview 

 

Geographic location 

Germany is a Western European country with access to the Baltic and North Sea.  

Denmark lies to the north, Netherlands and Belgium to the west, Switzerland, Liechtenstein, and Austria to the South, and Poland and Czech Republic to the east. 

Spoken language 

German is the official language of GermanyAccording to the 2011 census, it is spoken by 95% of inhabitants. 

Generally, German workers have a good command of English. It is the most popular non-native language (63%), followed by French (18%), and Dutch (9%).  

Population 

The 2019 German population is approximately 85.43 million 

The majority of the population lives in urban centers. Berlin is the largest (3.52 million), followed by Hamburg (1.78 million), Munich (1.45 million), and Cologne (1.06 million).  

The country also has 74 cities with a population between 100,000 and 1 million. 

Popular industries 

The top industries in Germany are automotive, mechanical engineering, chemical and electrical industries, and service-based industries such as finance, business services, hospitality, transport, and other service activities. 

Education 

The Times Higher Education World Rankings ranked 8 universities in the top 100 in the worldA further 22 are in the top 1,000. 

The Legatum Prosperity Index ranks Germany’s education system twentieth out of 149. 

Popular entity types 

The most common business entities in Germany are a Limited Liability CompanyJoint Stock Corporation, General or Limited Partnership, and Sole Proprietorship. 

The most commonly incorporated entity in Germany is the Limited Liability Company. 

German incentives for business 

Generally, Germany treats foreign business as it would a domestic business. Ifully recognizes 100% foreign ownership. 

Germany does offer a few tax incentives under certain conditions. For instance, they may grant a tax subsidy of between 25% and 27.5% on investments in new movable property and buildings. 

Federal research and development non-repayable grants are available for SMEs in the high-tech industry. Businesses may qualify for up to 50% of eligible costs. 

GRW cash grants are available for businesses in the manufacturing and service industries to cover up to 40% of startup costs. Eligible expenses include capital expenditures in the first three years and personnel costs in the first two years for newly-created jobs. 

In addition to federally-run programs, German states also offer R&D grant programs targeting SMEs in specific industry clusters, including non-tech. 

History & Features 

 

Main cities for business 

Germany has many cities with central business districts. These include Berlin, CologneDortmundDüsseldorfEssenFrankfurtHamburgMunich, and Stuttgart. 

Frankfurt is one of the world’s most important financial centers and Germany’s financial capital, followed by Munich. 

Popular historical & tourist attractions 

Germany’s rich history and stunning landscape includes 44 official UNESCO World Heritage Sites, including the Upper Middle Rhine Valley. 

The Rhine is Europe’s most important waterway flowing 1,320 kilometers from Switzerland, through Germany, and to the Netherlands. The Upper Middle Rhine area features over 40 castles and many medieval towns. 

Aachen Cathedral was built for Roman Emperor Charlemagne between 790 AD and 813 AD. It echoes the style of the eastern region of the Holy Roman Empire and symbolizes the unification with the West under Charlemagne. The highly-decorated cathedral with high dome and detailed mosaic was the first vaulted structure built north of the Alps, since antiquity. 

Cologne’s Cathedral is another UNESCO site and a Gothic masterpiece. Building started in 1248, but completed in 1880. However, through the ages the builders never wavered from the original plan. The cathedral was the only building that survived the World War II bombings that flattened Cologne. 

Neuschwanstein Castle is undoubtedly the most well-known castle in Germany. It was the inspiration for Walt Disney’s Sleeping Beauty and receives 1.4 million visitors annually. Ironically, King Ludwig II built the fairytale castle to retreat from public life. 

Germany’s Black Forest offers rolling hills, quaint villages, and lush forests. It spans an area of 4,600 square miles. Hiking and bike trails and scenic drives make the area easily accessible to locals and tourists. 

Visitors shouldn’t miss the iconic Berlin Wall either. Built in 1961 during the Cold War, it originally divided West and East Germany for almost 100 miles. Mostly destroyed in 1990, all that remains are graffiti-covered sections. However, an excellent Berlin Wall Exhibition and Memorial provide extensive information. 

Berlin’s Brandenburg Gate is also worth a visit. The gate was the first neoclassical structure built in the city by King Frederick William II in 1791. It was modeled after the Acropolis in Athens and measures over 85 feet in height. 

History 

Romans arrived in the Gaul region about 55 BC. The Rhine became a natural defensive barrier and the new frontier. The Romans did try to expand beyond the river, but they met with crushing defeat. However, they occupied the southern and western regions and founded many towns which still exist today. 

During the 8th and 9th century, Charlemagne dominated the region and was intent on converting inhabitants to Christianity. However, the Germanic Saxon tribes resisted for thirty years 

After much bloodshed, Charlemagne ruled the Netherlands, northeast Spain, France, Belgium, and much of Germany, Switzerland, Austria and north Italy. When Charlemagne died in 843, his kingdom was divided into three regions: east, west, and south – one for each son 

However, the division decentralized and weakened military and territorial power. Vikings attacked in the west and Magyars in the west, while the power of feudal lords grew.  

When the east Frankish king died in 911 AD, he did not have an heir. Rather than allowing the western Frankish king to assume power, the Saxons and eastern Franks elected their own king of Germany.  

After a series of deaths and successions, the Pope crowned Otto the Great emperor. It began an unbroken line of Holy Roman emperors for over eight centuries.  

However, by the Middle Ages the Holy Roman Empire was no longer a unified power in GermanySeparate duchies reported to the emperor, while prince-bishops sometimes took the place of the Roman commander, made secular decisions for the city and led their own troops when necessary. The link between church and state weakened and by 1250 dissolved completely after the death of Frederick II. 

Between 1250 and 1273 Germany did not have an emperor, which caused a governmental crisis. Rudolph of Habsburg was elected, but political unrest followed. 

In the early 14th century, Germany faced famines and the Black Death, killing almost a third of the population. Uprisings for better social conditions were commonplace. They culminated in the Peasant Wars of 1525, which led to tens of thousands of deaths. 

By the 16th century, the lines between nations became more defined. The Holy Roman Empire recognized the German nation, hoping to strengthen their power to resist the pressures of Martin Luther’s Reformation. 

Eventually, the Reformation split Germany between Protestantism and Christianity. This led to a war in 1546-47, but it did not eradicate Protestantism. Finally, in 1555 it was decided that each prince could decide the religion of their state. Germany enjoyed relative peace and stability until the end of the century. 

However, this peace did not endure. Both Protestants and Catholics formed military alliances in the early 17th century. Other European powers entered the picture which led to the Thirty Year War, one of the longest and most brutal in history. 

As the war evolved, it became more about who would govern Europe, not religion. When the Peace of Westphalia ended the conflict in 1648, Germany was in shambles. 

Throughout the 18th century, a series of wars and alliances engulfed the European continent. Prussia, Bavaria, France, Saxony, the Electorate of Cologne, Spain, SwedenNaples, Austria, Great Britain, Sardinia, the Netherlands and Russia all fought for territory. 

By 1806, sixteen German states were allies of Napoleon who created the Confederation of the RhineThe Holy Roman Empire dissolved the same year after the Napoleonic Wars and Napoleon defeated Prussia. However, Russia, Prussia, and Austria combined forces and defeated the French in 1813. 

In 1815, the Congress of Vienna met to decide the fate of Europe. Germany formed a confederation of 38 states called the Bundestag to replace the old Holy Roman Empire. The country industrialized, strengthened, and many states established more liberal constitutions. 

However, by 1845 the country was in dire straits again. A recession, high unemployment, and agricultural setbacks led to unrest. A revolution in France in 1848 triggered demonstrations across Europe, including Germany. However, European armies put down the rebellions. 

By 1863, conflicts between nations began again. Denmark tried to annex two duchies, leading to wars with Prussia and Austria. This alliance defeated Denmark and they gained joint administration over the area.  

Later, Prussia fought Austria and won, expelling Austria from German affairs. However, Prussia’s victory over Austria increased the already existing tensions with France. Otto von Bismarck was the German chancellor at the time. He quarreled with France over Spanish succession. France declared war, but lost the battle 

Meanwhile, southern German states agreed to become part of a new German Empire under the leadership of William I the same year. Germany industrialized rapidly and by the end of the century, their capabilities rivaled Britain’s. 

Bismarck had always maintained friendly relations with Britain, but things changed after his resignation. His successor expanded Germany’s navy, which set off alarms for Britain.  

Tensions were already high. Alliances between Germany and the Austro-Hungarian empire were set against a Britain, France and Russia alliance. When Austrian Archduke Franz Ferdinand was assassinated in 1914, World War I began. 

German forces invaded Belgium and marched on Paris. They were defeated at Marne, and both sides raced to claim lands towards the sea. Arriving simultaneously, they dug in and a deadlock ensued. 

However in the east Germany defeated the Russians. In 1917, Germany introduced unrestricted submarine warfare intended to sink any ships trading with the allies. Consequently, the U.S. declared war on Germany. 

During 1918, Germany attacked British and French lines. British and American forces retaliated, eventually advancing on the Germans. When Germany’s leader abdicatedthe country formed a new government and signed an armistice with the Allies on November 11. 

Even though Germany had a new government, it didn’t serve them well. Proportional representation made it impossible to establish a majority, so they ruled through weak coalition governments. The President could also pass laws of his own choosing by decree. 

In 1919 Germany signed the Treaty of Versailles, but many Germans resented it. The war guilt clause pinned the cause of the war on Germany and its allies. They also lost a significant portion of their territory and population.  

As well, they were made to pay reparations of 132 billion gold marks in 1921; a colossal sum for any country to bear. As a result, communist factions tried unsuccessfully several times to seize power. 

Political and social unrest in the early 1920s led to the formation of the German Workers Party. The party concurred with a myth circulating in Germany that they could have won the war, if they hadn’t been betrayed by civilians on the home front. They also pushed for a unified Germany, but were unashamedly racist and anti-Semitic. Adolph Hitler joined the party in 1919. 

The party eventually changed its name to the National Socialist German Workers Party, or NAZI party. By 1921, Hitler was their leader and he established a paramilitary organization. In 1923, they tried to seize control of Germany, but met armed opposition. The party collapsed, Hitler fled, and was arrested two days later. 

The same year, Germany fell behind on their reparation payments. French and Belgian troops occupied the Ruhr, Germany’s industrial heartland. Strikes, demonstrations, decreased productivity, and the mountains of printed currency given to “heroic” strikers led to food shortages and hyperinflation. The German mark was worthless. 

In 1923, Germany negotiated lower reparation payments under the Dawes plan. The Allies backed by J.P. Morgan floated a loan of $200 million to the German government. French and Belgian troops withdrew from the area. 

Germany’s conditions improved until the Wall Street Crash in 1929. Unemployment was already high in Germany and as a result democratic parties lost support. By 1932, the Nazi party was the largest in the Germany. In 1933, the president asked Hitler to become Chancellor of Germany. 

That year, the Nazi party failed to gain a majority again during the election. However, Hitler persuaded the parliament to pass a law that granted him power to pass new laws without parliamentary consent. 

In 1933, Hitler replaced the existing leadership with loyal Nazi governors. He banned labor unions and all parties except the Nazis. He also created his own protection squad, the SS.  

Eventually, the leader of the SS convinced Hitler that his own SA paramilitary organization was plotting to overthrow him. This led to the execution of many SA leaders and other critics.  

In 1934, Germany’s president died and Hitler assumed power. Anyone opposing his regime could be arrested and sent to a concentration camp without trial. 

However, the Nazis did eliminate unemployment in Germany. Hitler armed the country and introduced conscription. He also built roads and public buildings. Unfortunately, he also started to segregate Jews and Gypsies. Eventually this led to violence, property seizures, fines, imprisonment, deportations, and murders.  

Hitler censored the media and burnt books, but used the radio and cinema for propaganda. He also tried to indoctrinate all German children into Nazi ideals. 

By 1939, Hitler felt the country was ready to regain powerHis army invaded Poland and France and Britain declared war on Germany. By 1940, Germany had occupied Denmark and Norway. They continued their campaign and invaded the Netherlands, Belgium, and France. 

In 1941, German troops went to North Africa to fight the British. They also conquered Yugoslavia, Greece, and Crete. It seemed Germany was unstoppable until they invaded Russia and declared war on the U.S. too. 

At the end of 1942, the British pushed back in Egypt. Russians retook Stalingrad and the German army eventually surrendered. British and American forces also bombed German cities and industries relentlessly. 

Germany’s African troops surrendered in 1943. The Allies invaded Italy and Normandy and by 1944, they had liberated France and Belgium. The Germans failed in a counterattack and by 1945, Russia captured Berlin. 

Meanwhile, British and American forced crossed the Rhine and Hitler committed suicideGermany surrendered unconditionally and the country was divided into U.S., British, French, and Russian zones. However, it quickly became a matter of east versus west. 

The U.S. assisted West Germany and the Russians blocked access to the east. In 1949, the Federal Republic of Germany represented western interests. Through the 1950s and 1960s West Germany’s economy boomed. 

The German Democratic Republic in the east became a communist regime. East Germans held strikes in 1953, but Russian troops violently ended the gatherings. Many skilled workers fled to the west.  

By 1961, the government realized this problem was becoming a crisis. They built the Berlin Wall and shot anyone attempting to escapeHowever, the collapse of communism led to the destruction of most of the Berlin Wall in 1989. Germany was united again. 

Today, Germany has a highly developed social market economy and the largest national economy in Europe. It is fourth in the world by nominal GDP. 

Other relevant facts 

The predominant religion in Germany is Christianity (57%), followed by Islam (5%) Other religious groups include Buddhism (0.2%), Judaism (0.1%), Hinduism (0.1%) and others (0.4%). Almost 40% of the population does not claim an affiliation with any church or religion. 

According to Index Mundi, 91.5% of the population is German, 2.4% Turkish, and 6.1% are of other nationalities such as Polish, Italian, Romanian, Syrian, and Greek. 

Additional Information for Business 

According to Forbes’ 2019 Best Countries for Business, Germany is the 14th best country in the world for conducting business.  

The 2019 Index of Economic Freedom rates Germany 24th globally and states, Business freedom and investment freedom remains strong overall in Germany. Long-term competitiveness and entrepreneurial growth are supported by openness to global commerce, well-protected property rights, and a sound regulatory environment.  

World Bank’s “Doing Business” rankings rate Germany 24th for ease of doing business in the world. 

Germany Entity Support Services by Blueback Global

Blueback Global provides a one-stop integrated solution to managing all aspects of your global operations. We can take the burden off you or your company’s internal resources by managing Entity Setup, Local Payroll, Accounting, Tax Reporting, HR Admin and Regulatory Compliance matters associated with operating in a foreign country. Our services are designed to be flexible and customized, so whether you are starting from entity registration, or have already registered but need support in setting payroll or hire employees, we can help at every point of the process.

The common scenarios that may give rise to the need for Blueback Global’s services include the following:

With our integrated approach, you can expect the following experience:

We have an initial complimentary meeting to discuss the scope, objectives and plans for your expansion plan into Germany. After this meeting, you can expect a follow-up proposal from Blueback Global within 1 to 3 business days, that outlines that the approach, scope of work and expected deliverables and outcome. Thereafter, our implementation team will then work closely with your team to register the local entity, set up payroll, accounting process, employee social security and benefits. We will then develop a mutually agreed timeline and approach for ongoing payroll, accounting, tax reporting and HR support. Blueback Global will set up a compliance calendar so that you know exactly what and when compliance items such as tax reporting and payroll returns are due. We will of course facilitate all of these, so you do not have to keep track of the compliance dates.

Our goal is to make the process as smooth, simple and successful as possible, and remove the anxiety of operating in a foreign location, to deliver a great customer experience.

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