Establish a Subsidiary
or Branch Office
in Germany

Establish a Subsidiary or Branch Office in Germany

Our services
Contact us
Our lawyers

Given the increasing globalization of the business world and Germany’s position as one of the economic centres of Europe, corporate expansion to Germany represents an attractive opportunity for many foreign, internationally active companies to enter the lucrative German market.

If you are planning a company’s expansion to Germany, the first question to be asked concerning setting up a branch in Germany is how to choose the right organizational form. To gain a better overview of the various organizational forms and their respective advantages and disadvantages, these are listed and examined in more detail below.

You are here: Home » German Corporate Lawyer » Establish a Subsidiary or Branch in Germany

Our Services: Corporate Expansion

Expert German corporate law guidance in your corner

As a full-service law firm, Schlun & Elseven will oversee all the legal requirements

The Subsidiary Company in Germany

The subsidiary company is a legally independent company with its own legal personality, in which the parent company holds a majority stake. It is established per the provisions of German company law. In this respect, the subsidiary company of a foreign parent company has a German legal form.

German company law makes a fundamental distinction between partnerships, general partnerships (OHG) and limited partnerships (KG) and capital companies, limited liability companies (GmbH) and stock corporations (AG). Foreign company founders are thus subject exclusively to German legislation. This applies to the formation of companies, business registration and entry into the commercial register.

Advantages of the Subsidiary Company

  • German legal form facilitates commercial activity on the German market.
  • Domestic partners perceive companies as equal business partners.
  • Due to legal and organisational independence, entrepreneurial decisions can be made specifically for the German market.
  • Possibility of trading under its own name – independent of the parent company’s company name.

Disadvantages of the Subsidiary Company

  • High bureaucratic burden: Commercial register entry and business registration are necessary.
  • High economic effort: At least in the case of capital companies, the minimum share capital (AG 50.000,00 €/ GmbH 25.000,00 €) must be paid up.
  • Given the exclusive application of German law, there may be an increased need for legal advice.
  • Only suitable for longer-term commitments.

For more information on the company organisational forms in Germany, please visit our “Company Formation in Germany“ page.

The Permanent Establishment/Representative Office in Germany

As a dependent branch or subsidiary of the entire company, the permanent establishment is dependent on the company headquarters abroad. It may not run a separate trading name which differs from the head office – and invoices are issued in the trading name of the head office. The permanent establishment regularly carries out auxiliary transactions which serve to prepare, arrange or execute the main business of the foreign company. Consequently, a permanent establishment does not take part in business transactions independently. The head office and the permanent establishment therefore legally form a single business operation, which is merely physically separated.

An entry in the commercial register is not required. However, it is generally necessary to register a business at the competent trade office or public order office.

Advantages of Representative Office:

  • Low bureaucratic burden: registration in the commercial register is not required.
  • Fully subject to the law of the State of the head office
  • Suitable with regard to temporary commitment in Germany
  • No share capital required

Disadvantages of Representative Office:

  • Registration of the business with the responsible trade office / public order office required.
  • No independent business activity
  • Therefore less entrepreneurial flexibility with regard to the development of the German market.
  • No possibility of trading under a name that differs from the company name of head office.

The term “representative office”, often used in connection with the establishment of branches of foreign companies, has no basis in German trade and commercial law. Therefore, it is either a dependent permanent establishment or a domestic, external representative (e.g. commercial agent) is mandated, who acts legally independently for the head office and thus the operation of foreign companies on the German market is not applicable.

The Branch Office in Germany

A branch office is an intermediate form between a company with its own legal personality and a purely permanent establishment. It is to a certain extent dependent on the company of the head office, but on the other hand, the branch office takes part in business dealings independently.

The legal provisions of the branch office are defined in §§ 13 et seqq. HGB (German code of commercial law). The legislator deliberately refrained from defining the term branch office. However, it is generally described as an establishment separate from the head office, which carries out its own legal transactions for a temporary purpose – within the scope of the business activities of the head office – with a certain degree of organizational and factual independence vis-à-vis the outside business world. Despite this commercial independence, the branch office does not have the status of a legal entity and therefore cannot itself be the carrier of rights and obligations. In this respect, it represents a part of the company dependent on the head office without its own legal personality. It is therefore subject to the (foreign) law applicable to the head office.

The branch office must be organized in such a way that it could continue to exist if the head office were to disappear. To be independent, it must have its own management with freedom of disposition and its own business assets allocated by the main branch. In the head office’s balance sheet, the branch office’s business transactions are listed separately.

For a branch office to exist, it is sufficient that it is correctly established. However, it must be entered in the commercial register, whereby only German law applies to the registration procedure. However, an entry in the commercial register has only a declaratory effect.

Advantages of the Branch Office

  • Independent business activity
  • It is subject to the law of the head office from a legal and organizational point of view,
  • As a result, there may be less need for legal advice.
  • Low economic efforts: Although the legal status of an independent branch office requires its own capital resources, no minimum share capital is required.


  • High bureaucratic burden: Commercial register entry and business registration are necessary.
  • The trade name is basically the same as that of the head office but can be extended by a clarifying addition (e.g. “Zweigniederlassung Deutschland”).
  • Only suitable for longer-term commitments.

Tax Perspectives for Company Expansion to Germany

The organisational forms explained in more detail above may also differ in individual cases concerning tax law aspects. In principle, however, the profit of a company or its permanent establishment or branch office generated in Germany is also taxable in Germany. The actual tax burden then depends on the respective German legal form of the company or on the legal form with which the foreign head office most closely corresponds in its organisational structure.

In particular, income tax or corporate income tax, wage tax, business tax and value-added tax (VAT) may be incurred.

The extent to which the amount to be taxed in Germany is either released from taxation in the state of the main establishment/head office or is again subject to taxation in that state is determined in each case by the agreements for the avoidance of double taxation (DPA) which the Federal Republic of Germany has concluded with other states.

Permits (Concessions)/ Legal Issues relating to Foreigners

In Germany, any commercial activity of subsidiary companies, branch offices or permanent establishments must be registered with the competent trade office or public order office. If necessary, a separate permit/concession may also have to be applied for some areas of business activity. This applies in particular to the following areas of business: financial services, insurance, restaurants, travel and transportation, crafts, and brokerage.

In addition, questions may arise concerning the management of branches by foreign natural persons from third countries (countries that do not belong to the European Economic Area (EEA) except for Switzerland) concerning immigration law and, in particular, residence law. German immigration law provisions on entry and residence must therefore be observed.

Schlun & Elseven Logo

Practice Group: German Corporate Law

Practice Group:
German Corporate Law

Dr. Matthias Wurm


Jens Schmidt