VAT Registration, Corporate Bank Accounts and Legal Setup for Foreign Founders in Germany

One of the first and most significant practical obstacles facing foreign founders is gaining access to the German banking system. German banks operate under rigorous anti-money laundering regulations set out in the German Money Laundering Act (Geldwäschegesetz — GwG). These regulations require banks to conduct thorough Know Your Customer (KYC) checks before opening any corporate account, and the scrutiny applied to companies with foreign shareholders or parent entities is typically more extensive than that applied to purely domestic businesses.

The GwG places banks under a legal obligation to verify the identity of their clients, understand the nature of the business relationship, and assess the risk of financial crime. For companies with international ownership structures, this process involves a detailed examination not only of the German entity but of the broader corporate group.

When the shareholder or parent company is located outside Germany, banks will generally require a comprehensive set of documents before proceeding. These typically include:

• Official extracts from the relevant company registry in the country of incorporation, confirming the existence and legal status of the foreign entity;
• Full information on the ultimate beneficial owners (UBOs), including identity documents, proof of address, and details of their shareholding;
• A clear explanation of the ownership and corporate structure, often including an organogram or structure chart;
• Information about the company’s business model, the nature of expected transactions, and the anticipated transaction volumes;
• Documentation establishing the source of funds to be deposited;
• In many cases, official translations of foreign-language documents, and in some instances, notarization or apostille certification.

It is worth noting that requirements vary between banks, and some institutions are considerably more receptive to international clients than others. Online and fintech banks are generally more accessible to foreign founders, though they may offer fewer services than traditional institutions. The suitability of a given bank will also depend on the company’s legal form — banks that work well for sole traders or freelancers are not necessarily appropriate for a GmbH or UG.

Many German banks require the managing director to be identified before an account can be opened, regardless of where they are based. For traditional banks, this typically means attending in person at a branch. A number of banks and fintech providers now accept video identification (VideoIdent) as an alternative, which can reduce the need for travel. The identification method accepted will depend on the institution in question, and foreign directors should clarify this requirement early in the process. Seeking legal advice on which banks are most suited to the company’s circumstances before beginning the application can help avoid unnecessary delays.

Where the company is already incorporated, the account application will also require notarized copies of the articles of association and the commercial register entry (Handelsregisterauszug). The appointment of directors and the allocation of signing authorities should be established clearly before the application is submitted, as banks will require appropriate powers of attorney to be in place.

Foreign companies are required to register for VAT in Germany in a range of situations, regardless of whether they have a physical office or registered address in the country. The obligation arises when a company sells goods or services subject to German VAT, and the specific circumstances that trigger registration include:

• Buying and selling goods that remain physically located in Germany;
• Storing goods in a warehouse or fulfillment center in Germany;
• Selling goods to German consumers through online marketplaces where the relevant threshold is exceeded;
• Organizing live events, conferences, or similar activities on German soil;
• Operating through a consignment arrangement with a German customer.

VAT registration is a firm legal requirement wherever these conditions are met, for EU and non-EU companies alike. Failure to register when required can result in significant penalties, including fines calculated as a percentage of the VAT owed and additional charges on unpaid VAT subject to monthly interest.

Since July 1, 2021, the EU’s VAT rules for cross-border e-commerce have changed significantly. Foreign founders selling goods or services to consumers across EU member states — including Germany — should be aware of two alternative mechanisms that may reduce or eliminate the need for country-by-country VAT registrations.

The One Stop Shop (OSS) allows eligible businesses to register for VAT in a single EU member state and use that single registration to declare and pay VAT on all qualifying cross-border sales to consumers across the EU. This applies to distance sales of goods within the EU, supplies of services to EU consumers, and certain transactions facilitated through online marketplaces. One important threshold to note: where total cross-border supplies of goods and services to EU consumers remain below 10,000 euros per year, VAT may continue to be accounted for in the seller’s member state of establishment rather than in each consumer’s country. Above this threshold, the place of supply shifts to the consumer’s country, making OSS registration the practical means of managing these obligations centrally. Participation is voluntary, but where a business opts in, the OSS registration applies uniformly across all EU member states. Non-EU businesses that hold goods in a warehouse or other facility in Germany and sell from there to consumers in other member states may also be eligible to use OSS.

The Import One Stop Shop (IOSS) is a parallel mechanism designed for distance sales of goods imported from outside the EU in consignments with an intrinsic value not exceeding 150 euros. It allows sellers to declare and pay the VAT due across all relevant EU member states through a single registration with the Bundeszentralamt für Steuern (BZSt). Importantly, imports covered by IOSS are exempt from import VAT at the point of entry. Non-EU businesses wishing to use IOSS are required to appoint an EU-based fiscal intermediary. The sole exception applies where the business is established in a country that has a mutual assistance agreement with the EU — currently Norway is the only such jurisdiction.

Where neither OSS nor IOSS applies — or where a business chooses not to use them — country-specific VAT registration in Germany will be required. Legal advice is recommended to determine which regime is most appropriate for a given business model.

Foreign founders selling through online marketplaces should also be aware of the deemed supplier rule. Under both the EU VAT framework and the German VAT Act (Umsatzsteuergesetz — UStG), marketplace operators that facilitate certain supplies of goods are treated as if they have received and then resupplied those goods themselves for VAT purposes under Section 3(3a) UStG. Where this rule applies, the VAT obligation shifts to the platform rather than the individual seller. This can significantly affect how a foreign seller structures its VAT compliance, and whether a direct German VAT registration is required depends in part on whether the marketplace assumes the deemed supplier role for relevant transactions.

German tax authorities have become increasingly rigorous in examining VAT registration applications from foreign companies, particularly where the applicant has no physical presence in Germany. Finanzbehörden will assess whether the company’s business activities genuinely give rise to a VAT obligation, and may request additional documentation to verify the nature of transactions, the location of goods, and the ultimate recipients of services.

This heightened scrutiny makes careful preparation of the registration application essential. The documents submitted must clearly justify the company’s activities in Germany and demonstrate that the registration threshold has been met or exceeded. Inaccurate or incomplete submissions can result in delays or, in more serious cases, trigger audits and formal compliance proceedings.

The registration process for foreign companies broadly follows the same steps applicable to German-resident companies that exceed the registration threshold. It requires:

• Completion of the appropriate VAT registration form for non-resident businesses, submitted to the Finanzamt with national competence for foreign companies under Section 21 AO in conjunction with the VAT Jurisdiction Ordinance (Umsatzsteuerzuständigkeitsverordnung);
• Submission of supporting documents that confirm the nature of the company’s business activities and its connection to the German market;
• Compliance with any additional requirements imposed by the relevant Finanzamt, which can vary by jurisdiction.

Unlike the IOSS regime, direct VAT registration in Germany does not carry a mandatory fiscal representative requirement. Non-resident businesses register directly with the competent Finanzamt. However, one important exception applies: businesses with no residence, habitual abode, registered office, or place of management in Germany, another EU member state, or a country covered by the EEA Agreement, that intend to supply goods via an electronic interface in Germany, are required under Section 22f(1) of the VAT Act to appoint an authorized recipient (Empfangsbevollmächtigter) in Germany at the point of registration. This is a distinct and more limited obligation than a full fiscal representative, but it is a mandatory requirement for non-EU and non-EEA e-commerce businesses operating through online platforms and must be arranged before the registration is submitted.

Once registered with the competent Finanzamt, businesses requiring a VAT identification number for EU single market transactions must apply separately to the Bundeszentralamt für Steuern (BZSt). The VAT number is a stand-alone number issued in addition to the German tax number and is required for intra-Community supplies and acquisitions, among other cross-border transactions. The BZSt issues the VAT number by post only; notification by email or telephone is not possible. Processing can take several weeks, and foreign founders should factor this into their operational planning to avoid delays in issuing compliant invoices or fulfilling cross-border transaction requirements.

Once VAT registration is in place and a VAT number has been issued, the business is subject to ongoing compliance obligations. These include displaying the VAT identification number on invoices and other business documents for taxable supplies, filing periodic VAT returns with the competent Finanzamt, and making the corresponding VAT payments within the applicable deadlines. Returns must be submitted electronically via the ELSTER portal. The frequency of provisional returns — monthly or quarterly — depends on the business’s estimated annual VAT liability.

Germany maintains a dedicated register of beneficial owners, known as the Transparenzregister, which is governed by Sections 18 et seq. of the German Money Laundering Act (GwG). The register is administered by Bundesanzeiger Verlag GmbH and is separate from the Commercial Register (Handelsregister), though the two are closely related in practice.

Under Section 20(1) GwG, all legal entities incorporated under private law and registered partnerships are obligated to disclose their ultimate beneficial owners (UBOs) to the Transparenzregister. This includes GmbHs, UGs, AGs, KGs, OHGs, and other corporate forms commonly used by foreign founders establishing a German presence. The obligation applies regardless of whether the shareholders or controlling parties are based in Germany or abroad.

A beneficial owner (wirtschaftlich Berechtigter) is defined under Section 3 GwG as any natural person who ultimately owns or controls the entity in question. For companies, this generally means any individual who directly or indirectly holds more than 25% of the share capital, controls more than 25% of the voting rights, or exercises equivalent control by other means. Where no such natural person can be identified after thorough investigation, the company’s legal representatives are treated as the beneficial owners by default.

For foreign founders, this is particularly relevant where ownership runs through one or more intermediate holding companies located outside Germany. The full chain of ownership must be traced to the level of the natural person, and the intermediary structures must be documented and disclosed.

The following information must be submitted electronically via the Transparenzregister for each beneficial owner: full name as it appears in official identity documents, place of residence, date of birth, all nationalities, and the nature and extent of the beneficial interest held. Disclosure must cover the period from October 2017 onwards, or from the date of incorporation if later. Any change to the disclosed information — including a change of address or adjustment in shareholding — requires a new submission. The register entry must therefore be kept current on an ongoing basis.

Failure to submit required disclosures to the Transparenzregister, or submitting information that is late, incorrect, or incomplete, constitutes a regulatory offense under Section 56 GwG. Fines of up to 150,000 euros can be imposed, and in cases of serious, systematic, or repeated violations, fines of up to one million euros are possible. Final and non-appealable penalty decisions are published on the website of the Bundesverwaltungsamt for a period of five years.

For foreign founders, compliance with the Transparenzregister should be addressed at the point of incorporation, not treated as an afterthought. Banks conducting KYC checks under the GwG will cross-reference beneficial ownership information against the register, making accurate and timely disclosure a practical prerequisite for accessing German banking services and a legal obligation in its own right.

For foreign founders entering the German market, VAT registration, banking access, and the legal structuring of the German operation are not separate administrative tasks — they are closely interconnected. German banks conducting KYC checks will want to understand a company’s business model and expected revenue flows, meaning that clarity about VAT status and the nature of German transactions is directly relevant to the account opening process. At the same time, tax authorities examining a VAT registration application will scrutinize the corporate structure and beneficial ownership information — many of the same details required by banks.

Without a functioning corporate bank account, the day-to-day operations of a German business entity are effectively impossible. Banks may in turn ask about the company’s VAT and tax status as part of their compliance assessment. A fragmented or poorly prepared approach to these requirements can therefore create a cascade of delays, with each process stalling pending information that has not yet been gathered or formalized.

Addressing these requirements in a coordinated and legally sound manner from the outset is far more efficient than attempting to resolve compliance issues after they arise. Attending to corporate structure documentation, VAT registration, Transparenzregister disclosure, and banking access in the right sequence — and with the right documentation in place — significantly reduces the risk of delays and positions the foreign founder to begin operations on a compliant and stable footing.

Our corporate law team at Schlun & Elseven Rechtsanwälte has extensive experience supporting foreign founders and international businesses as they establish their presence in Germany. We understand the practical and regulatory obstacles that can arise at each stage of this process and are equipped to guide clients through them effectively.

Our services in this area include:

• Advising on the selection of appropriate banking institutions for foreign-owned companies;
• Supporting clients with the preparation and submission of corporate bank account applications;
• Advising on UBO disclosure obligations and corporate structure documentation;
• Assisting with VAT registration for foreign companies, including preparation of supporting documents and correspondence with the relevant Finanzamt;
• Reviewing and advising on the legal structuring of German subsidiaries, branches, and other corporate forms;
• Supporting clients in satisfying KYC and GwG compliance requirements;
• Advising on powers of attorney and the authority structures required for German banking and regulatory purposes.

If you are a foreign founder preparing to enter the German market, or if you have already encountered difficulties with banking access or VAT registration, please do not hesitate to contact our team directly. We are available to advise you on the most effective path forward for your specific situation.