social business development

Import restrictions

The only import restrictions of general application are those imposed in accordance with UN sanctions. Otherwise, there is a special licensing procedure for certain specific types of goods, mostly military equipment and drugs. Some import quotas are imposed by the European Union (e.g., for textiles), and these are also applied by Germany which issues licenses freely until the quota is filled. Products whose sale is prohibited in Germany can sometimes be imported, but they will not be cleared through customs and will therefore have to be re-exported. Since the EU member states constitute a single European market, deliveries to and from Germany and other EU countries do not qualify as imports or exports. Within the EU there are no longer any border controls of any description or any customs duties or other restrictions on intra-union traffic apart from certain minor formalities for travellers. The terms “export” and “import” therefore now only refer to trade between Germany and non-EU countries.

Import duties

Here is an excerpt from the PWC report: Doing business and investing in Germany | February 2010

Authorised economic operator

Regular importers and logistics businesses are increasingly aware of the benefits of registration as an “authorised economic operator” under EU-harmonised rules. Authorisation will be granted to businesses who have shown themselves to be reliable from the financial, record keeping and, as relevant, technical points of view. Authorisation is granted locally, but is valid throughout the EU. Thus an authorised economic operator from another member state does not need to re-apply in Germany in order to enjoy the benefits here.

Two types of authorisation are available. A business, the “economic operator”, may apply for either or both. Customs simplifications are the one and security and safety the other. Neither authorisation frees the holder from the obligation to declare imports and pay the relevant duty, or from the security and safety regulations currently in force, although both enable Customs to grant the holder priority in dealing with his requests for permits or rulings. Other benefits include fewer test checks of transactions and a more flexible approach to routine examinations.

Local representation

From the point of view of processing imports, local representation is neither necessary nor helpful. The actual processing is done in any case by the carrier.

Foreign businesses may freely sell and then ship most goods to Germany. The import will be the responsibility of the purchaser, who will have to obtain customs clearance.

A foreign business may require access to local German storage and onward delivery facilities. Logistic services of this nature are offered by most superior carriers and courier services.

Foreign exporters who wish to station their own employees in Germany or to appoint their own German representatives may well meet the preconditions of a taxable “permanent establishment” in Germany under the terms of the relevant double tax treaty. Effectively, part of the net profit earned on the sale of the goods to German customers would become chargeable to German income taxes and the foreign business would thus become subject to German accounting and record-keeping requirements.

It is also quite usual for a foreign business to establish a German sales subsidiary or German sales branch to regularly and systematically exploit the German market. There are usually no basic reasons why this should be impracticable, although it does lead to taxation in Germany.

Consumer sales from foreign websites

Foreign businesses providing electronic services or downloads to private, non-business consumers in Germany from outside the EU must register for VAT in an EU state of their choice. VAT is to be charged as though the service had been performed from that state and must be accounted for accordingly. Luxembourg currently has the lowest standard rate of VAT at 15%. The German rate of 19% will probably make it unattractive to foreign businesses to register in Germany, but if they do, they will have to abide by the German requirement to keep records in support of the VAT returns filed. These include obligations to submit the records in softcopy to the Federal Tax Office on demand and to retain them in hard and softcopy for ten years

Advantages of micro-enterprises

Risk reduction – Starting out in business can begin with a micro-enterprise, avoiding major costs and additional responsibilities for employees, and can find out whether the business idea will actually work and whether a market exists for it. With a micro-enterprise, it is possible to test the waters and see what potential there is. So a micro-enterprise is suitable for the early phase of a company

Formalities

Taxes – As a small businessperson, you can be exempted from turnover tax if you do not exceed certain thresholds. You must then produce your invoices without value-added tax, and can therefore logically not claim prior tax deduction.

Welfare insurance – As a rule, self-employed people need to pay their own health, pension and long-term care insurance. But there are exceptions: ask your health insurance fund.

Fees to chambers - Businesses and craft firms must be registered with the chamber of industry and commerce or the chamber of crafts. You only pay fees to the chamber of industry and commerce if your revenues exceed a threshold of EUR 5,200. The chambers of crafts can reduce or waive the fees. This is a matter for the respective chamber; there is no uniform arrangement. Different rules apply to professional services; in some cases, the professional rules prescribe compulsory membership of the relevant chamber (e.g. for doctors, architects).

Watch out for fictitious self-employment - Micro-enterprises (e.g. working for only one contractor) are in many cases “fictitious self-employment” (“scheinselbständig”). They are then treated by the welfare funds like salaried employees and must pay half of the contributions towards pension, health, long-term care and unemployment insurance. The other half must be paid by the (main) contractor. The courts may also force the latter to give the worker a permanent job. For this reason, contractors often take care to find out exactly whether the person working for them is “fictitiously self-employed” or not.

The Association of German Pension Insurance Carriers [Deutsche Rentenversicherung Bund] offers a status determination procedure. The result tells you and your contractor whether you are fictitiously self-employed or actually self-employed. You can find more on this topic on the Internet at
www.deutsche-rentenversicherung-bund.de or call for information at: 0800 10 00 480 70

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