Germany has become a prime market for investors and new business owners. It is the biggest in the European continent and the fourth-largest economy in the world.
It is also a powerful draw to do business, although recent outside investment has slowed somewhat in the wake of the global recession and subsequent Eurozone crisis. Its extensive, diversified economy is backed by a developed. Stable infrastructure, a highly-skilled labour force, a favourable social environment, a stable legal framework, and a rich history of innovative research and development.
Nevertheless, to do business successfully in Germany, one must be conversant with its bureaucratic system, taxation and legal system.
The German economy has become one of the strongest-performing economies in Europe in the last several years. But external forces beyond German control can put a drag on growth. A high dependency on exports implies that when events go awry in other parts of the world, Germany is affected by the second-hand effect. Its entry to the EU has contributed to the growth, but at the same time, exposed the nation to the European economic challenges.
The advantages and benefits of doing business in Germany
Germany is one of the largest and most stable trading economies in the world that providing a secure and highly developed political and economic structure. It has very powerful legal provisions, which help investors to easily execute their rights and safeguard their industrial and intellectual property. In addition, Germany is projected to continue its leading role in the Euro region and to be a guarantor of regional stability.
Strong dedication to innovation
Germany belongs to the top ten most innovative nations globally, and a high priority is placed on the role of economy-oriented science. The nation is capable of translating research into practice in very effective ways. Whether it is software or pharmaceuticals, the practical focus has been a source of employment and a means to apply German scientific research to the greater good of society. This high level of commitment to applied research is evidenced by the government of Germany funding research institutions. The development of start-up companies and the licensing of intellectual property to enable researchers to develop a career beyond academia.
Turning point consumer market
The European Union has the biggest consumer market in Germany, and the total population is 82.4 million. It ranks as the second biggest importer and third biggest exporter of consumer-oriented agricultural goods in the world, and definitely the most significant European market to foreign producers. The German market is also a strong force far beyond its borders. Some of the largest trade fairs in the world are held in Germany, where a massive amount of trade is transacted, including MEDICA, the Hannover fair, Automechanika and the ITB Tourism Show. When coupled with the geographic positioning of Germany at the centre of the European Union, these qualities give it a platform on which many U.S. companies base their European and global growth initiatives.
Good start culture
The startup ecosystem in Germany is rated highly by StartupBlink in terms of its strength. Berlin, Munich and Hamburg are the most dynamic startup environments in Germany. In the past ten years, Berlin has turned into the most exciting tech centre in Germany. With its variety of professionals and networks and its vibrancy, open-mindedness, creativity and international nature, Berlin is a perfect place to launch a company and set a base to international expansion.
Weaknesses and threats of operating in Germany\
They include:
Business startup
In spite of its benefits, Germany offers a lot of challenges in starting a business in the country. First, business creation may be difficult in Germany. According to the World Bank Doing Business Report of 2020, it is ranked 125 out of 190 economies in Starting a Business, which is mainly due to the complicated bureaucratic procedures in Germany.
Paying taxes
Germany has numerous tax benefits, but the tax legislation is very complex. You will have to dedicate a lot of time and money to fulfilling Germany’s tax obligations. The number of tax payments that businesses have to make during the year is nine, and on average, they need to spend 218 hours of business time. It is also very time-consuming to process social security payments, averaging 134 hours of work.
Registering property
In the World Bank Doing Business Report of 2020, Germany is ranked at 76. New companies registering property require an extract of the land registry and notarization of a transfer agreement. Obtain a waiver of pre-emption rights by the municipality and pay a transfer tax. This should take about 52 days to be done.
Culture
Cultural differences must be known to succeed in doing business in any other country. This is necessary in Germany, where business etiquette is taken so seriously. To begin with, business in Germany is the business of punctuality. Fix dates and times of meetings long before. Be punctual to the point of meeting.
Be very formal in the first meetings and refer to the executives by their titles. Give the latitude to the German business partners to introduce more informality as trust and the business relationship builds over the course of the business relationship. Generally, Germans do not small-talk. Avoid issues that are personal, like politics and religion. Safe areas are normally neutral subject matter, like the weather and appreciation of the local history.
The German culture is detail-oriented, orderly and structured. Again, be ready to go into depth in exploring every feature of a project with your contacts. They hate surprises. Even changes that are made at the last minute but are in order to enhance the outcome will not be embraced. It is important to note that most Germans do speak English, but they will be pleased to have key documents translated for them before meetings.
Conducting business in Germany more successfully
Operating in a new country can be very daunting. The regulatory environment is always in flux, and no business environment is ever stagnant. Lacking a proper understanding of the problems in question, companies face the risk of tax penalties and even civil or criminal prosecution.
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Getting Germany’s passport
Things to know before immigrating to Germany
Property prices in Germany
