A branch office is a suitable business form for a foreign company wanting to establish a presence in Germany for the purpose of initiating business and maintaining contacts with business partners.
In Germany, there are two kinds of branch establishments which primarily differ due to the degree of the independence from the head office company: the autonomous branch office and the dependent branch office.
Autonomous branch office
The autonomous branch office (selbständige Zweigniederlassung) fulfills tasks that exceed mere implementation and support-related tasks. It is dependent upon the head office company at the internal level but engages in business activities independently. However, the foreign head office company is liable for the business transactions concluded by the branch.
At the organizational level, autonomous branch offices are to a degree independent from the parent company. For instance, an autonomous branch office usually has its own management with executive powers, a separate bank account, and accounting as well as independent business assets.
Foreign companies can register an autonomous branch office in Germany if they are entered in a foreign commercial register (or a comparable directory). The autonomous branch office must be entered in the commercial register (Handelsregister) and registered with the local trade office (Gewerbeamt). As of August 2022, the online procedures for commercial register applications have been significantly extended. The involvement of a German notary is required. Documentation verifying the existence of the head office company as well as the power of representation for persons acting on behalf of it is needed for the registration.
A business license or permit is not necessary for registering the business in the majority of cases. In some sectors, a permit or authorization might be required.
Dependent branch office
A dependent branch office (unselbständige Zweigniederlassung) is a subordinate department of the head office company and does not have any autonomy from it. It focuses on maintaining contacts and initiating business in Germany.
The dependent branch office is not able to independently participate in the general business transactions of the head office. It performs support and implementation-related tasks without having any individual business discretion and is entirely dependent on the head office.
The only formal requirement for a dependent branch office is registration with the local trade office, for which certain documentation on the foreign company is also necessary. A business license or permit is not necessary for registering the business in the majority of cases. In some sectors, a permit or authorization might be required.
Branch office taxation
A branch office is subject to taxation in Germany if it is considered to be a permanent establishment according to the applicable double taxation agreement. An autonomous branch office is generally regarded as a permanent establishment, whereas a dependent branch office is only ever considered a permanent establishment under certain conditions.
The profit attributable to a German permanent establishment of a foreign corporation is taxed in Germany according to German taxation rules for corporations. Special rules apply for tax returns and income determination for permanent establishments.