2006 How to DM DW

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2006 Only intended to encourage further inquiry. Formal consultancy, with the following competent third parties: professional tax and legal council, is advised before final/contractual undertakings or investments are made. Business in Germany Setting-up How to… Guide: “Entry, Residence, Employment, Investment, and Establishment”

Invitation to Foreign Business: 

Invitation to Foreign Business Introduction to Residence, Employment, Investment and Establishment Welcome to Germany! We are sure you will find the right environment for foreign business success in Germany, once you have an appreciation of the facts, laws, and initial steps: German law makes no distinction between Germans and foreigners in connection with investments or the establishment of companies. There is no specific investment legislation in Germany, nor is there a minimum percentage of German shareholdings required for a foreign investment within Germany. General regulations relating to residence and employment in the Federal Republic of Germany vary depending on the entrant’s country of origin and the purpose of entry. As a rule, all non-EU/EEA foreigners require visas for stays of more than 3 months or stays leading to the holder taking up gainful employment – applications go to the German missions (embassies or consulates-general) in the alien’s country of residence. For stays of less than three months, the visa requirement has been abolished by EC regulation for nationals of approximately 30 states (“positive list”). Before taking up gainful occupation in Germany, all non-EU/EEA nationals, without exception, must obtain a corresponding residence permit or settlement permit. Establishing a business is a simple clear-cut procedure in Germany! Phone: +49-30-206-57-103 Fax: +49-30-206-57-111 e-Mail: warne@invest-in-germany.com www.invest-in-germany.com

Foreign Employee Process: 

Foreign Employee Process Steps one must take before assuming work in Germany. Before 1 January 2005: 4 Steps Since 1 January 2005: 2 Steps Address Registration Residence Title (includes Entry Permit and – where granted – Work Permit) Work Permit Central Labor Office (ZAV) Address Registration Local Registration Office (Einwohnermeldeamt) Residency Permit Foreigner Office (Ausländeramt) Entrance Visa Consulate-General or Embassy

Foreign Employee Process: 

Foreign Employee Process Steps one must take before assuming work in Germany. The new Immigration Act: 3 residence titles 1 2 3 Phone: +49-30-206-57-103 Fax: +49-30-206-57-111 e-Mail: warne@invest-in-germany.com www.invest-in-germany.com Visa Residence permit Settlement permit “Schengen visa”: short-term stay of up to 3 months (does not permit gainful occupation) Visa (or another residence title) must generally be obtained prior to entry from German mission abroad – Exception: countries for which EC has abolished visa requirement for short-term stays* The visa permits - entry into Germany - stay of up to 90 days per half year (= now constituting a residence title in itself) Visa may be subject to restrictions If gainful occupation is intended, a residence permit or settlement permit is necessary: After internalised involvement of the Federal Employment Office (FEO), the German mission abroad or aliens authority issues a residence title which itself states whether/to what extent gainful occupation is permitted (one-stop-government) Valid for a limited duration and specific purpose as set out in the permit May be subject to further restrictions Initial issue of residence permit for business founders usually limited to one year; extended after first year if business idea proves sustainable (i.e. adequate turnover, creation of jobs) Right to work implicit only in the case of “residence permit for the purpose of gainful employment” – requirements: - Usually vocational training qualification - Firm job offer - Occupational group envisaged by law - Approval by FEO, or special regulations apply Special provision for self-employed persons: Residence permit granted where - special or regional economic interest - positive effect on economy to be expected - funding of the business idea is secured This is assumed where 1 million € are invested and 10 new jobs created. Settlement permit may be granted after only 3 years if business idea has proven successful Permanent = unlimited in time, place and with regard to purpose of stay Automatically includes right to work, no restrictions on access to the labour market Must not contain supplementary reservations Issued after possession of residence permit for 5 years, if the alien fulfils requirements such as - adequate command of German language - ability to earn a living, secure income - no previous convictions Highly qualified persons can obtain a settlement permit from the outset, if they are - specialized scientists - employees with special professional Experience - annual salary of 85,500 euros or above and FEO approves or special regulations apply. Family members who enter Germany with such persons or subsequently are automatically entitled to take up gainful employment. * List available under www.auswaertiges-amt.de Late-coming family members entitled to gainful occupation inasmuch as residence permit holder

Foreign Employee Process: 

Foreign Employee Process Residency, Work Permission and Registration – where to get what. Bring ? What ? Where ? Who ? German Embassy or Consulate-General In exceptional cases where alien already resides in Germany: Foreigner Office (Ausländeramt) Short-term stays (semi-annual visits of up to 3 months) Non-EU/EEA/Switzerland nationals Except Non-EU/EEA nationals from countries for which visa requirement has been abolished for short-term stays (= “positive list countries”) Application prior to entry Duration: 2-10 work days No gainful occupation allowed Place-of-abode certificate (Meldebestätigung) Register at the local district office within one week, even if living temporarily in a hotel Duration: approx. 4 weeks Local Registration Office (Einwohneramt) EU and Non-EU citizen Passport Residency Permit Birth Certificate All stays exceeding 3 months All Non-EU / EEA / Switzerland nationals have to apply for a residence permit (if work intended: “residence permit for the purpose of gainful employment”) or settlement permit* - EU/EEA/Switzerland nationals: Do not require visa or residence title for stay or taking up work (temporary limitation for Eastern Europe, see left) Family members who are not EU-nationals get “residence permit EU” Have to prove sufficient financial funds and health insurance. Short-term stays (≤ 3 months) and taking up work Non-EU/EEA/Switzerland nationals, incl. “positive list country” nationals Duration: approx. 3 months Nationals of the 8 new Eastern European EU member states: Do not require visa or residence title - but work permit necessary if gainful employment is intended (application for work permit at local job center) Nationals from USA, Canada, NZL, Australia, Japan, South Korea and Israel: Can also apply for residence title after entry (within 3 months of entry at Foreigner Office) Schengen visa residence permit “for the purpose of gainful employment” residence permit or settlement permit Valid passport and requisite visa, identity and citizenship must be clarified Adequate financial funds for the intended stay Sufficient health insurance coverage (minimum coverage 30,000 €) Intention to return statement If work intended: documentation of requirements for relevant residence permit / settlement permit Address Registration Residence Title (includes Entry Permit and – where granted – Work Permit)

Corporate and Non-Corporate Legal Forms: 

Choosing a Legal Form of a Foreign Business in Germany. Corporate and Non-Corporate Legal Forms Set-up

Registering a Business in Germany: 

Steps in Registering a Business in Germany Registering a Business in Germany What to do? What to bring along? Where to go? Useful Tips and Explanations Commercial Register (Handelsregister) Registration application will be sent on automatically to the Chamber Industry and Trade Chamber of Industry and Trade (Industrie- und Handelskammer, IHK) IHK will contact you directly, after receiving a copy of your registration application from the Commercial Register Steps Registration of Business Commercial Register (Handelsregister) at the local court (Amtsgericht) Certified Articles of Association (as prepared by notary) Identification Card (e.g. Passport) Trade and partnership register entry at the local court (Amtsgericht) Payment of stated share or equity capital (Stammkapital or Grundkapital) into a primary bank account must be notarized! Proof that company name is characteristic and distinctive Preparation of the necessary articles of association, powers of attorney, resolutions and relevant declarations Hire Notary Notary Tax Registration Municipal (Gewerbesteueramt) AND local tax office (Finanzamt) Registration with the Local Trade Office Local Trade Office (Gewerbeamt) Registration with the local trade office is compulsory Set-up * Special licenses will be required for certain industries (e.g. master crafts, pharmaceutical, manufacturing, financial, and transport). Obtain a certificate of registration (Gewerbeanmeldeschein)* to commence business Business Plan (useful but not compulsory) Registration application Join Chamber of Commerce 5 1 2 3 4

Corporate Comparison: 

GmbH Incorporation Incorporated by one or more shareholders Notarized certificate of incorporation including articles of association and appointment of one or more managing directors Minimum share capital € 25,000 Personal liability of the shareholders until commercial registration Access to Share Capital AG Liability Organization and Controlling Only company share capital is liable to creditors Transfer of share capital is only possible through a notary. Certificate of incorporation where the shareholders appoint a supervisory board (at least 3 members) which appoint the management board (at least 1 person) Minimum share capital € 50,000 Only company shares are liable to creditors Corporate Comparison Set-up Comparing a limited liability corporation with a joint stock corporation. Note: limited liability company (GmbH), joint stock corporation (AG) Both bearer and registered shares are issued by the AG. Shares may be publicly listed and traded. Shareholder Assembly is sovereign, which can issue binding instruction for management An advisory or supervisory board may be installed if this is desirable. The Management Board controls day to day business. Supervisory Board elects and dismisses Management Board Members Shareholders can elect and dismiss members of the Supervisory Board at the General Meeting

GmbH as Preferred Business Partner: 

GmbH as Preferred Business Partner Comparing a limited liability corporation with a branch office. GmbH Independent branch office Subject to law of parent company Legal Liability of Entity Legally independent Permanent establishment By the owner of foreign company or other authorized signatories Commercial registration and notification via notary Business Agreement (Articles of Association) Announcement of commercial registration Commercial registration Appoint a branch manager in Germany as the legal representative Invoices with data of the parent company Others Commercial unit Branch office Legally independent relating management, disposition, and accounting Permanent establishment Legally dependent Temporarily business activity Formation Only commercial notification Translated and attested commercial register statement of (foreign) parent company Minimum Share Capital 25,000 € Not necessary, financial support by parent company Invoices with data of the parent company To establish confidence (e.g. for bank credit) a GmbH is recommended Automatically connected to the German Chambers of Commerce network Set-up Phone: +49-30-206-57-103 Fax: +49-30-206-57-111 e-Mail: warne@invest-in-germany.com www.invest-in-germany.com

Limited Liability Company (GmbH): 

Limited Liability Company (GmbH) Use this as your guide to setting-up a GmbH. What to do? Contents Conclusion of Business Agreement (Articles of Association) App. 450 € Costs Notary Articles of Association with information about corporate seat, entity, nature of business, nominal capital (min. 25,000 €), and shareholder structure (min. 100 € per share) Where Appointment of Executive Bodies n.a. Notary GmbH necessarily requires two bodies: General meeting of members and Chief executive Until commerce registration (step 4b) the chief executive is personally liable (so called „Pre-GmbH“) Raise Capital Min. 25,000 € Notary The founding partners are responsible for raising the nominal capital. Alternatively, by non-cash capital contribution (assets for GmbH ownership) Announcement of Commercial Registration App. 80 € Notary (at the local court) After authentication of the articles of association the company has to be announced at the local court where the firm is situated Appendix: authenticated partnership agreement, legal document of appointment chief executive, list of formation partners Commercial Registration App. 300 € Formation of GmbH as a legal entity (liability on nominal capital) Publication in Federal Official Gazette and one regional or supra-regional newspaper Following Set-up n.a. n.a. App. 30 € Tax Declaration (KSt, GewSt, VAT, ...) Publication of Balance Sheet Business letter specifications (firm, seat, register court and number, CEO) Tax consultant Local tax authority Local first-instance court via notary Steps Notary (at the local court) Phone: +49-30-206-57-103 Fax: +49-30-206-57-111 e-Mail: warne@invest-in-germany.com www.invest-in-germany.com Set-up 5 1 2 3 4

A Global Network of Offices and Affiliates: 

A Global Network of Offices and Affiliates Your first step toward investment in Germany: www.invest-in-germany.com David J. Warne Investor Relations Invest in Germany, GmbH Anna-Louisa-Karsch-Straße 2 D-10178 Berlin Germany Tel +49 30 206 57103 Fax +49 30 206 57111 warne@invest-in-germany.com Headquarters The German Foreign Chambers of Commerce in more than 80 countries also support business relationships with Germany.