Are you a foreign company and would you like to test the market in Germany? Maybe not decided yet to establish a legal entity in Germany? Maybe you just want to hire a remote employee for your foreign entity without establishing a company in Germany.
What is the Permanent Representative Solution?
A foreign company can have an employee in Germany without establishing a legal entity or a branch in Germany. This solution is well known as Permanent Representative without Establishment. A permanent representative without establishment is an alternative that can be used by foreign companies which want to hire employees in Germany. The foreign company will not have to set up a branch, nor will it need to establish any other legal entity in order to do so. The foreign company will be able to hire employees and pay them with its own funds through its bank account in the country where it’s based.
What are the requirements to proceed with the Permanent Representative Solution?
A foreign company wants to register in Germany, having a German Employee. Is this possible? Yes, sure. They need to have a person in Germany who can set up as their Permanent Representative. To make that happen the foreign company must obtain to German Tax Number just for employment purposes. The Permanent Representative is registered in German Social Securities as a Permanent Representative. It is a simple procedure that needs a couple of electronic forms and foreign registration confirmation. Consultinghouse team could prepare all documents on behalf of the foreign company and communicate with the German authorities. Consultingcouse attorneys will also prepare drafts of employment contracts.
The Permanent Representative does not have a permanent office in Germany. They owe compulsory social security contributions in Germany for salaries and other incomes similar to salaries paid to their employees working in Germany. Social security contributions and personal income tax should be declared and paid to the authorities according to the local legal provisions in force. In other words, Payroll has to be calculated in line with German regulations, but there are differences in terms of the definition of the taxpayer. The contractual relationship with rights and obligations between the Permanent Representative and other employees should meet the requirements of the German Labour Code.
Advantage of Permanent Representative without Establishment setup:
- Time required to establish a legal entity, open a bank account, finding an office will take longer than registering the foreign company to the local authorities.
- Costs related to opening a limited liability company or branch or representative office or office lease or lawyers’ fees are significantly much higher compared to Permanent Representative setup.
- The establishment procedure of a Permanent Representative is much simpler, compared to the registration of a limited liability company or a branch, and can be much more quickly achieved.
- Getting to know the market from own experiences, with own local employees, is much better and more efficient.
- Helps the investors to understand the market before establishing a legal entity in Germany.
- There is no required local accounting compliance, therefore no additional accounting service fees are involved.
Consultinghouse professional team is always at your disposal to provide more clarification and details about how to become a Permanent Representative of a foreign Company.