How to open a GmbH in Germany to buy property

When purchasing property in Germany, buyers have to decide if they want to register the purchase to themselves or to a legal entity after deciding on the purpose of the purchase, property type and budget. Tranio recommends registering the purchase to a GmbH (Gesellschaft mit beschränkter Haftung), which is equivalent to an LLC, if the investor is going to lease the property and it exceeding €1 million in value. This is beneficial to the buyer for a number of reasons:

• For individuals, the tax is calculated at a progressive rate ranging from 14.77% to 47.475% (including a solidarity surcharge), while for legal entities the rate is fixed at 15.825%, on condition that property leasing is the only commercial activity performed by the legal entity. An individual with an annual rental income in Germany exceeding €50,000 pays 34.27%, while a company only pays 15.825%.
• If the GmbH founder provides a loan to his/her company as an individual, the interest will be deducted from the company's tax base, and its corporate tax amount will reduce respectively. In theory, individuals can do the same, but this will arouse suspicion with tax authorities.

German residents and non-residents, individuals and legal entities can open a GmbH. Company registration takes two to four weeks.

Steps to open a GmbH

1. Legal advice

While face-to-face advice in Germany is often free, consultation via Skype, phone or e-mail is usually chargeable. This costs about €200.

2. Documentation

If the company´s founder is an individual, he or she will have to provide the German lawyer with the following documents:

• Copy of passport
• Proof of registration
• TIN

If the GmbH is opened by a legal entity, it needs to provide the company´s notarised and apostilled articles of association. In this case, it is recommended that one discuss with a German notary about the documents to be submitted.

The founder also needs to provide information on:

• Founding members and their shares in the company
• The head of the company (the need for assistance in hiring a third party as such is to be specified)
• Company name (preparing at least three names for availability check is recommended)
• Presumable types of business activity

The lawyer usually takes two or three working days to prepare the documents.

3. Signing the agreement

The founder signs a founder’s agreement at the notary´s office in Germany. If the founder is not proficient in German, he or she will need an interpreter.

The GmbH founder can buy property in Germany as early as at this stage, in other words, even before the company appears on the register. However, in this case, he or she will be personally and fully held liable for all obligations but not within the charter capital.

4. Opening a bank account

To open a bank account in Germany, the applicant must visit the bank personally with notarised articles of association and a passport. Non-residents sometimes need to have temporary registration in Germany.

It is not obligatory to open an account to deposit the charter capital at the same bank the buyer will get a property loan from.

5. Depositing the charter capital

The minimum charter capital amount for a GmbH is €25,000. Paying only half of this sum when registering the company is enough and there is no time limit for depositing the balance.

6. Company registration

The notary sends the documents to the German Commercial Register (Handelregister). It takes about four weeks from the submission of documents to be registered.

If the founder buys property after the GmbH appears on the register, the liabilities of its founding members will remain within the minimum charter capital amount. Property sellers have more trust in legal entities that are already established, and are more willing to close transactions upon receiving verification from the register.

Registration and maintenance costs

Company registration, including registration, notary and legal fees, costs around €3,000. Monthly maintenance costs around €800, or €1,500 if hiring a third party as a director (Table 1).

Table 1: Approximate GmbH establishment and maintenance costs for properties priced between €1.0–1.5 million in 2021 (VAT included)

Yulia Kozhevnikova, Tranio