Experiences with doing business in Germany

I think I am a pretty patient kinda guy in business. I expect problems. I expect hassle. That is business and my job is basically just to sort out problems.

However, after 3 years of doing business here the red tape and hassle is starting to depress me businesswise. I am constantly hassled by income tax issues, VAT issues,
trouble with the ZOLL, VAT inspections, ZOLL inspections, phone calls from the Finanzamt, more paperwork etc etc.

I am trying to be stoical about it. I am trying to accept that some of the issues are just "different". I am trying to accept that some of the issues seem more complicated
due to the language. I employ a German bookeeper, now onto my 2nd German accountant, I have German staff, but even with help it can be very frustrating to try and
get things sorted and get a straight answer.

So am I just paranoid, or is the German system totally ****ing unreasonable and negative to doing business? I am looking at "escape" options these days as it is just so
tiresome. If I actually do make any money I know they are gonna hit me with a rude tax bill. I am seriously reconsidering reinvesting any profits back into the business
just to avoid giving them any tax above and beyond what I need to eat. Grrrrrrrrrrrrrrrrr.

p.s. I am also bloody amazed that the Finanzamt actually phone people? You never get that in the UK. They must have too much time on their hands.

I d just like to say (having considered it at one point myself many years ago) any foreigner who runs a business and can keep it running over here has my total respect

You need to develop a Zen-like state of mind. Dont try to understand, just accept it and reflect everything concerning the "Finanzamt" to your tax consultant.

It is still a nicer place for doing business compared to Belgium. Some of my friends said Germany is business unfriendly and for me Belgium is more than just unfriendly.

I hope you will find peace with the German business system soon

0% Capital Gains Tax in Belgium so they can't be all bad. Gonna add that to my list of possible escape destinations. Batting everything over to the accountant was the plan. Except the accountant just did nothing, misssed all the deadlines and then the tax office started writing proper shitty letters and phoning us at home. So we have moved to accountant #2.

One of the first lessons of being an entrepreneur is to learn how to moan. Keeping moaning and never let up. At the same time, keep the money rolling in and build up a nice little secret fortune.

Good luck.

Vicar: I don't understand. Why do you have to keep moaning? What about? Am starting a business and very good at complaining (as the bf likes to tell me all the time)

So you just figured it out?

dear mr english (speaks with gently sarcastic tone) of course this is a depressing environment in which to do business. the people here are bloody miserable. sounds like you need a bike ride to Holzkirchen. btw I can't offerany busiess help butI do know the negative environment in which you live. sod 'em is my advice.

You have to always give the impression that it's a really hard life. You don't want people to know that really you're making a mint and you spend most of your time knocking off the company secretary. Topics for moaning include : red tape, tax, economic situation, competition, lack of skilled workers, long hours, stress, cash flow, bad debt, not enough profit etc.

Get some practice in on your boyfriend. Moan about too much housework, no free time, too much washing and ironing, boyfriend never cleans the bathroom etc. Then as soon as he's gone out the door jump on couch with big gin and tonic.

Good luck with your business.

Downstairs in my cafe there are: my lawyer, our architects, a Sachverstaendiger for Hygiene, a Lebensmittelamt rep, and our architect's insurance rep. I cant be there because of incidents of racism between us and the Lebensmittelamt (which my embassy had to get involved in) This meeting is to try to determine after 18 months, who is at fault for the fact that we cannot cook in our commercial kitchen (which took 4 visits from the lebensmittelamt to build and 9 months to open). It seems no one is to blame...
As soon as we opened we got slapped with 2 fines for not doing things properly (like having a sign saying we dont sell alcohol to minors even though we dont sell alcohol at all because we are not allowed because we dont have a handicapped toilet!) No warnings and no offers to give you the information you need prior to opening.
The government goes on and on about how business friendly they are but it seems to me as if I am being attacked on a weekly basis by various officials claiming yet again that I am just too stupid to understand German ways.
This country is a nightmare for small business. I am definitely feeling homesick these days

I suspected it all along - Johnny English and Johnny Norfolk are one and the same...

Yes, we know it from personal experience that this country is a nightmare for small business. We also have friends who have been running a hotel and rest. for the last 2 decades. They are constantly 'harassed' by the authorities. Our friend has paid thousands of Euros in fines. On one occasion, he had to pay a hefty fine for employing a foreigner whose visa had just expired the previous day.

But then, is there any other European country which is 'better for business' ? Or should one be saying 'Deutschland Adi!'

I think this country does not want "redistribution of wealth", meaning rich should stay rich and poor should stay poor. this is why individuals and small businesses continuously struggle and there are burearcreatic obstacles everywhere

Corporate taxes are low in Germany. Cigarette smokers in Germany pay more in taxes for their smokes than businesses do. I got that stat from a translation I did on doing business in Germany.

As for your fines and officials telling you that you've done things wrong, well you have! When you open a business, it's up to you find out what's necessary, not for anyone to come along and hold your hand while you fill out the paperwork. It reminds me of all the people who complain about the trouble they had getting their resident or work permit. If you don't have all the forms, why are you surprised that you have problems?

Showem, what is the effective tax rate paid by German small businesses, middle-sized companies, and multinationals? Of course, this will vary from company to company, but it stands to reason that tax write-offs were written primarily for the benefit of larger companies which are better able to move to another tax locale if they wish, an option which is probably not available to most small businesses.

EDIT: Surely not everything garnering a fine really is justifiable. This goes for any country, by the way.

Conquistador, I of course don't know the answer to that. But I do know that running my own business, I was able to write off a lot of stuff every year, and I certainly wasn't a multi-national.

Surely knowing what you need to open your business before opening it is justifiable?

Let me see if I can find statistics for corporate income tax paid since the Red/Green tax reforms passed in 1999, and the Gewerbschaftesteuern paid since then, as these can be rough proxies for the effective tax rates of small and large businesses.

Sorry if I am being thick today but is that quote with a huge dose of irony???

EU Corporate Tax Rates
Austria: 34%
Belgium: 40%
Denmark: 34%
Finland: 28%
France: 40%
Germany: 42%-51%
Greece: 35%-40%
Ireland: 20%
Italy: 19%-37%
Netherlands: 35%
Portugal: 37.4%
Spain: 35%
Sweden: 28%
UK: 30%
source: IFS

I understand the point you are trying to make, but we are complaining about unnecessary levels of bureaucracy making life difficult. And also a degree of heavy handidness if you do slip up. I appreciate the need to have rules, and the need for them to be adhered to, but I guess the question is how brutally these should be policed in practise. Are the authorities there to assist and encourage business with helpful leaflets, advice and assistance or are they there just to be big brother and punish offenders that step off the tracks?

I would like to see a little more carrot, and a little less stick personally. I do not feel in any way encouraged to expand my business here and employ more people, I just feel intimidated by regulations and the threat of punishments.

There are some great aspects to doing business here, that I prefer to the UK, but the worst part is dealing with the authorities.

I would agree with you under normal circumstances but the fines we received were for things that are not written down anywhere and by offices that we had spoken with extensively to try to get the information we needed prior to opening. We have a legal battle going on over the fact that our kitchen is not 15 sq meters even though the EU, German and local law does not give that figure as the size a kitchen needs to be. In fact, the IHK clearly spells this out for you that you do not have to have 15 sq meters anymore as of 2006. But, after one year of battles, it turns out the it doesnt matter what the law says because the local officials have the final say and if they say 15 sq meters (after you have already built the kitchen on their instructions) then that is the way it is and there is nothing you can do about it. The risk here is enormous because any info you receive prior to opening can be turned around on you by officials who simply dont like you.
I would not call myself an ignorant person when it come to any of this but knowledge doesnt seem to help. We are still screwed.

Whilst it makes for depressing reading, in a way this post was reassuring to me, in that I know I'm not the only one struggling with the un-business friendly environment here.
I'm also onto my second accountant, and because our first accountant neglected to advise us properly or ensure things were submitted on time I am still trying to catch up with the relentless monthly VAT returns etc. (why do they need the damn things every month, is quarterly or yearly not enough?)
This morning a letter arrived from the Finanzamt demanding a late payment fee for a payment that I have already made, because it was 3 days late - because I happened to be away on holiday. I can't understand the rationale of demanding a late payment fee after they have received the payment..
I am also entertaining escape strategies - they keep me sane if nothing else. Whilst there are many positive aspects of life in Germany, the Finanzamt and the "amt" in general are definitely not one of them. It seems to me that there is certainly no efforts to develop an enterprise culture here, in the same way as there is in the UK.

Finding a good Steuerberater is the key to success for starting a business here.

I got that one recently! They hit me with a €20,000 extra duty payment after a Zoll inspection because the original Zoll department had screwed up. I handed to my accountant and said "Can you ask them if we can spread the payment over 3 months?". There was a long delay - then the answer came back as NO pay immediately. So I paid immediately (the next day) and then 1 week later I got fined for paying it late. Did not have the energy to argue the toss any more.

That said I am enjoying it more at the moment!!

Germany's receipts of corporate income taxes are only 1.3% of GDP, according to a November 2006 KPM report, and only 3.5% of all taxes collected. These are probably 2005 figures. I wonder how fines such as those described above are classified, since they clearly reduce pre-tax income.

Germany's nominal corporate income tax rate was 59.7% in 1993, and was 38.3% last year, but obviously the effective corporate income tax rate is a better piece of information to analyze.

I once (briefly) thought about getting out of the business and opening a barbecue restaurant. I thought it would go over well, and found a great location. Amongst the many, many obstacles put in front of me by various bureaucrats, was the complaint by the local Green Party politicos that I would be selling pork products too close to a Turkish neighborhood. I kid you not. Germany, land of WURST, did not want me selling Schweinefleisch.

Yes - those late payment fees are pretty steep too - I'm not sure if its always the case, but the demand I received this morning was for 10% of the original figure due. As you you rightly point out Conquistador at least it reduces my taxable income...not that it makes me an happier...

The German system is again taking the piss - although I am laughing, not crying this time.

Been waiting for my urgent delivery of goods from Israel by air. The goods appear to have "disappeared" - this is normal here. We ring the "Augsburg Zoll" and they tell my colleague "No, you will get a blue card in the post if we receive any goods for you".

I say nope - ring them again as they are incompetent, never send a blue card, and usually just sit on the goods. So he rings, and they check - "Nope, we absolutely have no goods for your firm".

Then I kick arse in Israel, get hold of the signed delivery document in the name of "Herr Heidner" on the 29th December. No idea who he is. So now I am chasing the Post Office guys to check where they delivered etc, but the Israelis also give me the number for the main German Post Office in Hamburg. After several calls they say "No problem - Herr Heidner works at the Augsburg Zoll."

So incompetent it is funny.