How to Enter the German Market for Your Business?
By: Vanessa Anderson
Entrepreneurs and businessmen always consider the German market the best option to start their business. The question appears why the German market is so important? Let's see!
Germany is the largest economy in Europe and ranked as the fourth-largest economy in the world and fifth by GDP (PPP) Purchasing power parity. It is renowned for its research and development and invests around 80 billion euros annually in research and development (R&D). The biggest achievement of Germany is its ability to attract global foreign direct investment.
Moreover, there are over 45000 companies from around the world who are doing business in Germany. The labor market in Germany is very flexible and stable because of labor market reforms in 2003. The most important thing about Germany is that it spends a large amount of money on the education system and they focus more on skillful training at the workplace so that students don't have to spend time in traditional classrooms.
In this way, they get a permanent job after 3 to 4 years of professional education. For boots tappers, Germany is ranked at 114 number out of 190 countries by the World Bank and international finance corporation. This is just because of procedural delays.
Simply put, Germany offers huge potential for business and if you want to become a global name, you must consider outreaching to the German market.
If You Want to Enter a German Market Then You Need to Communicate and Work With
- Local Chamber of Industry and Commerce
- The local office of business and standards
- Local commercial register and the professional association of any relevant trade
All These Legal Formalities Are Required to Start a Business in Germany.
Property Legal Requirement
Registering the property in Germany is a bureaucratic process. On average, it includes 6 procedures and new business needs to register ownership of the building with the land registry and validate the transfer agreement. One thing needs to be kept in mind that in case of waiver of pre-emption, rights need to be obtained. If you purchase a Property in Germany, it acquires transfer tax which takes 52 days to comprehend.
Process of Taxation
The monetary strategy and requirements in Germany are very strict and need thorough compliance. The businessman needs to pay at least 9 tax payments every year. These tax payments also include other payments like social security contributions, and this calculation needs 134 hours. Overall, there are 14 different taxes including VAT payments and corporate tax payments that a business needs to pay.
The border trade is very cheap and requires four different documents to export. Import needs five documents. The turnaround time for import and export is a week.
Electronic Payment Method
The electronic payment method used in German is called ELV. It is an abbreviation of Elektronisches Lastschriftverfahren. For opening an e-commerce business in Germany one needs to open its account in a German bank and enter into an agreement with the German payment service that enables German payment through ELV.
Once the ELV account is opened, the trader will get a debit card called Girokarte or EC-Karte. These debit cards are different from credit cards and Germans use them throughout Europe.
A More Comprehensive Guide for Entering the German Market
Scrutinize the Company’s Name
Great scrutiny is required in existing companies' names to know whether or not the company name is available. It can be done through the local Chamber of Industry and Commerce. A great search can be done through the pages of the Berlin Chamber of Industry and Commerce to check whether the prescribed name is available or not. Checking online is free. If written notification is received then the prescribed name is already registered then you need to pay the EUR25. This process is completed within one day.
Validating the Articles of Association and Memorandum of Association
The official documents required to be formally validated by a recognized Notary. The charges which are demanded in this regard are associated with the value of the share capital.
Minimum Investment Required
After validating the articles of Association and Memorandum of association minimum investment is required to be deposited in a bank. If the company is with limited liability, then the amount deposited needs to be 25% of the initial capital.
Filing the Documents
The documents regarding the article of association need to be filed by the Notary Public with the local commercial register. In articles of association, you need to send a deed of appointment of directors in which list of companies Shareholders and assurance of minimum capital amount which is deposited in the bank are mentioned. These documents need to be sent to the commercial register through electronic media.
The Commercial Register then decided to register a company without any delay. When the decision is taken to register the company then the information is published on the central website. By law, it is required that decisions should be made within one month after filing the registration. The legislative fee is fixed.
Getting A Trading License
After the registration and establishment of the company, the local office of business and standards must be informed. The office will then issue a trading license. Formal registration is also made in the office of statistics, the local labor office, social security and health insurance and chamber of industry and commerce. This process takes the time of one day. The fee depends upon the number of shareholders in the company.
The Labor laws
When the local office of business and standards have given all the details then the local labor office will issue an eight-digit number for the company that can be used for all labor laws issues. The employees of the company will be registered for unemployment, health and annuity insurance and their contributions are taken.
Assisting the Local Tax Office
Once your company is set up then the registration with the local tax office needs to be completed in one month and more than one month is required when articles of association have been validated. The trade office gives information to the tax office that the company is operating.
The tax office sends a form to the company which needs to be filled and returned. The form is the questionnaire that requires all the relevant information regarding the company and its processes.
Professional Translation Company is Required to Penetrate in the German Market
Before entering any new market, you need to thoroughly understand the market and devise your business strategy accordingly. Every country rules and regulations and business communication style is different so to deal with communication barriers, professional German Translation Services are required.
Poor Translation can Cause Blunders
A poor translation can alter the meaning and distort your message. For instance, when Vicks Company launched its cough drops in Germany, the brand name was also translated. For German translation, the alphabet V was replaced with F and the word which was created meant bad in German language.
The same is the case of Clairol's launch of hair curling iron which is called Mist Stick. In the German language, Mist means fertilizer, so people of German were not willing to buy sticks of fertilizers. There are many renowned companies which failed to operate in Germany because of bad translation and cultural differences.
The Need for Localized Marketing
When you plan to tap into the german market, make sure you create a localization strategy to resonate with their culture. Without localized marketing, you won’t be able to gain the trust of the audience. For instance, when Starbucks created Gingerbread latte, they thought not to translate Gingerbread in German as gingerbread is already famous there, so Starbucks kept the name gingerbread during Christmas.
This word did not click the German target market and so the product was a failure. When they revamped their marketing strategy after correct German translation Lebkuchen Latte then the product was successful. This shows the need for proper marketing with proper German translation.
Look for a Reliable German Translation Services
Choose a reliable translation partner and it will be very beneficial for your business in the long run. With the assistance of professional German Translation Services, you can get your website and marketing material translated and communicate with the German market effectively to make your place as a reliable name in the industry.