Germany: Non-profit/For-profit Company Registry Requirements


Germany offers several options for establishing a non-profit organization, including a foundation (Stiftung) and limited liability company (Gesellschaft mit beschränkter Haftung, GmbH). The term “foundation” comprises different forms of organization and types. The most popular forms of organization are the civil law foundations with legal personality and the trust foundation. The term “foundation” can also refer to other forms of organization, such as a foundation with limited liability (Stiftungs-GmbH) or a foundation association.

In the beginning of November, IOTA became the first legally independent crypto foundation under German civil law approved by the Berlin Foundation Supervisory Authority. The foundation has been structured as a charitable foundation focusing on supporting science, research and education, more particularly the idea behind IOTA and distributed ledger technology.

From a legal perspective establishing the foundation was more complicated, as it includes the IOTA tokens as assets. Although they have a market value, they do not yield any income themselves (such as interest on traditional money, dividends on equities or rental income on real estate). Profits can only be realized through divestments. This poses a problem for the founding of the foundation: Basically, only assets that can be permanently obtained but nevertheless generate their own income can be contributed as basic assets. A design as a trust, in which even non-profit assets can be used was not considered due to the desired durability of the foundation. A contribution as a donation would have had charitable difficulties.

The so-called hybrid foundation is a foundation form that is still quite rare in practice. Its assets, in contrast to the classic foundation and the pure trust foundation, are composed of both basic assets and consumable assets. As in any other classic foundation, the value of the basic assets has to be maintained in a lasting and undiminished way. However, crypto foundations might also have consumable assets that can be consumed entirely or in parts over time in order to realize the purposes of the foundation.

A. Foundation (stiftung)

Establishing a foundation in Germany is arranged in the German Civil Code, book 1, article 80-88. A foundation is formed by means of an endowment transaction and recognition of the foundation by the competent public authority of the place in which the foundation is to have its seat.

  • The endowment transaction must give the foundation a charter with provisions on 1.  The name of the foundation 2.  The seat of the foundation 3.  The objects of the foundation 4.  The assets of the foundation 5.  The composition of the foundation board
  • Foundation can be established by any natural person or legal entity
  • A foundation can either be founded for an infinite time or a specific period of time to be described in the AoA
  • The founder(s) can freely choose the name of the foundation. However, it must be ensured that the name cannot be confused with existing foundations.
  • The government has precisely defined what makes a foundation not-for-profit. Only if the Inland Revenue Office recognizes a foundation as not-for-profit it can enjoy tax privileges.
  • There are no regulations for a minimum capital for foundations. However, it shall possess the minimum financial resources that are required to administer the foundation or to fulfill the purpose of the foundation.
  • The foundation has a board of directors. This shall be at least one person, but can be multiple persons as well. There is also the option to install a supervisory board
  • Any income generated by the foundation shall be allocated to fulfilling its purpose. There is no fixed period within the income shall be spent and the foundation can postpone spending the money in case there is no appropriate purpose, however it cannot be postponed indefinitely.
  • The board has the duty to maintain financial records and keep an administration. It shall prepare financial statements, including the annual report and balance sheet and additionally a report on the purpose of the foundation.

B. Limited liability company (Gesellschaft mit beschränkter Haftung, GmbH)

A German limited is formed by means of a notarial deed that includes the AoA

  • The AoA shall include a description of share capital, shareholders and respective shares, business name, registered office, and company object(s).
  • Can be founded by one or more legal or natural persons, regardless its origin or nationality
  • The GmbH must be entered into the commercial register (Handelsregister). All managing directors (Geschäftsführer) must sign the commercial register application in person in the presence of a notary. Once registered in the commercial register, the GmbH becomes a legal entity. The GmbH must then be registered at the local trade office (Gewerbe- oder Ordnungsamt).
  • Minimum capital of €25.000, 50% shall be paid during establishing the company
  • A limited has a board and shareholders meeting; a supervisory board is optional
  • A GmbH is managed and legally represented by its managing directors. There must be at least one managing director (who does not have to be a shareholder or a German resident).
  • The AoA describe the way board members (and supervisors) are appointed and dismissed, as well as the scope of their competences
  • The AoA describe how shareholders can transfer their shares
  • The limited is a legal person. Therefore, the board members are not liable for the debts of the entity, except in case of negligence and/or mismanagement
  • German companies are subject to corporate income tax and a trade tax. Corporate income tax is levied at a rate of 15 percent + a 5.5% solidarity surcharge, making the total amount 15.825%. The trade tax consists of a base rate of 3.5% and multiplier that differs per municipality. On average the multiplier is between 350 and 400 percent, and cannot be lower than 200. Germany furthermore applies a dividend tax of 25 percent
  • If a German subsidiary company distributes profits to its corporate foreign parent company a 25 percent rate of withholding tax (Kapitalertragssteuer) is payable in Germany. In the event of the existence of a double taxation agreement (DTA) between Germany and another country, the rate of withholding tax that is paid can be reimbursed according to the agreements made in the corresponding DTA.
  • Companies must add value-added tax (VAT) to their prices. The normal VAT rate is 19 percent. A reduced rate of 7 percent applies to certain consumer goods and everyday services (such as food, newspapers, local public transport, and hotel stays). Some services (such as bank and health services or community work) are completely VAT exempt.
  • The board has the duty to maintain financial records and keep an administration. Within 5 months from the end of each financial year, the board must prepare a balance sheet and a statement of revenues and expenditures of the company. The shareholders meeting has to approve the annual report and afterwards the company shall file the report with the Commercial Chamber.
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