I want to hire someone in Germany but I don’t have a legal entity

We can help you with that problem

This is the same as setting up a Representative Office or, if you will, a “virtual company”. The idea is that the head office (or a branch in another country) is registered as a foreign employer with the local social security and for employment tax withholding. Like that we can arrange for all social security payments to be made on your behalf.

 

ADVANTAGES

  • No legal or taxable entity is created. There are no accounts to keep. The initial cost is much lower than setting up a legal entity.
  • The employee will get an employment contract directly with your company and can have a company email, can have a business card, can work full time for you, is excluded from working for other firms, can be asked to sign non-competition clauses etc. This is the cheapest solution.

 

DISADVANTAGES

  • The employee cannot sign contracts, issue prices, credit terms etc. without Head Office approval. The employment contract should reflect this. If this is not done, then German authorities would see this as a taxable branch office.
  • Because there is no legal entity established your company cannot take out local contracts for a company car, mobile phone, maintenance, local benefits and insurance etc. As a matter of fact, a permanent office should be avoided if possible since this would indicate that you have a branch office. We can help arrange these things though, so that for instance the mobile phone remains your property (important in case employee leaves at some point).
  • The tax authorities MAY claim that the operation is really a Permanent Establishment and should be subject to taxation like a branch. But in practice as long as employee income taxes are paid and social security is paid this is unlikely.
  • There is some paperwork involved – which we take care of. We will need a limited power of attorney, may need articles of incorporation etc. however.

Please note: even if you stipulate that the employment contract falls under some other jurisdiction, it will always fall under German jurisdiction and therefore German laws.

Talk to us about hiring someone without a legal entity in Germany

We can guide you through the necessary steps of employing people in Germany and offer our advice along the way

+49 (0) 2173 / 2039568