It’s crucial to understand the different business structures in Germany. Businesses can operate as a subsidiary, an independent branch, or a dependent branch. This also affects the exact filing requirements of the annual report, especially if the head office of the branch, is based in another EU country.
House of Companies provides an in-depth guide on annual reporting for businesses in Germany, discussing the when and how of the process.
Subsidiary
A subsidiary is a separate legal entity from the parent company. It operates under its own name and requires a license issued by German authorities or the European Central Bank under the Single Supervisory Mechanism.
Independent Branch
An independent branch is part of the same company as the parent company, but it participates independently in business transactions. It must be organised to operate even if the parent company ceases to exist.
Dependent Branch
A dependent branch, like an independent one, is part of the parent company. However, it’s not a separate legal entity and doesn’t participate independently in business transactions.
The Importance of Annual Reporting
Annual reporting is a vital part of business operations, providing a comprehensive overview of a company’s financial performance over a year. It ensures transparency and accountability, which are crucial for maintaining trust among stakeholders.
In Germany, annual reporting is a legal requirement for businesses. The reports are used by the German Federal Financial Services Supervisory Authority (BaFin) and other similar organizations to analyze the financial health of a company. It’s also used for tax purposes.
When to File
The timing for filing annual reports in Germany depends on the type of business structure. For a subsidiary or an independent branch, the report should be filed at the end of the financial year. For a dependent branch, the report can be filed at the same time as the parent company’s annual report.
How to File
The process of filing an annual report in Germany involves several steps. First, the report must be prepared according to the German Accounting Standards (GAS). It must include a balance sheet, income statement, and notes explaining the financial statements.
Once the report is prepared, it must be audited by an independent auditor. The auditor will verify the accuracy of the financial statements and provide an opinion on the company’s financial health.
After the audit, the annual report is submitted to the Commercial Register, where it’s made available to the public. The report can be submitted online through the Federal Gazette’s electronic filing system.
Reporting Requirements for Different Business Structures
The reporting requirements vary depending on the type of business structure.
Subsidiary
A subsidiary is required to submit a full annual report, including a balance sheet, income statement, and notes. The report must be audited by an independent auditor.
Independent Branch
An independent branch is required to submit a simplified annual report. The report must include a balance sheet and income statement, but notes are not required. The report does not need to be audited.
Dependent Branch
A dependent branch is not required to submit a separate annual report. Instead, its financial information is included in the parent company’s annual report.
Compliance with the German Banking Act
Businesses operating in Germany must comply with the German Banking Act (Kreditwesensgesetz – KWG), which sets out the rules for banking and financial services. Under the KWG, businesses are required to submit regular reports to the BaFin. These reports include information about the business’s financial position, risk profile, and compliance with regulatory requirements.
The Role of the House of Companies in Annual Reporting
The House of Companies offers a self-governance portal that allows businesses to file their annual reports in Germany without the need for a local accountant. The portal simplifies the reporting process and ensures compliance with German laws and regulations.
The House of Companies’ vision of ‘Globalisation as a Service’ involves making legal processes more understandable and actionable. It aims to disrupt traditional consultancy practices and empower entrepreneurs to manage their businesses overseas.
Conclusion
Annual reporting is an essential part of operating a business in Germany. It ensures transparency, accountability, and compliance with German laws and regulations. By understanding the reporting requirements and using resources like the House of Companies’ self-governance portal, businesses can ensure they meet their reporting obligations and continue to thrive in the German market.