Subsidiary, branch, permanent establishment

A foreign company that wants to expand its operations in the State of Rheinland-Pfalz has three options:

• establishing a subsidiary,
• establishing a branch or
• setting up a permanent establishment.

Subsidiary

A legally independent company is formed when a subsidiary is founded. The legal provisions applicable to the legal form are applicable to the establishment. Only German provisions apply to the business establishment, registration of trade and entry in the companies' register even if they are foreign founders.

Branch

The branch is an independent one of an existing company. It requires registration of trade and must be entered in the commercial register.

Permanent establishment

The permanent establishment is an independent branch of an existing company. It requires only registration of trade.

In contrast to the cross-border activity, companies that settle in Germany must meet higher requirements on notification and registration requirements and need more regulatory approvals.

For more useful information on this subject in the European context, see Your Europe - Parent companies and their subsidiaries.

Citizens of the EU, the European Economic Area and Switzerland can be self-employed in Germany or start and manage a business enterprise. They are treated just as German nationals by the EU rules on freedom of movement and business establishment.

However, those who do not come from an EU member state, the European Economic Area or Switzerland, require under a special residence title to be self-employed in Germany according to immigration law:

• Residence permit to pursue self-employment
• Permission for permanent residence in EU
• Settlement permit

This is documented by a relevant visa in the passport.

The management of subsidiaries, branches or permanent establishments by foreigners, who are not from an EU member state, the European Economic Area or Switzerland, requires a residence permit that allows practice of their intended trade if the concerned person wants to stay for a longer term or permanently in Germany.

For more useful information on this subject in the European context, see Your Europe - Residence rights.