Author: Burkhard Volbracht, https://www.berlin-partner.de/en/
The following article is aimed at providing an overview of the most important information after arriving in Germany, so that Indian founders can start their business expansion as quickly as possible.
Stays in Germany require a valid visa for Indian citizens. For a short or long-term stay, the visa must be applied for at the responsible mission abroad. The visa for a longer-term stay requires the approval of the responsible foreigner’s authority in Germany. The authority responsible is the foreigner’s authority of the place where the foreigner will take up residence. Just to give an orientation about the time frame needed: The missions abroad usually need between two to ten working days to decide on an application for a short-term stay visa. In the case of an application for a visa that entitles the holder for a longer stay or to take up work, a processing period of several months must be expected. While it is actually not the processing time that takes so long, only getting an appointment with the embassy or consulate in India to submit the documents can take up to six months. The time for the German embassy in India to process visa applications has significantly increased in recent years due to a yearly rise of applications. Once you have booked your appointment, regularly check whether there are free slots that may pop up in case people cancel their application.
Appointments can be made at the German embassy in India. For a work visa, a concrete job offer is needed, including the job description and details of gross annual salary.
Furthermore, the EU blue card is an instrument to attract qualified professionals. Academics with a recognized university degree, or one which is comparable to a German university degree, are entitled to take residence in Germany and get a work permit to take up an employment which corresponds to their qualifications. Whether foreign university degrees are recognized in Germany can be checked in the database Anabin.
An advantage of the Blue Card is that its holders are entitled to a permanent residence permit after working for 33 months. Furthermore, it is possible to take a short-cut, if one can prove that the required language skills comply with level B1 of the Common European Reference Framework for Languages (CEFR). In that case, permanent residence can be obtained after just 21 months.
While work visas and Blue Cards are more relevant for foreign employees of German startups, Indian founders have to apply for a self-employment visa. Being self-employed means either being the owner of a company (more than 50 percent of the shares) or working as a freelancer. Managing directors holding no shares are treated as employees.
When applying for a visa, a draft of the Gesellschaftervertrag and/or managing director employment contract will be requested. However, before you apply you should find out which documents are required by the responsible German mission. The Indo-German Chamber of Commerce will be able to help you in this endeavour. In addition, several German states have set-up so called “Welcome Centres” that could be contacted to obtain more information.
Usually, the following documents need to be prepared:
- Application for a visa or residence permit
- CV and profile
- Company/service profile
- Profit and loss account
- Copy of the first and last page of the passport
- Evidence for liquidity or for private means (copy bank account, etc)
- Copies of (potential) clients, partners etc.
- Evidence of health insurance
During the application process, the questions why the founder would like to come to Germany, why to the specific city and what is its added value are scrutinized. Thus, founders should also include a short paragraph about the added value that the business creates for the city (e.g. job creation and related investment expenditure) in their company profile. Sometimes, everything can be formulated in English. Yet, a short summary in German is appreciated.
However, this visa type is only advisable if the applicant intends to relocate to Germany, which means staying for more than 180 days per year in Germany. If one only seeks the possibility to come to Germany regularly for business trips, a short-stay Schengen visa is sufficient.
If somebody you are already living in Germany with a temporary residence and work permit, you can apply for an indefinite residence title, called a “permanent permit”. A permanent permit opens numerous prospects: unrestricted right to live in Germany with one’s family, taking up employment and self-employment.
Nationals of non-EU and non-EEA states can apply for a permanent permit if they meet the following requirements:
- They have held a residence permit for 5 years. They have the means to support themselves without public funds.
- They have paid the compulsory or voluntary contributions to statutory pension insurance for at least 60 months.
- They are entitled to exercise gainful employment and have the permits to do so.
- They have a sufficient command of the German language, basic knowledge of the legal and social system and the way of life in Germany.
- They have sufficient living space for themselves and their family.
Anyone holding an EU Blue Card can apply for a permanent permit after just 33 months if they exercised skilled employment during that time. Self-employed persons have to show a pension plan or savings and German language skills.
It is very important to note that any residence and work permit is only valid as long as someone is registered in the respective city. Even though it is possible to travel and even to leave Germany for a longer period of time, one has to remain registered in a municipality. Relocating within Germany (and registering accordingly) is not a problem.
To register in a municipality, the following documents are required:
- Personal identification (e.g. personal identification document or passport)
- Registration form
- Confirmation of residence by the landlord
- If necessary, supplement for registration (in the case of several apartments)
- Civil status certificate if existing, e.g. marriage certificate, birth certificate (for initial registration in Berlin)
In Germany, health insurance is mandatory for everyone, but several different systems are in place one could choose from. There is a government-regulated public insurance scheme (GKV) and private insurances (PKV). Most Germans are part of a public insurance scheme.
The contributions towards the health insurance depend on the income one is having. When beginning an employment, several taxes related to the overall public social welfare system such as health insurance, social- and unemployment insurance as well as pension fund are automatically deducted from the employee’s gross salary, whereby in case of the health insurance the employer pays 50% of the overall contribution. The net amount of the salary is then transferred to the employee on a monthly basis. Within the public insurance system, there are many providers to choose from, including AOK, BARMER, TK, SBK, BEK, and DAK.
The basic protection of public health care insurance companies include the following benefits:
- Outpatient medical treatments
- Dental care
- Medication and medicinal aids
- Hospitalizations and treatments
- Medically necessary rehabilitation
- Services for pregnant women including delivery
If an employee already has a health insurance when starting a new employment, it is necessary to provide the employer with a confirmation of the health insurance. This confirmation can be obtained directly from the health insurance provider.
Furthermore, once employment is taken up in a German company, it is also mandatory to contribute to the social insurance (Sozialversicherung). The employer requires the employee’s social insurance number for that purpose. This number is the same as the pension insurance number. In most cases, it is easy to find on the pay slips from previous employers. In case of uncertainty, one can contact the German Pension Insurance office or one’s insurance provider and ask for assistance.
Those who do not have a social insurance number yet can apply for one with the German Pension Insurance or their health insurance provider. It takes one to four weeks to process an application. The applicant will then receive their social insurance number as well as their social insurance card by mail.
Self-employed persons or employees who earn more than 60.750 Euro per year can opt out of the public scheme in favor of a private insurance. Private providers generally offer a wider choice of covered treatments and services, and contributions are differentiated based on desired insurance package, age, and individual risk. A lot of doctors depend on patients who are privately insured and, therefore, welcome them. Similar to the public scheme, there are a plethora of providers to choose from.
In general, which kind of health insurance scheme and provider is best, depends on the age, family, and health conditions. An advantage of the public scheme is that family members without an own income are co-insured non-contributorily.
The rental market in Germany, especially in larger cities, can be quite tough. Unlike in India, it is not easy to find a flat in cities such as Berlin, Hamburg or Munich very fast and you should plan in adequate time to search for an apartment. A useful site for both renting and buying apartments is ImmobilienScout24. To receive a rental contract, one usually has to provide references such as proof of income, freedom from debt through a so-called ‘SCHUFA Auskunft’, confirmation of the previous landlord that the rent has been paid regularly, etc. In contacting potential landlords, it is also recommended to give some information about oneself, one’s family, and one’s occupation in order to increase the chances of being invited for a viewing.
Immediately after moving into a new apartment or house in Germany, subscription for electricity, and if necessary gas, is required. In Berlin, for instance, many households are supplied with gas – both for heating and hot water. Normally, the landlord will inform you about the details while seeing the flat. Also, the rental agreement should provide information in that regard. Usually, it is possible to choose one of the several electricity and gas suppliers. In Berlin, for instance, if someone has not yet chosen a provider, the household will first be supplied via the company “Vattenfall” (electricity) and “Gasag” (gas). This guarantees the supply of gas and electricity from the day you are moving in.
There are several comparison portals on the Internet that can calculate and show electricity and gas prices for a specific household. The prices depend on the size of the home, the consumption and the exact place of residence. The price comparison portal Check24 can help to find the best energy supplier. Most of the contracts can be done online. In addition, it is crucial to take note of the exact electricity and/or gas meter reading when moving in to avoid paying for the electricity consumption of the previous tenants.
Pre-paid SIM cards (Prepaidkarte/Guthabenkarte) allow for immediate use and are available in nearly all supermarkets, drug stores, electronics stores, and gas stations. They can be registered either directly, using the cell phone, or online. Without a fixed residence, you can provide someones name and a c/o address, or the address of the hotel where you are staying.
Pre-paid cards have a limited balance which needs to be “recharged” regularly. In case you would like to get a mobile phone with a contract, including monthly bills, it is advisable to visit a phone shop or go directly to the provider’s website. A German identification card, or alternatively a registration certificate is needed to sign a mobile phone contract.
There are three big mobile network operators in Germany: Telefonica/O2, Telekom, and Vodafone. However, the three big players are split into around 50 smaller providers, such as congstar, Othello, ALDI Talk, Blauworld, FONIC, and many others. While Vodafone has the best coverage in Germany, it is by far the most expensive provider. Don’t be surprised but unlike India, Germany’s mobile network is still nascent. While you will be able to receive 4G in most bigger cities, in more remote areas it may happen that you do not have any network coverage at all. Almost all operators offer both pre-paid cards and contracts with a base monthly fee. For those who call and use the internet relatively frequently, an all-inclusive tariff (Pauschaltarif) with a flat rate is recommended. Irregular users will probably be better off buying minutes or pre-paid cards.
Fast broadband internet connections are available in almost every city in Germany. Subscribing to a DSL flat rate is beneficial as it allows surfing around the clock for a fixed price and helps to avoid extra costs. Many providers offer a combined flat rate DSL and telephone subscription. Independent DSL portals are useful to compare different providers. Moreover, many DSL and telephone providers offer information and registration forms in multiple languages.
Lastly, one should bear in mind that the registration process for both prepaid SIM cards and contracts is often carried out in German, including German documents. It could, thus, be a good idea to take a German friend or colleague to the shop, if available.
In contrast to some other industrialized countries, the core social security in Germany is financed collectively by means of a redistribution system. It is intended as a collective to help those who suffer hardship or are in need, acting on the principle of solidarity. The cost for the social security system is directly deducted form one’s salary and is been paid by employees and employers.
Social security contributions are made up of:
- Health insurance
- Nursing care insurance
- Pension insurance
- Unemployment insurance
- Accident insurance
Social security contributions are mandatory for all employees earning more than 450€ and are shared by the employer and employee. Only the costs for the accident insurance are exclusively borne by the employer. In total, the employer’s share of social insurance contributions amounts to about 21 percent of the employee’s gross wage.
Self-employed people generally do not have to pay all the social security contributions. While the health care insurance is mandatory and is fully borne by the self-employed person, the nursing care insurance is optional. Similarly, most self-employed people can voluntarily opt to pay for the pension insurance. However, a few exceptions exist. For instance, artists and publicists such as journalist are mandated to contribute towards the artist social insurance that also covers the pension funds. Also, self-employed people regularly working only for one client also have to pay for the pension fund.
If you do not contribute to the social security system, it is important that you make your own provisions when it comes to pensions, unemployment or health issues.
In case an Indian entrepreneur temporarily transfers employees from India to Germany, EU regulations allow the employee to remain within the Indian scheme for a certain amount of time. This means that no contributions have to be paid in the German system.
Individual persons, with a domicile or a customary place of abode in Germany, are generally subject to tax on their worldwide income in Germany. In this context, the term “customary place of abode” means that an individual does not only stay temporarily (less than six months in the calendar year) at this place or in this area.
An individual person, who is not a resident in Germany, is generally subject to tax only on income derived from German sources.
The German income tax law distinguishes between several categories of income, including income from employment, self- employment, investment, business and real estate. Income from each of the categories may be combined, and overall taxable income is then determined by subtracting special deductions.
In general, annual tax returns must be filed by the 31st of July of the year following the tax year. However, extensions for filing are granted automatically until the 31st of December of the year following the tax year if the return is prepared with the assistance of a tax adviser.
Non-residents may file an income tax return only if they have income that is not subject to withholding tax. For example, employers must withhold income tax (known as wage tax) for their employees.
Individual tax rates for 2018 gradually increased from an effective rate of 14% to a marginal rate of 42%. The top rate of 45% applies only if taxable income is EUR 265,327 or more. A basic tax-free allowance of EUR 9,000 is available for single individuals. However, income from investment is generally taxed at source with a flat tax rate of 25%.
To help finance the costs related to the German unification, a 5.5% solidarity surcharge continues to be imposed on the income tax liability of all taxpayers. If a German tax resident is a member of a registered church in Germany, the church is entitled to impose church tax. Church tax is assessed at a rate of 8% or 9% on income tax liability, depending on the location.
Expenditure incurred by an employee to create, protect or preserve income from employment is generally deductible. Income-related deductible expenses include, for example, the cost of travel between the home and the workplace or expenses connected with maintaining two households for business reasons (e.g. rent, home trips, per diems and moving costs, to a certain extent).
A standard deduction of EUR 1,000 per year for employment-related expenses is granted without any further proof. However, an employee can claim a larger deduction if he or she proves that the expenses actually paid exceed the standard deduction.
- German Consulate (https://india.diplo.de/in-de/service/05-VisaEinreise)
- Anabin Database (https://anabin.kmk.org/anabin.html)
- SCHUFA (https://www.schufa.de/de/)
- ImmobilienScout24 (https://www.immobilienscout24.de/)
- Check24 (https://www.check24.net/stromanbieter-wechseln)