In more than 90 countries

The consumer

Consumer Profile
According to Eurostat, in 2019, the median age of the population was 46, the third oldest population in the world. The population is aging, since the median age was 44.3 years in 2010. Germany's population rose by 148,000 (+0.2%) in 2019. While 13.6% of the population is under 14 years old, 64.9% is between 15 and 64 years old and 21.5% is over 65 years old. On average in 2019, households are made up of 2 people while 41.9% of households are people living alone, mostly women. The Federal Statistical Office (Destatis) also reports that the number of one-person households is expected to rise in the near future. The population is 48.8% men and 51.2% women. It is estimated that 14.3% of German population is foreign and 77.4% of the population lives in urban areas, and the cities of Berlin Hamburg, Munich and Cologne are the most populated. Germany has one of the highest levels of education: 86% of people aged 25 to 54 have completed upper secondary education. Moreover, Destatis accounts that in 2018 the proportion of vocational and continuing training of all pupils in upper secondary education in Germany (47%) was higher than the OECD average (42%). Among the active population, 22% work in raw material extraction, and industry, 20% in business organization, accounting, law and administration, 18% in health, social and education, 13% in transport, logistics, protection and security and 12% in commercial services, retail, hotels and tourism.
Purchasing Power
According to the Word Bank, GDP per capita PPP was estimated at $ 56,052 in 2019. The average monthly gross income of households in Germany amounted to 4,846 euros in 2018, according to results of the Sample Survey of Income and Expenditure (latest data available). Germans have an average per capita purchasing power of €23,766 in 2020 according to GfK’s latest purchasing power study. Private consumption and expenditure is 2,704 euros, according to Destatis. The Gini index is 0.31, and fits into European averages. Wage inequalities between men and women have been decreasing since 2014. According to Destatis, women in Germany earned 20% less than men in 2019. The earnings difference between men and women, the unadjusted gender pay gap, was 1 percentage point lower than in the previous years. Women earned an average 17.72 euros per hour in gross terms, that is 4.44 euros less than men (22.16 euros). In addition, the risk of poverty rate is higher for women, over 65s and non-Germans. In total, 19% of the population is at risk of poverty or social exclusion.
Consumer Behaviour
Germany is a mass consumer society. Before making a purchase, beyond the price, German consumers like to learn as much as possible about other similar products, features, provenance etc. According to some studies, German consumers are among the most demanding in the world. Some consumers are willing to pay more for a better quality product. Consumer confidence is high (above the average for OECD countries) but it dropped by 5.9% point in September 2020. Online shopping has become the norm in Germany and the country is Europe's largest online market . Consumers are relatively open to the products of international companies. However, local, national and European products may sometimes be preferred.Germans are relatively loyal to brands if its a quality product. About 60% of the population is willing to buy the same brand several times in this case. Social networks are a useful way to learn about products, but also in the discovery process. Comments left by other users can determine a purchase decision. However, due to concerns about data collection by companies, Germans can be passive users of social networks.

Environmental awareness is common among German consumers. This is reflected in consumption, with the development of organic products, vegan, using little energy etc. In addition, local product consumption attracts some consumers who are willing to pay more for it. The second-hand market is very widespread in Germany, especially in the big cities, for economic, ecological and social reasons. This translates with the purchase in fripperies, second-hand stores but also with online exchanges. The collaborative economy is widely developed, both with VTC platforms, apartment rentals and carpooling.
Consumer Recourse to Credit
Germany is a country where cash payment is widespread. Debit cards are used and widely accepted, although there are places where only cash is accepted. Credit cards are less common and may be refused in some establishments such as small shops, restaurants and hotels. Household debt to GDP is down in Germany (52.5% of GDP in the second quarter of 2018). Debt is composed of long-term debt (real estate), which is rising, and short-term debts (consumer loans) which are declining. The Germans have about 760 euros of debt per person in 2018. The level of household debt is relatively low compared to other European countries with real estate debt being lower and therefore consumers need for less loans. The majority of loans are provided by banks and traditional banking providers. Loans are used to finance housing, white goods (refrigerators, washing machines, electronic products). The trend should continue in 2019, with an increase in mortgage loans but a slowdown in consumer credit. In the second quarter of 2018, German households contracted 11.8 billion euros of new loans.
Growing Sectors
Leisure and culture, education services, vehicles, catering services, accommodation services, telephony, dishes and household utensils, garden equipment, audio-visual equipment, food and footwear.
Consumers Associations
VZBV , Federation of German Consumer Associations
TEST , Product Testing Foundation
Verbraucher , Consumer Initiative


Importing & Distributing

Import Procedures
Import procedures are subject to a declaration on-line or on paper. You will find further information on the German Customs Authority website.

The official model for written declarations to customs is the Single Administrative Document (SAD). The SAD serves as the EU importer's declaration.  It encompasses both customs duties and VAT and is valid in all EU Member States.

As part of the "SAFE" standards advocated by the World Customs Organisation (WCO), the European Union has set up a new system of import controls- the "Import Control System" (ICS)- which aim to secure the flow of goods at the time of their entry into the customs territory of the EU. This control system, part of the Community Programme eCustoms, has been in effect since 1 January 2011. Since then, operators are required to fill out an Entry Summary Declaration (ENS) to the customs of the country of entry, prior to the introduction of goods into the customs territory of the European Union.

Non-agricultural goods entering EU territory must adhere to customs formalities (ENS). This declaration must be carried out by the person bringing the goods to the territory. The Summary Declaration can be made electronically or on a form provided by the customs authorities. The deadline for lodging the ENS depends on the mode of transport carrying the goods.

Since July 1, 2009, all companies established outside of the EU are required to have an EORI number if they wish to lodge a customs declaration or an Entry/Exit Summary declaration. Once a company has received an EORI number, it can use it for exports to any of the 28 EU Member States.

Goods in transit only need a single EU transit document.

Inward processing is free of customs treatment. This procedure allows raw material (non-Union good) to enter temporarily without customs fees if it will be processed (or repaired) and re-export the finished products out of the EU territory. In this case, the importer gives a guarantee (from an insurance company or bank) equal to the amount of customs duties that would have been due on the imported raw material. This guarantee will be reimbursed when the final product is exported. This process also applies to goods planned to be re-exported. Only goods sold in the EU market are eligible to import duty and taxes.

For outward processing, duties and taxes apply only to the value added during the process. Only firms located in Germany or in the EU may take advantage of this measure.

The EU plans to introduce a new import control system called ICS2 that will start on 15 March 2021 to implement the EU customs pre-arrival security and safety programme.

Check the website of the EU Customs Union periodically for updates.
Specific Import Procedures

The Union Custom Code - adopted on 9 October 2013 as Regulation (EU) No 952/2013 - Title V provides for the following customs simplifications:

  • Simplified declaration (Article 166 UCC)
  • Centralised clearance (Article 179 UCC)
  • Entry in the declarant's records (Article 182 UCC). This type of customs declaration is not allowed for all customs procedures (e.g. exclusion of transit).
  • Drawing-up of customs declarations for goods falling under different tariff subheadings ( Article 177 UCC)
  • Self-assessment (Article 185 UCC)
Distribution channels
With more than 83 million inhabitants, the German market is the largest in European Union with one of the highest income in the world. According to the latest data available provided by Destatis, household final consumption expenditure per inhabitant in Germany was a nominal (not price adjusted) 30% above the average of the European Union Member States in 2018.

In the first half of 2020, Germany recorded an increase in online and mail order sales, a clear result of the corona crisis, whilst at the same time the pandemic further aggravated the economic situation of traditional department stores. On the basis of provisional data, the Federal Statistical Office (Destatis) reports that the department stores’ turnover in real terms was down by 2.4% in August 2020 compared to the previous year.

The German retail food market is characterized by consolidation, market saturation, strong competition and low prices, although there has also been a consumer preference towards smaller grocery formats, including convenience stores, small grocery retailers and independents. In this way, all major grocery retailers have been investing in modernizing their existing stores to fit with this new trend. The top five retail groups together (Edeka-Group, Rewe-Group, Schwarz-Group, Aldi-Group, Metro-Group) account for around 72 percent of the revenues.  While Germans are very price sensitive in general, many wealthy consumers are looking for premium quality products and are willing to pay a higher price.

The growth of discount stores is slowing down due to market saturation, while sales in supermarkets are increasing. In 2019 supermarkets recorded the best performance in terms of revenue growth among all retail channels. This underlines the growing trend towards small, quick but high-quality grocery shopping in the cities. Thus, the rise of smaller grocery formats has hampered growth of hypermarket sales. Although, hypermarkets are still widespread amongst consumers in rural or suburban areas due to their convenience and attractive prices. Online grocery shopping is still a niche market in Germany, but it really picked up when Amazon Fresh started in Berlin and Munich in 2017.

Distribution market players
According to Euromonitor, the German distribution structure is characterised by:

  • the high level of consolidation of the market
  • the large number of small independent shops
  • the sector's low level of concentration (as compared with the main European markets such as France, the United Kingdom and Belgium)
  • the predominance of distribution in city centers and urban areas
  • small number of "hypermarket" style stores, mainly in the suburban and rural areas

According to the German Retail Business Federation, discount stores recorded the highest net turnover, 74.5 billion euros. Supermarkets recorded 51.2 billion euros, followed by department stores with 18.5 billion euros and hypermarkets with 17 billion euros.
According to the US Food Export Association, the five leading German distribution groups are Edeka, Rewe, Schwarz Group, Aldi and Metro, which together held 72% of value sales in 2018 (latest data available). The rise of discounters such as Lidl or Aldi has forced distributors to wage a price war. As a result, narrow profit margins may slow down the modernisation of sales outlets and the development of new distribution concepts. Other online food retailers in Germany are Amazon, getnow and Picnic.

Retail Sector Organisations
German Retail Business Federation (German only)
Foreign Trade Association of German Retailers


Operating a Business

Type of companies

Gesellschaft mit beschrankter Haftung (GmbH): limited liability company
Number of partners: No minimum: one or more partners.
Capital (max/min): EUR 25,000 minimum with at least half fully paid up at the creation of the company.
Shareholders and liability: Liability is limited to the amount of capital contributed by all shareholders.
Aktiengesellschaft (AG): public limited company
Number of partners: No minimum: one or more partners.
Capital (max/min): EUR 50,000 minimum with at least one quarter fully paid up at the creation of the company.
Shareholders and liability: Liability is limited to the amount of capital contributed by all shareholders.
Offene Handelsgesellschaft (OHG): general partnership
Number of partners: Minimum: two; no maximum.
Capital (max/min): No minimum capital.
Shareholders and liability: Liability is joint and indefinite on the obligations and debts of the company.
Kommanditgesellschat (KG): limited joint-stock partnership
Number of partners: Minimum: two; no maximum. There are two types of partners: active partners and silent partners.
Capital (max/min): EUR 50,000.
Shareholders and liability: The liability of active partners is personal and indefinite. The liability of silent partners is limited to the amount of capital contributed.
Setting Up a Company Germany OECD
Procedures (number) 9.0 5.2
Time (days) 8.0 9.5

Source: Doing Business - Latest available data.


Cost of Labour

Minimum Wage
Starting from January 2020, the statutory minimum wage is set at €9.35 per hour. The federal minimum wage applies to almost all employees, including foreign workers, part-time workers, interns (under certain conditions) and people working through a probationary period.
Average Wage
Average annual wage: $ 53,638 (source: OECD, 2019 - latest available data).
Social Contributions
Social Security Contributions Paid By Employers:

In total, the employer's share of social insurance contributions amounts approximately 20.5% of employee's gross wages:

  • Pension (9.35%),
  • Health (7.3%),
  • Unemployment (1.5%),
  • Nursing care (1.275%),
  • Accident insurance (1.22%).

Social Security Contributions Paid By Employees:

Social security contributions are generally shared equally by employer and employee. Employees pay approximately 19.3% of gross wages:

  • Pension (9.35%),
  • Health (7.3%),
  • Unemployment (1.5%),
  • Nursing care (1.275%).

Intellectual Property

National Organisations
The organisation responsible for the protection of intellectual property in Germany is the Deutsches Patent- und Markenamt (DPMA).
Regional Organisations
For patent protection: The European Patent Office.
Governing trademarks, designs and models: The Office for Harmonisation in the Internal Market.
International Membership
Member of the WIPO (World Intellectual Property Organization)
Signatory to the Paris Convention For the Protection of Intellectual Property
Membership to the TRIPS agreement - Trade-Related Aspects of Intellectual Property Rights (TRIPS)


Tax Rates

Consumption Taxes

Nature of the Tax
Value Added Tax (VAT), also refered to as Umsatzsteuer (USt) or Mehrwertsteuer (MwSt).
Tax Rate
Reduced Tax Rate
A reduced rate of 7% applies to food, agricultural products, public transport, books, e-books and magazines, hotels (short-term accommodation) and certain cultural services, social services, medical equipment for disabled persons and firewood.
Intra-EU supplies, exports to non-EU countries, cross-border transport of goods to and from non-EU countries are generally zero-rated.

In light of the COVID-19 epidemic, the Federal government decided to temporarily reduce the VAT rates from 19% to 16% (standard rate) and from 7% to 5% (reduced rate) in the period between 1 July and 31 December 2020. Furthermore, the rate on meals (excepting beverages) provided in restaurants and through other catering services were temporarily reduced from 19% to 5% for services provided between 1 July and 31 December 2020 and to 7% for the period until 31 December 2022.

Other Consumption Taxes
Germany levies several environmental taxes, including those on mineral oil, gas, coal and electricity. A motor vehicle tax is imposed on the ownership of motor vehicles.
General insurance premiums also incur a 19% tax.
Excise duties apply on fuel, electric power, alcoholic products and tobacco.
There are no stamp duties in Germany (except for the real estate transfer tax).

Corporate Taxes

Company Tax
Standard rate is 15% (15.825% including a 5.5% solidarity surcharge). Effective rate including trade tax (assessed independently by each municipality from 7% to 17.5%) is estimated at about 30-33%
Tax Rate For Foreign Companies
Resident and non-resident companies are subject to the same tax treatment. A company is resident for tax purposes in Germany if it is effectively managed or if its place of incorporation is in Germany.
The German law (in line with OECD's provisions) defines a permanent establishment as any fixed business facility serving the corporate purpose.
Capital Gains Taxation
Capital gains are typically taxed at the same rate as ordinary income at 15% (or 15.825% with the solidarity surcharge). A 95% tax exemption (a 100% exemption with a 5% add-back as a non-deductible business expense) applies to the sale of shares by a company, regardless of how long the participation in the subsidiary has been held. Such an exemption does not apply to banks, financial institutions and finance companies, life or health insurance companies and pension funds.
Main Allowable Deductions and Tax Credits
In general, all expenses incurred in the course of business operations are deductible. Germany offers unilateral tax relief, allowing companies to credit foreign taxes paid up to the amount that is subject to domestic tax or to deduct foreign tax as a business expense. Net operating losses up to EUR 1 million can be carried back one year for corporation tax (for losses incurred in 2020 and 2021 the limit has been increased to EUR 5 million, in response to the COVID-19 crisis), but this provision does not apply for trade tax. Losses up to EUR 1 million may be carried forward indefinitely. For net operating losses exceeding EUR 1 million, at least 40% of the taxable income is subject to taxation ("minimum taxation" principle). Deduction of net interest expense is generally limited to 30% tax EBITDA.

Start-up and formation expenses are deductible. Bad debts incurred on business activity with unrelated parties are deductible if it is apparent that they are irrecoverable and all attempts to pursue the debt have failed or been abandoned.

Donations to charity organizations that respect certain parameters, whether in cash or in kind, are deductible up to the higher of 20% of otherwise net taxable income or 0.4% of the total of sales revenue and wages and salaries paid during the year.

Paid taxes are deductible, except for corporation tax, trade tax, and the VAT on most non-deductible expenses. Fines and penalties are not deductible. The deductibility of certain royalty payments to related parties has limitations. Payments to foreign affiliates can be deducted, provided the amounts are at "arm’s length".

According to a Federal decree, taxpayers having income from agriculture or forestry, trade, self-employment, or rent or lease and expect to suffer losses due to the COVID-19 pandemic in 2020, which may be carried back to 2019, may apply for a reduction of income or corporation tax prepayments for 2020 (to EUR 0) and for a retroactive reduction of income or corporation tax prepayments made for 2019 based on a lump-sum loss carry-back (15% of the tax base for the prepayments in 2019). Furthermore, enhanced depreciation rates were introduced for movable assets acquired or made in the period between 31 December 2019 and 1 January 2022 of up to the factor of 2.5 compared to currently applicable depreciation rates (up to a maximum of 25% per year).

Other Corporate Taxes
A municipal trade tax is levied by municipalities at a minimum rate of 7% (averages between 14% and 17% of income).
A tax on property is levied by local authorities at a rate of 0.35% of the tax value of the property, multiplied by a municipal coefficient. A real estate transfer tax applies with rates varying between 3.5-6.5%, including on indirect transfers from the acquisition of at least 95% of the shares in property-owning companies.
Employers are liable for social security contributions, as follows:

- Pension insurance: 9.3%
- Unemployment insurance: 1.2%
- Health insurance: 7.3% (the health funds may levy a supplement of 1.1% on average)
- Invalidity insurance: 1.525% (with a surcharge of 0.25% in some cases)
The upper monthly salary limit varies according to the region.

Other Domestic Resources
Federal Central Tax Office
Consult Doing Business Website, Summary of taxes and mandatory contributions

Double Taxation Treaties

Countries With Whom a Double Taxation Treaty Have Been Signed
Federal Ministry of Finance
Withholding Taxes
Dividends: 25% (26.375% with solidary surcharge)
Interest: 0/25% (26.375%, including the solidarity surcharge; generally only interests paid by banks to residents is subject to a withholding tax)
Royalties: 0 for residents/15% for non-residents (15.825% with solidarity surcharge)