Offering construction services in Germany

In Germany, the provision of construction services is a regulated activity, and both domestic and foreign companies must comply with various legal requirements to operate within the country. Here is a detailed analysis of the legal framework governing the provision of construction services by foreign companies in Germany:

1. Legal Framework for Construction Services

A. EU and EEA Companies

Companies from the European Union (EU) and the European Economic Area (EEA) benefit from the principles of freedom of establishment and freedom to provide services. This means that they can generally offer construction services in Germany without having to establish a German subsidiary or branch, provided they comply with local regulations.

Key Requirements:

• Notification and Registration: EU and EEA companies must notify the German authorities of their intention to provide services. This typically involves registering with the relevant trade supervisory authority (Gewerbeamt) and the local Chamber of Crafts (Handwerkskammer) if the services fall under craft trades.
• Compliance with Local Regulations: Companies must adhere to German laws and regulations, including building codes, health and safety regulations, and employment laws.
• Recognition of Qualifications: Workers from EU and EEA countries must have their professional qualifications recognized in Germany if these qualifications are required for the specific type of construction work.

B. Non-EU/EEA Companies

For companies based outside the EU and EEA, the process is more complex. These companies must establish a legal presence in Germany, such as a branch office or a subsidiary, to offer construction services.

Key Requirements:

• Establishing a Legal Entity: Non-EU/EEA companies must establish a German subsidiary (e.g., GmbH) or register a branch office (Zweigniederlassung). This involves complying with the requirements of the German Commercial Code (Handelsgesetzbuch, HGB).
• Business Registration: The company must register with the local trade office (Gewerbeamt) and possibly the Chamber of Crafts (Handwerkskammer), depending on the nature of the construction work.
• Permits and Licenses: Specific construction activities may require additional permits or licenses from local authorities.
• Employment and Immigration Compliance: Companies must comply with German employment laws and, if necessary, obtain work permits and visas for non-EU/EEA employees.

2. Craft Trades Regulation (Handwerksordnung)

In Germany, many construction activities are considered craft trades (handwerkliche Tätigkeiten), which are regulated under the Crafts and Trades Regulation Code (Handwerksordnung, HwO). Foreign companies, whether from the EU/EEA or outside, must ensure that they meet the requirements of the HwO if their services fall under this regulation.

Key Points:

• Master Craftsman Qualification: Certain trades require a master craftsman qualification (Meisterbrief) for the person responsible for the technical management of the business.
• Entry in the Register of Craftsmen: Companies offering craft trade services must be registered in the Register of Craftsmen (Handwerksrolle) maintained by the local Chamber of Crafts.

3. Employment and Labor Law Compliance

Foreign companies must comply with German employment and labor laws, including:

• Minimum Wage Laws: Germany has strict minimum wage laws that must be observed.
• Working Conditions: Compliance with regulations regarding working hours, occupational health and safety, and working conditions is mandatory.
• Social Security Contributions: Companies must make social security contributions for their employees working in Germany.

4. Taxation

Foreign companies providing construction services in Germany are subject to German tax laws. This includes:

• Corporate Tax: Income generated from construction activities in Germany is subject to German corporate tax.
• VAT Registration: Companies must register for Value Added Tax (VAT) and comply with German VAT regulations.
• Withholding Taxes: Certain payments to foreign contractors may be subject to withholding tax.

5. Public Procurement Regulations

If the construction services are provided under a public contract, foreign companies must comply with the public procurement laws in Germany. This includes adhering to the tendering procedures and ensuring that their bids comply with the requirements set forth by the contracting authority.

Conclusion

While EU and EEA companies can generally offer construction services in Germany without establishing a local company, they must still comply with notification, registration, and regulatory requirements. Non-EU/EEA companies, on the other hand, must establish a legal presence in Germany to provide such services.

Foreign companies must also comply with German employment, labor, tax laws, and public procurement regulations when applicable. Given the complexity of these requirements, it is advisable for foreign companies to seek legal advice to ensure full compliance with all applicable laws and regulations before offering construction services in Germany.

This comprehensive approach will help ensure that the foreign company can operate legally and effectively within the German market.