Employing as a foreign company in Germany
  1. Help Center
  2. Employing in Germany
  3. Employing as a foreign company in Germany

How can I employ employees in Germany without a German legal entity?

Since you do not have a German legal entity in place, you need to assign a Permanent Representative in Germany.

The income tax number is required for social security contributions

Every company that has employees in Germany needs an income tax number.

The wage tax number is ultimately a kind of file against which all wage-related social contributions (social insurance, insurance, wage tax, etc.) are registered and documented.

Who receives an income tax number?

German companies and the local permanent representatives of foreign companies receive the income tax number.

As a rule, we would recommend foreign companies to set up a German company, e.g. a GmbH

In some cases, the foreign company doesn't want that. For this reason, an employee in Germany is appointed as a permanent representative

What is a Permanent Representative?

A permanent representative within the meaning of § 13 AO is a person who takes care of the business of a company in the long term and is subject to its material instructions. As a tax consequence, the permanent representative establishes a so-called representative permanent establishment in Germany.

The permanent representative in Germany

The permanent representative will be introduced to the German authorities in order to receive a tax number that is required to process payroll in Germany. It also can be a regular employee, however, the employee needs to be aware of his additional role. We also need to make sure that the working contract is reflecting specific criteria to successfully apply for the tax number. 
  • The permanent representative is also a regular employee working for your UK-based company out of Germany.
  • Typically the permanent representative has got a senior role and is therefore helping the management in the UK to develop business in Germany. Having said this, the PR should be rather a strategic employee supporting to meet the long-term objectives of your company in Germany.

Tasks and responsibilities

In principle, as a permanent representative, you will only receive mail from the offices. This post needs to be processed.

If we are commissioned as a consulting office, we can receive this mail directly to process it.

As long as we are commissioned and all payments are transferred to the offices on time, there is no risk as a permanent representative.

We look after a large number of foreign companies that have appointed a permanent representative in Germany. As a rule, permanent representatives have to fulfill a strategic mandate from a foreign company in Germany. e.g. business development or building your own team.


  • Ideally, the Permanent Representative should be someone who reports directly to your managing director and also represents your ongoing business strategy for Germany
  • We will have a power of attorney in place, however, your assigned PE may still receive communication from the German authorities
  • In addition, the German tax authorities may raise corporate taxes in addition. This would imply that at some point you would have to run monthly accounting services in Germany

    Application process

    We have taken care of the foreign companies employing staff in Germany and this approach works best for companies that do not wish to incorporate a new legal entity in Germany. 

    Our recommendation

    To sustainably develop your business, we would recommend considering opening your own German legal entity at some point in time. Please let us know in case of any further questions

    Advantages & Disadvantages


    • No legal or taxable entity is created. There are no accounts to keep. The initial cost is much lower than setting up a legal entity.
    • The employee will get an employment contract directly with your company and can have a company email, can have a business card, can work full time for you, is excluded from working for other firms, can be asked to sign non-competition clauses, etc. 


    • The employee cannot sign contracts, issue prices, credit terms, etc. without Head Office approval. The employment contract should reflect this. If this is not done, then German authorities would see this as a taxable branch office.
    • Because there is no legal entity established your company cannot take out local contracts for a company car, mobile phone, maintenance, local benefits, and insurance, etc. As a matter of fact, a permanent office should be avoided if possible since this would indicate that you have a branch office. We can help arrange these things though so that for instance the mobile phone remains your property (important in case the employee leaves at some point).
    • The tax authorities MAY claim that the operation is really a Permanent Establishment and should be subject to taxation like a branch. But in practice as long as employee income taxes are paid and social security is paid this is unlikely.
    • There is some paperwork involved – which we take care of. We will however need a limited power of attorney and may need articles of incorporation etc.

    Please note: even if you stipulate that the employment contract falls under some other jurisdiction, it will always fall under German jurisdiction and therefore German laws.


    Generally, a foreign company requires to appoint a permanent representative (PR) in Germany to employ employees in Germany. The PR needs to meet a couple of criteria to successfully apply for a German payroll tax number. The payroll tax number is required to register the company as well its employees with social security as well as to calculate the monthly payroll etc.

    We usually receive questions with regard to the permanent representative’s enhanced responsibilities. In this regard, the foreign company has to make sure that all criteria for the very first employee in Germany are met. The first employees typically also fulfill a strategic role, e.g. with regard to being the first employee and potentially building a team in Germany.

    Please note that we typically work very closely with the foreign company as well as their permanent representatives in Germany to make sure that all questions are answered. Having said that, you can always reach out to us in case of questions or concerns.


    Questions Answers
    When is the German Payroll Tax Number actually needed and how to obtain it? Has your company been running payroll in Germany before? In this case, your company already has a German payroll tax number.

    Otherwise, we will be taking care of the application of your German payroll tax number as part of your onboarding.
    So now we have all the data entries of the employer. We would like to proceed with the Foreign Employer Registration.

    Which further documents do we need to begin the Foreign Employer Registration?

    You will send us:

    • A signed PoA for us to communicate with social security
    • A recent commercial registry/customs house excerpt as a PDL
    • Company Articles of Association as a PDF
    • The actual work contract. Please note that the work contract needs to include specific features


    Can the PoA be signed digitally? Yes
    Does a recent commercial registry/customs house excerpt need to be notarized, apostilled? No
    I understand that you don't need a Company Articles of Association as a PDF? If it is required, does it need to be notarized and apostilled? No
    How does the process look like to register a foreign company as an employer of employees in Germany There are 4 parts involved in the process:

    1) the foreign Company outside of Germany that wants to employ employees in Germany

    2) the employee who is about to be installed as the permanent representative of the foreign company

    3) the German work contract the employment relationship is based on

    4) the monthly payroll service  can start as soon as the foreign company has been registered in Germany

    Please note that points 1), 2), 3) are related to Labour legal law and need to be taken care of before proceeding with 4)

    This implies that we first need to have a valid work contract in place before registering the foreign company for payroll.

    Based on the work contract the employee can already start working. We became calculate an approx salary which can be corrected as soon as the company is fully registered with point 4).
    When could the employment start? The employee can start to work for a foreign company out of Germany as soon as the work contract is signed
    After signing the work contract and beginning employment, approximately how long would we wait for the registration of the company? The registration process of the foreign company that wishes to employ employees in Germany may take approx. 4-8 weeks.

    This is mainly because the company does not have a German legal entity and we need to have a permanent representative registered in Germany.
    Referring to point 4:
    1. I understand that if the contract starts on the 1st of next month, Consultinghouse would offer us a monthly payroll service already for this very first month?
    Yes, Consultinghouse will need to provide monthly payroll as well as foreign employer services.

    Please note, that since the permanent representative has got higher needs than a normal employee we are communicating not only with the foreign company but also with the permanent representative directly.
    Even though the company and its permanent representative have not been registered in Germany yet, the employee can be legally paid during those first months working out of Germany? Yes, Consultinghouse can help to payout everything, however, as long as the company has not been registered the calculation will be not 100% correct and therefore most likely needs to be corrected retrospectively. (There is a small variation of 1-3% with regard to taxes and social security which essentially will have a very small impact on the actual net salary)