Germany is one of India's largest trade partners, and most Indian companies meet the German tax system before they ever set up a company there — through an engineer posted on site, an Amazon warehouse, or a client that suddenly withholds tax on an invoice.
The first question: do you have a permanent establishment?
Germany taxes a non-resident company only on German-source business profits, which usually means real activity on the ground. A permanent establishment (PE) under the India-Germany tax treaty can arise from a fixed place of business, a long-running installation or construction site, or an agent in Germany who habitually concludes contracts for you.
This matters because a PE changes everything: German corporate tax returns, profit attribution, payroll for people working there, and a transfer-pricing file. Teams deputed to a client site for months at a time are the usual trigger, and the discovery usually comes late.
If a German company is your customer
- Withholding tax. Germany withholds on royalties and certain licence payments. The India-Germany treaty reduces the rate, but relief generally has to be applied for in advance through the Federal Central Tax Office, with a residency certificate — otherwise you pay the full rate and claim a refund later.
- VAT on services. For most B2B services to a German business customer, the reverse charge applies: the customer accounts for the VAT and you don't need a German VAT registration. Get their VAT ID and put the reverse-charge reference on the invoice.
- Goods and e-commerce are different. Stock held in a German warehouse, or B2C sales, generally do require a German VAT registration. VAT is 19% standard, 7% reduced.
If you set up a German entity
- GmbH — share capital of €25,000, notarised articles, entry in the commercial register, trade office registration, and a tax number from the Finanzamt.
- UG (haftungsbeschränkt) — the "mini-GmbH", which can start with as little as €1 but must retain part of its profits each year until reserves reach €25,000, at which point it converts.
- Tax: corporate income tax of 15%, a 5.5% solidarity surcharge on that, and municipal trade tax that varies by city — an effective burden of roughly 30%. Filing is electronic, through the ELSTER system.
The India side
- ODI or LRS for the investment, with Form FC, the UIN, and an annual APR — the same framework as any other overseas investment.
- Schedule FA in your ITR for the shareholding and any German bank account.
- Form 67 to claim credit for German tax against Indian tax on the same income.
- Transfer pricing for services, management charges or goods between the Indian and German entities.
- 15CA/15CB on remittances out of India, with the treaty rate applied correctly.
The most expensive Germany mistakes we see aren't tax computations. They're a deputation arrangement that quietly created a PE, and a royalty invoice raised without advance treaty relief.
How Vitt-Marg helps
We assess the PE risk before your team is deployed, structure the contract and the invoicing accordingly, handle the residency certificate and treaty paperwork, and take care of the Indian filings — 15CA/15CB, ODI and APR, Schedule FA, Form 67 and transfer-pricing documentation. German filings themselves are done with a German tax adviser (Steuerberater), and we coordinate both sides so the same transaction is reported the same way in both countries.
General information, current as of September 2026, not advice for a specific case. GST and income-tax rules change often — check with us before acting on it.