92021 Doing Business 2015 Germany Economy Profile 2015 Germany Doing Business 2015 Germany 2 © 2014 The International Bank for Reconstruction and Development / The World Bank 1818 H Street NW, Washington, DC 20433 Telephone: 202-473-1000; Internet: www.worldbank.org All rights reserved. 1 2 3 4 17 16 15 14 This work is a product of the staff of The World Bank with external contributions. The findings, interpretations, and conclusions expressed in this work do not necessarily reflect the views of The World Bank, its Board of Executive Directors, or the governments they represent. The World Bank does not guarantee the accuracy of the data included in this work. The boundaries, colors, denominations, and other information shown on any map in this work do not imply any judgment on the part of The World Bank concerning the legal status of any territory or the endorsement or acceptance of such boundaries. 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Doing Business 2015 Germany 3 CONTENTS Introduction .................................................................................................................................. 4 The business environment .......................................................................................................... 6 Starting a business ..................................................................................................................... 16 Dealing with construction permits ........................................................................................... 24 Getting electricity ....................................................................................................................... 31 Registering property .................................................................................................................. 36 Getting credit .............................................................................................................................. 45 Protecting minority investors ................................................................................................... 51 Paying taxes ................................................................................................................................ 59 Trading across borders .............................................................................................................. 64 Enforcing contracts .................................................................................................................... 68 Resolving insolvency .................................................................................................................. 74 Labor market regulation ........................................................................................................... 79 Distance to frontier and ease of doing business ranking ...................................................... 85 Resources on the Doing Business website .............................................................................. 88 Doing Business 2015 Germany 4 INTRODUCTION Doing Business sheds light on how easy or difficult it is 1, 2014 (except for the paying taxes indicators, which for a local entrepreneur to open and run a small to cover the period January–December 2013). medium-size business when complying with relevant The Doing Business methodology has limitations. Other regulations. It measures and tracks changes in areas important to business—such as an economy’s regulations affecting 11 areas in the life cycle of a proximity to large markets, the quality of its business: starting a business, dealing with construction infrastructure services (other than those related to permits, getting electricity, registering property, getting trading across borders and getting electricity), the credit, protecting minority investors, paying taxes, security of property from theft and looting, the trading across borders, enforcing contracts, resolving transparency of government procurement, insolvency and labor market regulation. macroeconomic conditions or the underlying strength of In a series of annual reports Doing Business presents institutions—are not directly studied by Doing Business. quantitative indicators on business regulations and the The indicators refer to a specific type of business, protection of property rights that can be compared generally a local limited liability company operating in across 189 economies, from Afghanistan to Zimbabwe, the largest business city. Because standard assumptions over time. The data set covers 47 economies in Sub- are used in the data collection, comparisons and Saharan Africa, 32 in Latin America and the Caribbean, 25 benchmarks are valid across economies. The data not in East Asia and the Pacific, 26 in Eastern Europe and only highlight the extent of obstacles to doing business; Central Asia, 20 in the Middle East and North Africa and they also help identify the source of those obstacles, 8 in South Asia, as well as 31 OECD high-income supporting policy makers in designing regulatory reform. economies. The indicators are used to analyze economic More information is available in the full report. Doing outcomes and identify what reforms have worked, where Business 2015 presents the indicators, analyzes their and why. relationship with economic outcomes and presents This economy profile presents the Doing Business business regulatory reforms. The data, along with indicators for Germany. To allow useful comparison, it information on ordering Doing Business 2015, are also provides data for other selected economies available on the Doing Business website at (comparator economies) for each indicator. The data in http://www.doingbusiness.org. this report are current as of June Doing Business 2015 Germany 5 CHANGES IN DOING BUSINESS 2015 As part of a 2-year update in methodology, Doing Finally, the name of the employing workers indicator set Business 2015 incorporates 7 important changes. First, has been changed to labor market regulation, and the the ease of doing business ranking as well as all topic- scope of this indicator set has also been changed. The level rankings are now computed on the basis of indicators now focus on labor market regulation distance to frontier scores (see the chapter on the applying to the retail sector rather than the distance to frontier and ease of doing business ranking). manufacturing sector, and their coverage has been Second, for the 11 economies with a population of more expanded to include regulations on labor disputes and than 100 million, data for a second city have been added on benefits provided to workers. The labor market to the data set and the ranking calculation. These regulation indicators continue to be excluded from the economies are Bangladesh, Brazil, China, India, aggregate distance to frontier score and ranking on the Indonesia, Japan, Mexico, Nigeria, Pakistan, the Russian ease of doing business. Federation and the United States. Third, for getting Beyond these changes there are 3 other updates in credit, the methodology has been revised for both the methodology. For paying taxes, the financial statement strength of legal rights index and the depth of credit variables have been updated to be proportional to 2012 information index. The number of points has been income per capita; previously they were proportional to increased in both indices, from 10 to 12 for the strength 2005 income per capita. For enforcing contracts, the of legal rights index and from 6 to 8 for the depth of value of the claim is now set at twice the income per credit information index. In addition, only credit bureaus capita or $5,000, whichever is greater. For dealing with and registries that cover at least 5% of the adult construction permits, the cost of construction is now set population can receive a score on the depth of credit at 50 times income per capita (before, the cost was information index. assessed by the Doing Business respondents). In addition, Fourth, the name of the protecting investors indicator set this indicator set no longer includes the procedures for has been changed to protecting minority investors to obtaining a landline telephone connection. better reflect its scope—and the scope of the indicator For more details on the changes, see the “What is set has been expanded to include shareholders’ rights in changing in Doing Business?” chapter starting on page corporate governance beyond related-party transactions. 24 of the Doing Business 2015 report. For more details Fifth, the resolving insolvency indicator set has been on the data and methodology, please see the “Data expanded to include an index measuring the strength of Notes” chapter starting on page 114 of the Doing the legal framework for insolvency. Sixth, the calculation Business 2015 report. For more details on the distance to of the distance to frontier score for paying taxes has frontier metric, please see the “Distance to frontier and been changed. The total tax rate component now enters ease of doing business ranking” chapter in this profile. the score in a nonlinear fashion, in an approach different from that used for all other indicators (see the chapter on the distance to frontier and ease of doing business ranking). Doing Business 2015 Germany 6 THE BUSINESS ENVIRONMENT For policy makers trying to improve their economy’s regulatory environment for business, a good place to start ECONOMY OVERVIEW is to find out how it compares with the regulatory environment in other economies. Doing Business provides an aggregate ranking on the ease of doing business Region: OECD high income based on indicator sets that measure and benchmark regulations applying to domestic small to medium-size Income category: High income businesses through their life cycle. Economies are ranked from 1 to 189 by the ease of doing business ranking. This Population: 80,621,788 year's report presents results for 2 aggregate measures: the distance to frontier score and the ease of doing GNI per capita (US$): 46,100 business ranking. The ranking of economies is determined by sorting the aggregate distance to frontier (DTF) scores. DB2015 rank: 14 The distance to frontier score benchmarks economies with respect to regulatory practice, showing the absolute DB2014 rank: 13* distance to the best performance in each Doing Business Change in rank: -1 indicator. An economy’s distance to frontier score is indicated on a scale from 0 to 100, where 0 represents the DB 2015 DTF: 79.7 worst performance and 100 the frontier. (See the chapter on the distance to frontier and ease of doing business). DB 2014 DTF: 80 The 10 topics included in the ranking in Doing Business 2015: starting a business, dealing with construction Change in DTF: -0.3 permits, getting electricity, registering property, getting credit, protecting minority investors, paying taxes, trading * DB2014 ranking shown is not last year’s published across borders, enforcing contracts and resolving ranking but a comparable ranking for DB2014 that insolvency. The labor market regulation indicators captures the effects of such factors as data (formerly employing workers) are not included in this corrections and the changes in methodology. See year’s aggregate ease of doing business ranking, but the the data notes starting on page 114 of the Doing data are presented in this year’s economy profile. Business 2015 report for sources and definitions. The aggregate ranking on the ease of doing business benchmarks each economy’s performance on the indicators against that of all other economies in the Doing Business sample (figure 1.1). While this ranking tells much about the business environment in an economy, it does not tell the whole story. The ranking on the ease of doing business, and the underlying indicators, do not measure all aspects of the business environment that matter to firms and investors or that affect the competitiveness of the economy. Still, a high ranking does mean that the government has created a regulatory environment conducive to operating a business. Doing Business 2015 Germany THE BUSINESS ENVIRONMENT Figure 1.1 Where economies stand in the global ranking on the ease of doing business Source: Doing Business database. Doing Business 2015 Germany THE BUSINESS ENVIRONMENT For policy makers, knowing where their economy regional average (figure 1.2). The economy’s rankings stands in the aggregate ranking on the ease of doing (figure 1.3) and distance to frontier scores (figure 1.4) business is useful. Also useful is to know how it ranks on the topics included in the ease of doing business relative to comparator economies and relative to the ranking provide another perspective. Figure 1.2 How Germany and comparator economies rank on the ease of doing business Note: The rankings are benchmarked to June 2014 and based on the average of each economy’s distance to frontier (DTF) scores for the 10 topics included in this year’s aggregate ranking. The distance to frontier score benchmarks economies with respect to regulatory practice, showing the absolute distance to the best performance in each Doing Business indicator. An economy’s distance to frontier score is indicated on a scale from 0 to 100, where 0 represents the worst performance and 100 the frontier. For the economies for which the data cover 2 cities, scores are a population-weighted average for the 2 cities. Source: Doing Business database. Doing Business 2015 Germany 9 THE BUSINESS ENVIRONMENT Figure 1.3 Rankings on Doing Business topics - Germany (Scale: Rank 189 center, Rank 1 outer edge) Figure 1.4 Distance to frontier scores on Doing Business topics - Germany (Scale: Score 0 center, Score 100 outer edge) Note: The rankings are benchmarked to June 2014 and based on the average of each economy’s distance to frontier (DTF) scores for the 10 topics included in this year’s aggregate ranking. The distance to frontier score benchmarks economies with respect to regulatory practice, showing the absolute distance to the best performance in each Doing Business indicator. An economy’s distance to frontier score is indicated on a scale from 0 to 100, where 0 represents the worst performance and 100 the frontier. For the economies for which the data cover 2 cities, scores are a population-weighted average for the 2 cities. Source: Doing Business database. Doing Business 2015 Germany 10 THE BUSINESS ENVIRONMENT Just as the overall ranking on the ease of doing business tells Doing Business introduced the distance to frontier score. This only part of the story, so do changes in that ranking. Yearly measure shows how far on average an economy is from the movements in rankings can provide some indication of best performance achieved by any economy on each Doing changes in an economy’s regulatory environment for firms, Business indicator. but they are always relative. Comparing the measure for an economy at 2 points in time Moreover, year-to-year changes in the overall rankings do allows users to assess how much the economy’s regulatory not reflect how the business regulatory environment in an environment as measured by Doing Business has changed economy has changed over time—or how it has changed in over time—how far it has moved toward (or away from) the different areas. To aid in assessing such changes, most efficient practices and strongest regulations in areas covered by Doing Business (figure 1.5). Figure 1.5 How far has Germany come in the areas measured by Doing Business? Note: The distance to frontier score shows how far on average an economy is from the best performance achieved by any economy on each Doing Business indicator since 2010, except for getting credit, paying taxes, protecting minority investors and resolving insolvency which had methodology changes in 2014 and thus are only comparable to 2013. The measure is normalized to range between 0 and 100, with 100 representing the best performance (the frontier). See the data notes starting on page 114 of the Doing Business 2015 report for more details on the distance to frontier score. Source: Doing Business database. Doing Business 2015 Germany 11 THE BUSINESS ENVIRONMENT The absolute values of the indicators tell another part of regulation—such as a regulatory process that can be the story (table 1.1). The indicators, on their own or in completed with a small number of procedures in a few comparison with the indicators of a good practice days and at a low cost. Comparison of the economy’s economy or those of comparator economies in the indicators today with those in the previous year may region, may reveal bottlenecks reflected in large numbers show where substantial bottlenecks persist—and where of procedures, long delays or high costs. Or they may they are diminishing. reveal unexpected strengths in an area of business Table 1.1 Summary of Doing Business indicators for Germany United Kingdom DB2015 Best performer globally Denmark DB2015 Germany DB2015 Germany DB2014 Norway DB2015 Finland DB2015 Iceland DB2015 Indicator France DB2015 DB2015 Starting a Business 114 103 25 27 28 31 22 45 New Zealand (1) (rank) Starting a Business (DTF 81.38 81.75 93.40 93.10 93.00 92.35 94.03 91.23 New Zealand (99.96) Score) Procedures (number) 9.0 9.0 4.0 3.0 5.0 5.0 4.0 6.0 New Zealand (1.0)* Time (days) 14.5 14.5 5.5 14.0 4.5 4.0 5.0 6.0 New Zealand (0.5) Cost (% of income per 8.8 4.8 0.2 1.1 0.9 2.4 0.9 0.3 Slovenia (0.0) capita) Paid-in min. capital (% 35.8 37.8 14.5 7.0 0.0 9.3 5.0 0.0 112 Economies (0.0)* of income per capita) Dealing with Hong Kong SAR, Construction Permits 8 7 5 33 86 56 27 17 China (1) (rank) Dealing with Hong Kong SAR, Construction Permits 87.42 87.35 89.84 81.61 73.14 77.60 83.05 85.06 China (95.53) (DTF Score) Doing Business 2015 Germany 12 United Kingdom DB2015 Best performer globally Denmark DB2015 Germany DB2015 Germany DB2014 Norway DB2015 Finland DB2015 Iceland DB2015 Indicator France DB2015 DB2015 Hong Kong SAR, Procedures (number) 8.0 8.0 7.0 15.0 8.0 17.0 10.0 9.0 China (5.0) Time (days) 96.0 96.0 64.0 64.0 183.0 84.0 122.5 105.0 Singapore (26.0) Cost (% of warehouse 1.1 1.2 2.3 0.8 4.7 0.5 0.6 1.2 Qatar (0.0)* value) Getting Electricity 3 2 14 33 60 9 25 70 Korea, Rep. (1) (rank) Getting Electricity (DTF 98.37 98.36 91.07 85.29 79.87 93.81 87.44 78.42 Korea, Rep. (99.83) Score) Procedures (number) 3.0 3.0 4.0 5.0 5.0 4.0 4.0 4.0 12 Economies (3.0)* Time (days) 28.0 28.0 38.0 42.0 79.0 22.0 66.0 126.0 Korea, Rep. (18.0)* Cost (% of income per 44.4 46.9 114.9 29.7 42.9 12.7 11.9 90.1 Japan (0.0) capita) Registering Property 89 80 8 38 126 23 5 68 Georgia (1) (rank) Registering Property 67.78 70.10 92.61 80.58 59.36 86.03 94.12 72.55 Georgia (99.88) (DTF Score) Procedures (number) 5.0 5.0 3.0 3.0 8.0 3.0 1.0 6.0 4 Economies (1.0)* Time (days) 40.0 40.0 4.0 32.0 49.0 3.5 3.0 21.5 3 Economies (1.0)* Cost (% of property 6.7 5.7 0.6 4.0 6.1 3.6 2.5 4.6 4 Economies (0.0)* value) Getting Credit (rank) 23 19 23 36 71 52 61 17 New Zealand (1) Getting Credit (DTF 70.00 70.00 70.00 65.00 50.00 60.00 55.00 75.00 New Zealand (100) Score) Strength of legal rights 6 6 8 7 4 5 5 7 3 Economies (12)* index (0-12) Doing Business 2015 Germany 13 United Kingdom DB2015 Best performer globally Denmark DB2015 Germany DB2015 Germany DB2014 Norway DB2015 Finland DB2015 Iceland DB2015 Indicator France DB2015 DB2015 Depth of credit 8 8 6 6 6 7 6 8 23 Economies (8)* information index (0-8) Credit registry coverage 1.3 0.0 0.0 0.0 44.5 0.0 0.0 0.0 Portugal (100.0) (% of adults) Credit bureau coverage 100.0 100.0 7.8 19.6 0.0 100.0 100.0 100.0 23 Economies (100.0)* (% of adults) Protecting Minority 51 50 17 76 17 28 12 4 New Zealand (1) Investors (rank) Protecting Minority 59.17 59.17 67.50 55.83 67.50 65.00 70.00 78.33 New Zealand (81.67) Investors (DTF Score) Extent of conflict of interest regulation 5.0 5.0 6.7 6.0 5.7 6.7 7.0 8.3 Singapore (9.3)* index (0-10) Extent of shareholder governance index (0- 6.8 6.8 6.8 5.2 7.8 6.3 7.0 7.3 France (7.8)* 10) Strength of minority investor protection 5.9 5.9 6.8 5.6 6.8 6.5 7.0 7.8 New Zealand (8.2) index (0-10) United Arab Emirates Paying Taxes (rank) 68 64 12 21 95 46 15 16 (1)* Paying Taxes (DTF United Arab Emirates 77.02 76.84 91.94 88.36 72.12 80.86 90.80 90.52 Score) (99.44)* Payments (number per Hong Kong SAR, 9.0 9.0 10.0 8.0 8.0 26.0 4.0 8.0 year) China (3.0)* Time (hours per year) 218.0 218.0 130.0 93.0 137.0 140.0 83.0 110.0 Luxembourg (55.0) Trading Across Borders 18 16 7 14 10 39 24 15 Singapore (1) (rank) Trading Across Borders 87.67 88.26 92.23 89.10 90.18 83.23 85.56 88.32 Singapore (96.47) Doing Business 2015 Germany 14 United Kingdom DB2015 Best performer globally Denmark DB2015 Germany DB2015 Germany DB2014 Norway DB2015 Finland DB2015 Iceland DB2015 Indicator France DB2015 DB2015 (DTF Score) Documents to export 4 4 4 4 2 4 4 4 Ireland (2)* (number) Time to export (days) 9.0 9.0 6.0 9.0 10.0 10.0 8.0 8.0 5 Economies (6.0)* Cost to export (US$ per 1,015.0 905.0 795.0 615.0 1,335.0 1,530.0 1,265.0 1,005.0 Timor-Leste (410.0) container) Cost to export (deflated 1,015.0 925.2 795.0 615.0 1,335.0 1,530.0 1,265.0 1,005.0 US$ per container) Documents to import 4 4 3 5 2 4 5 4 Ireland (2)* (number) Time to import (days) 7.0 7.0 5.0 7.0 11.0 9.0 7.0 6.0 Singapore (4.0) Cost to import (US$ per 1,050.0 940.0 745.0 625.0 1,445.0 1,620.0 1,140.0 1,050.0 Singapore (440.0) container) Cost to import (deflated 1,050.0 960.9 745.0 625.0 1,445.0 1,620.0 1,140.0 1,050.0 US$ per container) Enforcing Contracts 13 13 34 17 10 3 8 36 Singapore (1) (rank) Enforcing Contracts 76.74 76.74 68.79 75.58 77.67 82.30 78.41 68.08 Singapore (89.54) (DTF Score) Time (days) 394.0 394.0 410.0 375.0 395.0 417.0 280.0 437.0 Singapore (150.0) Cost (% of claim) 14.4 14.4 23.3 13.3 17.4 9.0 9.9 39.9 Iceland (9.0) Procedures (number) 31.0 31.0 35.0 33.0 29.0 27.0 34.0 29.0 Singapore (21.0)* Resolving Insolvency 3 3 9 1 22 15 8 13 Finland (1) (rank) Resolving Insolvency 91.78 91.65 84.59 93.85 75.94 81.47 85.62 82.04 Finland (93.85) (DTF Score) Doing Business 2015 Germany 15 United Kingdom DB2015 Best performer globally Denmark DB2015 Germany DB2015 Germany DB2014 Norway DB2015 Finland DB2015 Iceland DB2015 Indicator France DB2015 DB2015 Time (years) 1.2 1.0 0.9 1.9 1.0 0.9 1.0 Ireland (0.4) Cost (% of estate) 8.0 8.0 4.0 3.5 9.0 3.5 1.0 6.0 Norway (1.0) Outcome (0 as piecemeal sale and 1 as 1 1 1 1 1 1 1 1 going concern) Recovery rate (cents on 83.4 83.2 87.5 90.2 77.2 84.6 92.3 88.6 Japan (92.9) the dollar) Strength of insolvency 15.0 15.0 12.0 14.5 11.0 11.5 11.5 11.0 5 Economies (15.0)* framework index (0-16) Note: DB2014 rankings shown are not last year’s published rankings but comparable rankings for DB2014 that capture the effects of such factors as data corrections and changes to the methodology. Trading across borders deflated and non-deflated values are identical in DB2015 because it is defined as the base year for the deflator. The best performer on time for paying taxes is defined as the lowest time recorded among all economies in the DB2015 sample that levy the 3 major taxes: profit tax, labor taxes and mandatory contributions, and VAT or sales tax. If an economy has no laws or regulations covering a specific area—for example, insolvency—it receives a “no practice” mark. Similarly, an economy receives a “no practice” or “not possible” mark if regulation exists but is never used in practic e or if a competing regulation prohibits such practice. Either way, a “no practice” mark puts the economy at the bottom of the ranking on the relevant indicator. * Two or more economies share the top ranking on this indicator. A number shown in place of an economy’s name indicates the number of economies that share the top ranking on the indicator. For a list of these economies, see the Doing Business website (http://www.doingbusiness.org). Source: Doing Business database. Doing Business 2015 Germany 16 STARTING A BUSINESS Formal registration of companies has many WHAT THE STARTING A BUSINESS immediate benefits for the companies and for business owners and employees. Legal entities can INDICATORS MEASURE outlive their founders. Resources are pooled as several shareholders join forces to start a company. Procedures to legally start and operate a Formally registered companies have access to company (number) services and institutions from courts to banks as well Preregistration (for example, name as to new markets. And their employees can benefit verification or reservation, notarization) from protections provided by the law. An additional benefit comes with limited liability companies. These Registration in the economy’s largest limit the financial liability of company owners to their business city 1 investments, so personal assets of the owners are not Postregistration (for example, social security put at risk. Where governments make registration registration, company seal) easy, more entrepreneurs start businesses in the formal sector, creating more good jobs and Time required to complete each procedure generating more revenue for the government. (calendar days) What do the indicators cover? Does not include time spent gathering information Doing Business measures the ease of starting a business in an economy by recording all procedures Each procedure starts on a separate day (2 officially required or commonly done in practice by procedures cannot start on the same day). an entrepreneur to start up and formally operate an Procedures that can be fully completed industrial or commercial business—as well as the online are recorded as ½ day. time and cost required to complete these procedures. Procedure completed once final document is It also records the paid-in minimum capital that received companies must deposit before registration (or within 3 months). The ranking of economies on the No prior contact with officials ease of starting a business is determined by sorting Cost required to complete each procedure their distance to frontier scores for starting a (% of income per capita) business. These scores are the simple average of the distance to frontier scores for each of the component Official costs only, no bribes indicators. No professional fees unless services required To make the data comparable across economies, by law Doing Business uses several assumptions about the Paid-in minimum capital (% of income business and the procedures. It assumes that all per capita) information is readily available to the entrepreneur and that there has been no prior contact with Deposited in a bank or with a notary before officials. It also assumes that the entrepreneur will registration (or within 3 months) pay no bribes. And it assumes that the business:  Is a limited liability company, located in the  Has a start-up capital of 10 times income per largest business city and is 100% domestically capita. owned . 1  Has a turnover of at least 100 times income per  Has between 10 and 50 employees. capita.  Conducts general commercial or industrial  Does not qualify for any special benefits. activities.  Does not own real estate. 1 For the 11 economies with a population of more than 100 million, data for a second city have been added. Doing Business 2015 Germany 17 STARTING A BUSINESS Where does the economy stand today? What does it take to start a business in Germany? largest business city of an economy, except for 11 According to data collected by Doing Business, starting a economies for which the data are a population-weighted business there requires 9.0 procedures, takes 14.5 days, average of the 2 largest business cities. See the chapter costs 8.8% of income per capita and requires paid-in on distance to frontier and ease of doing business minimum capital of 35.8% of income per capita (figure ranking at the end of this profile for more details. 2.1). Most indicator sets refer to a case scenario in the Figure 2.1 What it takes to start a business in Germany - Paid-in minimum capital (% of income per capita): 35.8 Note: Time shown in the figure above may not reflect simultaneity of procedures. Online procedures account for 0.5 days in the total time calculation. For more information on the methodology of the starting a business indicators, see the Doing Business website (http://www.doingbusiness.org). For details on the procedures reflected here, see the summary at the end of this chapter. Source: Doing Business database. Doing Business 2015 Germany 18 STARTING A BUSINESS Globally, Germany stands at 114 in the ranking of 189 average ranking provide other useful information for economies on the ease of starting a business (figure 2.2). assessing how easy it is for an entrepreneur in Germany The rankings for comparator economies and the regional to start a business. Figure 2.2 How Germany and comparator economies rank on the ease of starting a business Source: Doing Business database. Doing Business 2015 Germany 19 STARTING A BUSINESS Economies around the world have taken steps making it they often are part of a larger regulatory reform easier to start a business—streamlining procedures by program. Among the benefits have been greater firm setting up a one-stop shop, making procedures simpler satisfaction and savings and more registered businesses, or faster by introducing technology and reducing or financial resources and job opportunities. eliminating minimum capital requirements. Many have What business registration reforms has Doing Business undertaken business registration reforms in stages—and recorded in Germany (table 2.1)? Table 2.1 How has Germany made starting a business easier—or not? By Doing Business report year from DB2010 to DB2015 DB year Reform Germany made starting a business easier by reducing the DB2010 minimum capital requirement to a symbolic amount. Germany eased business start-up by increasing the efficiency of communications between the notary and the commercial DB2011 registry and eliminating the need to publish an announcement in a newspaper. Germany made starting a business more difficult by increasing DB2015 notary fees. Note: For information on reforms in earlier years (back to DB2005), see the Doing Business reports for these years, available at http://www.doingbusiness.org. Source: Doing Business database. Doing Business 2015 Germany 20 STARTING A BUSINESS What are the details? Underlying the indicators shown in this chapter for STANDARDIZED COMPANY Germany is a set of specific procedures—the bureaucratic and legal steps that an entrepreneur must complete to incorporate and register a new Legal form: GmbH-Gesellschaft mit firm. These are identified by Doing Business through beschränkter Haftung collaboration with relevant local professionals and the study of laws, regulations and publicly available Paid in minimum capital requirement: EUR information on business entry in that economy. 12,500 Following is a detailed summary of those procedures, City: Berlin along with the associated time and cost. These procedures are those that apply to a company Start-up Capital: 10 times GNI per capita matching the standard assumptions (the “standardized company”) used by Doing Business in collecting the data (see the section in this chapter on what the indicators measure). Table 2.2 Summary of time, cost and procedures for starting a business in Germany - Time to No. Procedure Cost to complete complete Obtain the company’s name at the local chamber of industry and commerce Entrepreneurs need to obtain the company’s name at the Berlin Chamber of Industry and Commerce. Less than one day 1 no charge (online procedure) Agency: Chamber of Industry & Commerce Notarize the Articles of Association and Memorandum of Association The Bundestag of Germany passed the Act on Modernization of Cost Rules (2. Kostenrechtsmodernisierungsgesetz) on June 27, 2013, which came into force on August 1, 2013. This Act restructured the system of judicial and notarial fees for more transparency and adjusted the costs of notarizing the Articles of Association and Memorandum of see procedure 2 Association to the general economic development. 1 day details For notarizing the articles of association and memorandum of association for GmbH start-ups with two or more shareholders, costs would be calculated on the basis of a “2.0 Fee” as follows: • Up to EUR 500 share capital: Fees is EUR 35 • From EUR 501 to EUR 2,000 share capital: A fee of EUR 18 is added for each EUR 500 of share capital • From EUR 2,001 to EUR 10,000 share capital: A fee of EUR 19 is added for each EUR 1,000 of share capital Doing Business 2015 Germany 21 Time to No. Procedure Cost to complete complete • From EUR 10,001 to EUR 25,000 share capital: A fee of EUR 26 is added for each EUR 3,000 of share capital • From EUR 25,001 to EUR 50,000 share capital: A fee of EUR 35 is added for each EUR 5,000 of share capital • From EUR 50,001 to EUR 200,000 share capital: A fee of EUR 120 is added for each EUR 15,000 of share capital • From EUR 200,001 to EUR 500,000 share capital: A fee of EUR 179 is added for each EUR 30,000 of share capital The cost schedule continues up to a maximum Fee of EUR 22,770 calculated on the basis of a nominal share capital equal or more than EUR 10,000,000 (maximum transaction value). Agency: Public Notary Open a bank account For a GmbH company, at least 50 percent of the initial capital must be paid up front. 3 1 day no charge Agency: Bank File the Articles of Association through the notary public at the local Commercial Register Applicants must submit to the Commercial Register by electronic form: • the notarized articles of association • the deed of appointment of the directors, if not included in the articles • a list of the company’s shareholders EUR 150 • the assurance that the statutory minimum paid-in capital has been (registration fee) + 4 paid in to the free disposition of the management. 7 days EUR 250 (application for Pursuant to the applicable registration laws, the Commercial Register registration) must decide on the company’s registration without undue delay. The Commercial Register publishes the registration on a central electronic platform (www.handelsregister.de) and notifies the local Chamber of Industry and Commerce and the Tax Office of the new company. Agency: Notary Public Notify the local Office of Business and Standards of the establishment of the company 5 1 day EUR 31 Certain businesses (e.g., restaurants and brokers) must apply for a trading permit (Gewerbeerlaubnis). However, the permit does not have to be presented at the time of the registration of the GmbH at the Doing Business 2015 Germany 22 Time to No. Procedure Cost to complete complete commercial register. If no such permit is required, start-up companies must simply notify the local Trade Office, which issues a trading license (Gewerbeschein). This notification procedure also covers registration formalities with the Central Statistical Office, the relevant Chamber of Industry and Commerce, the local Labor Office, the Social Security and Federal Health Insurance Office. Agency: Local Trade Department (Gewerbeamt) * Register with the Professional Association of the relevant trade The professional associations are carriers of occupational accident 1 day insurance. Registration must be done within a week of the founding of (simultaneous with 6 the business after the notarization of the Articles of Association. no charge previous procedure) Agency: Professional Association (Berufsgenossenschaft) * Notify the local Labor Office of the establishment of the company The notification can be in writing and/or over the phone. The Labor 1 day Office assigns an eight-digit operating number, which is needed to (simultaneous with 7 report to the Social Security Office. no charge previous procedure) Agency: Local Labor Office * Register employees for health and social insurance The Social Security and Federal Health Insurance Office notifies the local Labor Office and the annuity insurance carrier (Deutsche 1 day Rentenversicherung Bund). It also collects payment for mandatory (simultaneous with 8 health, unemployment, and annuity insurance. no charge previous procedure) Agency: Social Security Office * Mail out the documentation to the Tax Office Registration must be done within a month of the opening of the 1 day business and not later than a month after the notarization of the (simultaneous with 9 no charge Articles of Association. After the Tax Office is notified of the company’s previous business activity by the Trade Office, the Tax Office sends the company procedure) a questionnaire requesting the company’s business data. Doing Business 2015 Germany 23 Time to No. Procedure Cost to complete complete Agency: Local Tax Office * Takes place simultaneously with another procedure. Note: Online procedures account for 0.5 days in the total time calculation. Source: Doing Business database. Doing Business 2015 Germany 24 DEALING WITH CONSTRUCTION PERMITS Regulation of construction is critical to protect the WHAT THE DEALING WITH CONSTRUCTION public. But it needs to be efficient, to avoid excessive PERMITS INDICATORS MEASURE constraints on a sector that plays an important part in every economy. Where complying with building regulations is excessively costly in time and money, Procedures to legally build a warehouse many builders opt out. They may pay bribes to pass (number) inspections or simply build illegally, leading to Submitting all relevant documents and hazardous construction that puts public safety at risk. obtaining all necessary clearances, licenses, Where compliance is simple, straightforward and permits and certificates inexpensive, everyone is better off. Submitting all required notifications and What do the indicators cover? receiving all necessary inspections Doing Business records the procedures, time and cost Obtaining utility connections for water and for a business in the construction industry to obtain sewerage all the necessary approvals to build a warehouse in Registering the warehouse after its the economy’s largest business city, connect it to completion (if required for use as collateral or basic utilities and register the warehouse so that it for transfer of the warehouse) can be used as collateral or transferred to another Time required to complete each procedure entity. (calendar days) The ranking of economies on the ease of dealing with Does not include time spent gathering construction permits is determined by sorting their information distance to frontier scores for dealing with Each procedure starts on a separate day. construction permits. These scores are the simple Procedures that can be fully completed online average of the distance to frontier scores for each of are recorded as ½ day. the component indicators. Procedure considered completed once final To make the data comparable across economies, document is received Doing Business uses several assumptions about the business and the warehouse, including the utility No prior contact with officials connections. Cost required to complete each procedure (% The business: of warehouse value) Official costs only, no bribes  Is a limited liability company operating in the construction business and located in  Will have complete architectural and the largest business city. For the 11 technical plans prepared by a licensed economies with a population of more than architect or engineer. 100 million, data for a second city have  Will be connected to water and sewerage been added. Is domestically owned and (sewage system, septic tank or their operated. equivalent). The connection to each utility  Has 60 builders and other employees. network will be 150 meters (492 feet) long. The warehouse:  Will be used for general storage, such as of books or stationery (not for goods requiring  Is valued at 50 times income per capita. special conditions).  Is a new construction (there was no  Will take 30 weeks to construct (excluding all previous construction on the land). delays due to administrative and regulatory requirements). Doing Business 2015 Germany 25 DEALING WITH CONSTRUCTION PERMITS Where does the economy stand today? What does it take to comply with the formalities to build economy, except for 11 economies for which the data a warehouse in Germany? According to data collected by are a population-weighted average of the 2 largest Doing Business, dealing with construction permits there business cities. See the chapter on distance to frontier requires 8.0 procedures, takes 96.0 days and costs 1.1% and ease of doing business ranking at the end of this of the warehouse value (figure 3.1). Most indicator sets profile for more details. refer to a case scenario in the largest business city of an Figure 3.1 What it takes to comply with formalities to build a warehouse in Germany - Note: Time shown in the figure above may not reflect simultaneity of procedures. Online procedures account for 0.5 days in the total time calculation. For more information on the methodology of the dealing with construction permits indicators, see the Doing Business website (http://www.doingbusiness.org). For details on the procedures reflected here, see the summary at the end of this chapter. Source: Doing Business database. Doing Business 2015 Germany 26 DEALING WITH CONSTRUCTION PERMITS Globally, Germany stands at 8 in the ranking of 189 other useful information for assessing how easy it is for economies on the ease of dealing with construction an entrepreneur in Germany to legally build a permits (figure 3.2). The rankings for comparator warehouse. economies and the regional average ranking provide Figure 3.2 How Germany and comparator economies rank on the ease of dealing with construction permits Source: Doing Business database. Doing Business 2015 Germany 27 DEALING WITH CONSTRUCTION PERMITS What are the details? The indicators reported here for Germany are based BUILDING A WAREHOUSE on a set of specific procedures—the steps that a company must complete to legally build a warehouse—identified by Doing Business through Estimated cost of information collected from experts in construction EUR 1,744,968 construction : licensing, including architects, civil engineers, construction lawyers, construction firms, utility City : Berlin service providers and public officials who deal with building regulations. These procedures are those The procedures, along with the associated time and cost, that apply to a company and structure matching the are summarized below. standard assumptions used by Doing Business in collecting the data (see the section in this chapter on what the indicators cover). Table 3.2 Summary of time, cost and procedures for dealing with construction permits in Germany - Time to No. Procedure Cost to complete complete Obtain building permit The building permit grants the right to build on a plot and authorizes construction as well. There are several building departments (Bauaufsichtsämter) located in the districts of Berlin. The location of the building site in Berlin determines which building department is responsible for issuing the building permit. To obtain a construction permit, BuildCo must provide the building authority with, among other documents, project design drawings, a building specification including a detailed description of the future use of the building, proof of stability, and other necessary proofs (e.g. heat insulation, sound insulation). The architect needs to sign the application for the building permit and must attach the design drawings, usually scaled at 1:100. Static calculations must be added. The building authority will produce static expert double-check calculations (carried out by a "Pruefstatiker"). The building authority will then forward the application to other relevant departments (e.g., the fire department, 25 days EUR 6,107 1 planning department). The Building Procedures Regulation (Bauverfahrensverordnung, abbreviated as BauVerfVO) was amended on 22nd March 2013. According to the amendment, the applicant is now obliged to submit the building permission procedure documents electronically in Portable Document (PDF/A). Under a revised Berlin State Law, the Building Code Berlin (Bauordnung Berlin, abbreviated as BauO Bln), effective September 29, 2005, amended by Regulation from June 29, 2011, certain constructions require only a simple building permit (Section 64 BauO Bln) or a waiver (Section 63 BauO Bln, maximum value EUR 3,000.00). In the case of a simplified building permit under Section 64 BauO Bln, the application will be deemed to be complete and sufficient unless the building department notifies the applicant to the contrary within three weeks of receiving the application. If the building department remains silent for four weeks, the application will be deemed granted and construction Doing Business 2015 Germany 28 Time to No. Procedure Cost to complete complete may commence (Section 70, Paragraphs 3 and 4 BauO Bln, and Section 71, Paragraph 7, Item 1 BauO Bln). It is the duty of the architect or the engineer to supervise compliance of the construction project with the applicable state law. In addition, upon receiving the application for a normal building permit, the building department has to notify the applicant within 14 days if the application is complete or if additional documents or plans are required (Section 70, Paragraph 1 and 2 BauO Bln). If the applicant fails to amend the application within a period determined by the building authority, the application will be deemed abandoned. If the application is complete, the building department will contact other departments involved (i.e., the fire safety and public street supervision departments). If the other departments fail to make a decision within a month, they will be deemed to have consented to the issuance of the permit. If the application is not complete for the purpose of these other departments, then this period of a month is interrupted until the application is completed by the applicant. Upon receiving consent from the other departments, the building department again has a month to decide on the application for a building permit. Agency: Building Department Apply for approval of static calculation The building authority appoints an independent engineer (either from a private company or from within the authority) who is responsible for verifying the static calculations (the “Pruefingenieur”). A legal certificate of static stability, issued by a “Pruefingenieur”, must be available at the time of start of construction. The cost of an independent engineer to double-check the static stability is calculated by a Regulation concerning the work of the “Pruefingenieure” and the payment (Bautechnische Prüfungsverordnung, abbreviated as BauPrüfV, effective February 12, 2010, amended by Regulation from August 23, 2010). In the case of the 21 days EUR 3,150 2 warehouse considered here, the cost for an independent engineer is about EUR 3,150.00. The calculation is based on a volume of 3900 cubic meters and a chargeable building value of EUR 95 per cubic meters (Appendix 1 to Section 27 Paragraph 1 BauPrüfVO, Item 15). The chargeable building value amounts up to EUR 370,500.00 in accordance with the list. A structural framework of average difficulty considered (“Bauwerksklasse” 2-3, Appendix 2 to Section 27 Paragraph 4 BauPrüfVO) gives a basic fee of about EUR 3,150.00 for a legal certificate of static stability, issued by a “Pruefingenieur”. Agency: Independent Engineer Doing Business 2015 Germany 29 Time to No. Procedure Cost to complete complete Receive fire safety inspection from District Chimney Sweeper Before completion of the building shell, BuildCo must provide the building authority with a certificate confirming the suitability of the chimneys. Such a certificate by the District Chimney Sweeper is mentioned in Section 81, Paragraph 4 BauO Bln. The cost is EUR 31.20 per hour (see Section 1, Paragraph 3, Item 3 a and Section 12 of the applicable city ordinance: Verordnung über die Kosten für Kehr und Überprüfungsarbeiten und Messungen durch den Bezirksschornsteinfegermeister in Berlin, abbreviated as KÜGebO, promulgated January 14, 1999, amended January 23, 2006). The inspection may take more than one hour, but it will not take more than 1 day EUR 31 3 a day. An appointment can be made on short notice, probably 1 -- 2 weeks before the day of inspection. This procedure is for fire safety and for the cases where the heating is done by gas boilers. However, some buildings in Berlin will use a so called "long distance heating" system to heat the building, which is essentially heating by hot water from a centralized boiler. In this case, this procedure would not be required. Agency: District Chimney Sweeper Receive inspection of the building shell The notification must be made 2 weeks before the completion of the building shell. The building authority may then decide on its own whether it will inspect the site (the likelihood is 10%); 2 weeks after the 1 day EUR 2,600 4 notification, BuildCo may start with interior fittings. Agency: Building Department Receive inspection after completion of the building ("Foermliche Bauabnahme") The notification must be made 2 weeks before the completion of the building shell. The building authority may then decide on its own 5 whether it will inspect the site (the likelihood is 10%); 2 weeks after the 1 day no charge notification, BuildCo may start to use the building. Agency: Building Department * Apply for water connection 6 1 day EUR 7,500 Agency: Berliner Wasserbetriebe Doing Business 2015 Germany 30 Time to No. Procedure Cost to complete complete Receive inspection by water company 7 1 day no charge Agency: Berliner Wasserbetriebe Obtain water connection 8 45 days no charge Agency: Berliner Wasserbetriebe * Takes place simultaneously with another procedure. Note: Online procedures account for 0.5 days in the total time calculation. Source: Doing Business database. Doing Business 2015 Germany 31 GETTING ELECTRICITY Access to reliable and affordable electricity is vital for WHAT THE GETTING ELECTRICITY businesses. To counter weak electricity supply, many firms in developing economies have to rely on self- INDICATORS MEASURE supply, often at a prohibitively high cost. Whether electricity is reliably available or not, the first step for Procedures to obtain an electricity a customer is always to gain access by obtaining a connection (number) connection. Submitting all relevant documents and What do the indicators cover? obtaining all necessary clearances and permits Doing Business records all procedures required for a Completing all required notifications and local business to obtain a permanent electricity receiving all necessary inspections connection and supply for a standardized warehouse, as well as the time and cost to complete them. These Obtaining external installation works and procedures include applications and contracts with possibly purchasing material for these works electricity utilities, clearances from other agencies Concluding any necessary supply contract and and the external and final connection works. The obtaining final supply ranking of economies on the ease of getting electricity is determined by sorting their distance to Time required to complete each procedure frontier scores for getting electricity. These scores are (calendar days) the simple average of the distance to frontier scores Is at least 1 calendar day for each of the component indicators. To make the data comparable across economies, several Each procedure starts on a separate day assumptions are used. Does not include time spent gathering The warehouse: information  Is owned by a local entrepreneur, located Reflects the time spent in practice, with little in the economy’s largest business city, in follow-up and no prior contact with officials an area where other warehouses are Cost required to complete each procedure located. For the 11 economies with a (% of income per capita) population of more than 100 million, data Official costs only, no bribes for a second city have been added. Excludes value added tax  Is not in a special economic zone where the connection would be eligible for subsidization or faster service.  Is to either the low-voltage or the medium- voltage distribution network and either  Is located in an area with no physical overhead or underground, whichever is more constraints (ie. property not near a railway). common in the area where the warehouse is  Is a new construction being connected to located. Included only negligible length in the electricity for the first time. customer’s private domain.  Is 2 stories, both above ground, with a total  Requires crossing of a 10-meter road but all surface of about 1,300.6 square meters the works are carried out in a public land, so (14,000 square feet), is built on a plot of there is no crossing into other people's 929 square meters (10,000 square feet), is private property. used for storage of refrigerated goods  Involves installing one electricity meter. The The electricity connection: monthly electricity consumption will be 26880 kilowatt hour (kWh). The internal  Is 150 meters long and is a 3-phase, 4-wire electrical wiring has been completed. Y, 140-kilovolt-ampere (kVA) (subscribed capacity) connection. Doing Business 2015 Germany 32 GETTING ELECTRICITY Where does the economy stand today? What does it take to obtain a new electricity connection Most indicator sets refer to a case scenario in the largest in Germany? According to data collected by Doing business city of an economy, except for 11 economies for Business, getting electricity there requires 3.0 procedures, which the data are a population-weighted average of the takes 28.0 days and costs 44.4% of income per capita 2 largest business cities. See the chapter on distance to (figure 4.1). frontier and ease of doing business ranking at the end of this profile for more details. Figure 4.1 What it takes to obtain an electricity connection in Germany - Note: Time shown in the figure above may not reflect simultaneity of procedures. For more information on the methodology of the getting electricity indicators, see the Doing Business website (http://www.doingbusiness.org). For details on the procedures reflected here, see the summary at the end of this chapter. Source: Doing Business database. Doing Business 2015 Germany 33 GETTING ELECTRICITY Globally, Germany stands at 3 in the ranking of 189 average ranking provide another perspective in assessing economies on the ease of getting electricity (figure 4.2). how easy it is for an entrepreneur in Germany to connect The rankings for comparator economies and the regional a warehouse to electricity. Figure 4.2 How Germany and comparator economies rank on the ease of getting electricity Source: Doing Business database. Doing Business 2015 Germany 34 GETTING ELECTRICITY What are the details? The indicators reported here for Germany are based on a OBTAINING AN ELECTRICITY CONNECTION set of specific procedures—the steps that an entrepreneur must complete to get a warehouse connected to electricity by the local distribution utility— Vattenfall Europe Name of utility: identified by Doing Business. Data are collected from the Distribution Berlin GmbH distribution utility, then completed and verified by electricity regulatory agencies and independent City: Berlin professionals such as electrical engineers, electrical The procedures are those that apply to a warehouse and contractors and construction companies. The electricity electricity connection matching the standard distribution utility surveyed is the one serving the area assumptions used by Doing Business in collecting the (or areas) in which warehouses are located. If there is a data (see the section in this chapter on what the choice of distribution utilities, the one serving the largest indicators cover). The procedures, along with the number of customers is selected. associated time and cost, are summarized below. Table 4.2 Summary of time, cost and procedures for getting electricity in Germany - Time to No. Procedure Cost to complete complete Conclude supply agreement with electricity supplier The customer concludes a supply contract with Vattenfall Sales (VE Sales) Berlin. The customer selects a tariff on the website of VE Sales or the customer has a conversation with a representative of the business client 14 calendar days EUR 0 1 team at VE Sales. Afterwards, the customer concludes a supply contract. Agency: Vattenfall Europe Sales GmbH * Submit application with Vattenfall Europe Distribution Berlin GmbH and await and accept estimate The application can be submitted online by email. Documents to be submitted are: Architect’s plan indicating the room for the grid connection, a route in the building and on the lot for the cable, power performance balance for the building, technical information of the connection, registration number of the electrician and map of the area (“Flurplan”). The application can only be submitted by a registered electrician with the utility. This is required because the application is also 12 calendar days EUR 0 2 of technical nature and technical information is required in the application form. The electrician responsible for the internal wiring of the warehouse has to be listed at the local distribution system operator (Full License) or via a “guest pass” from another German distribution system operator (Guest License). There are no costs for the registration process. The installer identification from any other DSO of the electrician or the Master craftsman’s diploma, trading license and a standard form of the distribution operator is needed for the listing process. To be authorized to install internal wiring in a house, an electrician has to be a Master electrician (“Elektromeister”). Master electrician ("Elektromeister") means Doing Business 2015 Germany 35 Time to No. Procedure Cost to complete complete he/she is licensed with the Chamber of Commerce and has a Craftsman Diploma. This is the general procedure and requirement to be allowed to work as electrician in Germany and to do the internal wiring in a house. The Master electrician ("Elektromeister") is always legally responsible for the internal wiring. All Master electricians (“Elektromeister”) in Berlin are registered with Vattenfall. This license is valid for all his/her projects in the area of the local DSO. Electricians working in the field of industrial (warehouses) connections are registered with Vattenfall in a second form through training. Those electricians receive a number ("Installateurnummer") and are allowed to install the meter. All electricians in Berlin that are working in the field of industrial (warehouses) connections are certified by Vattenfall. The list of those certified electricians is on the website of Vattenfall and can be obtained at the Guild of electricians ("Elektroinnung") as well. There is no external and no internal inspection. The internal wiring is never inspected by Vattenfall DSO, as they trust the electricians through a process of registration and diplomas. Agency: Vattenfall Europe Distribution Berlin GmbH Make payment and await completion of external connection works and meter installation by Vattenfall Europe Distribution Berlin GmbH The customer is paying the estimate at a bank through a wire transfer. The required external connection works are underground work for the cable, building of metering, building of the grid connection, and connection of the building to the grid. The meter gets installed at the same time when the connection is done and by the same or another department if the meter installation is done by Vattenfall DSO. However, in most of the cases, the private electrician (the Master electrician) who 3 did the internal wiring would install the meter. At this moment, this 14 calendar days EUR 15,500 private electrician has to hand over to Vattenfall DSO a form ("Errichterbescheinigung") that certifies that he installed the internal wiring according to technical and safety standards. In 98% of all cases, the internal wiring and the external connection works are done at the same time and usually the external connection works are completed before the internal wiring as this is usually more complex. Electricity starts flowing immediately. Agency: Vattenfall Europe Distribution Berlin GmbH * Takes place simultaneously with another procedure. Source: Doing Business database. Doing Business 2015 Germany 36 REGISTERING PROPERTY Ensuring formal property rights is fundamental. WHAT THE REGISTERING PROPERTY Effective administration of land is part of that. If INDICATORS MEASURE formal property transfer is too costly or complicated, formal titles might go informal again. And where property is informal or poorly Procedures to legally transfer title on administered, it has little chance of being accepted immovable property (number) as collateral for loans—limiting access to finance. Preregistration (for example, checking for liens, notarizing sales agreement, paying property What do the indicators cover? transfer taxes) Doing Business records the full sequence of Registration in the economy’s largest business procedures necessary for a business to purchase city 2 property from another business and transfer the property title to the buyer’s name. The transaction is Postregistration (for example, filing title with the municipality) considered complete when it is opposable to third parties and when the buyer can use the property, Time required to complete each procedure use it as collateral for a bank loan or resell it. The (calendar days) ranking of economies on the ease of registering Does not include time spent gathering property is determined by sorting their distance to information frontier scores for registering property. These scores are the simple average of the distance to frontier Each procedure starts on a separate day. scores for each of the component indicators. To Procedures that can be fully completed online are recorded as ½ day. make the data comparable across economies, several assumptions about the parties to the Procedure considered completed once final transaction, the property and the procedures are document is received used. No prior contact with officials The parties (buyer and seller): Cost required to complete each procedure  Are limited liability companies, 100% (% of property value) domestically and privately owned and Official costs only, no bribes perform general commercial activities. No value added or capital gains taxes included  Are located in the economy’s largest business city . 2  Is located in a periurban commercial zone, and no rezoning is required.  Have 50 employees each, all of whom are nationals.  Has no mortgages attached, has been under the same ownership for the past 10 years. The property (fully owned by the seller):  Consists of 557.4 square meters (6,000 square  Has a value of 50 times income per capita. feet) of land and a 10-year-old, 2-story The sale price equals the value. warehouse of 929 square meters (10,000  Is registered in the land registry or cada- square feet). The warehouse is in good stre, or both, and is free of title disputes. condition and complies with all safety standards, building codes and legal  Property will be transferred in its entirety. requirements. There is no heating system. 2 For the 11 economies with a population of more than 100 million, data for a second city have been added. Doing Business 2015 Germany 37 REGISTERING PROPERTY Where does the economy stand today? What does it take to complete a property transfer in Most indicator sets refer to a case scenario in the largest Germany? According to data collected by Doing Business, business city of an economy, except for 11 economies for registering property there requires 5.0 procedures, takes which the data are a population-weighted average of the 40.0 days and costs 6.7% of the property value (figure 2 largest business cities. See the chapter on distance to 5.1). frontier and ease of doing business ranking at the end of this profile for more details. Figure 5.1 What it takes to register property in Germany - Note: Time shown in the figure above may not reflect simultaneity of procedures. Online procedures account for 0.5 days in the total time calculation. For more information on the methodology of the registering property indicators, see the Doing Business website (http://www.doingbusiness.org). For details on the procedures reflected here, see the summary at the end of this chapter. Source: Doing Business database. Doing Business 2015 Germany 38 REGISTERING PROPERTY Globally, Germany stands at 89 in the ranking of 189 regional average ranking provide other useful economies on the ease of registering property (figure information for assessing how easy it is for an 5.2). The rankings for comparator economies and the entrepreneur in Germany to transfer property. Figure 5.2 How Germany and comparator economies rank on the ease of registering property Source: Doing Business database. Doing Business 2015 Germany 39 REGISTERING PROPERTY Economies worldwide have been making it easier for the time required substantially—enabling buyers to use entrepreneurs to register and transfer property—such as or mortgage their property earlier. What property by computerizing land registries, introducing time limits registration reforms has Doing Business recorded in for procedures and setting low fixed fees. Many have cut Germany (table 5.1)? Table 5.1 How has Germany made registering property easier—or not? By Doing Business report year from DB2010 to DB2015 DB year Reform Germany made it more expensive to register property by DB2015 increasing the property transfer tax. Note: For information on reforms in earlier years (back to DB2005), see the Doing Business reports for these years, available at http://www.doingbusiness.org. Source: Doing Business database. Doing Business 2015 Germany 40 REGISTERING PROPERTY What are the details? The indicators reported here are based on a set of STANDARD PROPERTY TRANSFER specific procedures—the steps that a buyer and seller must complete to transfer the property to the buyer’s name—identified by Doing Business through information collected from local property lawyers, Property value: EUR 1,744,968 notaries and property registries. These procedures are those that apply to a transaction matching the City: Berlin standard assumptions used by Doing Business in collecting the data (see the section in this chapter on The procedures, along with the associated time and what the indicators cover). cost, are summarized below. Table 5.2 Summary of time, cost and procedures for registering property in Germany Time to No. Procedure Cost to complete complete The extract (Gebührensatz): The notary obtains an extract from the Land Registry and notarizes Authentication (2.0 the transfer agreement fee) + Support (0.5 The notary obtains the information referred to the property, e.g. from fee), both based the land registry to "name" the object in the contract and to see if it is on property value. free of burdens and mortgages. A notary has a privileged access to the A full 1.0 fee land register to obtain the extracts. Some of the notaries have on-line (Gebühr):First EUR access to such land registers which are already converted to electronic 500= EUR 15Up to land registers. They are in the position to review the extracts very shortly EUR 2,000 an before the notarization from their own offices. The land registry in Berlin increase of EUR 4 is entirely computerized, and so extracts can be obtained online. The for every EUR notary will also notarize the sale and transfer agreement. This is a 500Up to EUR necessary form requirement according to Germany statutory law. 10,000 an increase Notary's fees are fixed by law and depend on the property price. In our of EUR 6 for every case it is EUR 4794 but the fee varies depending on additional measures 5 days 1 EUR 1,000Up to needed in each individual case. A notary will generally examine the land register extracts. In exceptional cases there might not be sufficient time, EUR 25,000 an for example because he has been asked by the parties to notarize a sale increase of EUR 8 and transfer agreement within a very short time period. If he is willing in for every EUR such cases to notarize the agreement he will provide for a clause to 3,000Up to EUR exclude his liability that he has not reviewed the land register but that 50,000 an increase the parties have asked him, nevertheless, to notarize the document. If the of EUR 10 for notary has not prepared the draft sale and transfer agreement he asks every EUR 5,000Up for the draft agreement to be provided in advance for his review. The to EUR 200,000 an usual Procedure is that the notary examines the draft and provides the increase of EUR 27 parties with comments as regards legal and technical aspects. for every EUR 15,000Up to EUR Agency: Land Registry 'Grundbuchamt' 500,000 an increase of EUR 50 for every EUR 30,000Up to EUR Doing Business 2015 Germany 41 Time to No. Procedure Cost to complete complete 5,000,000 an increase of EUR 80 for every EUR 50,000Up to EUR 10,000,000 an increase of EUR 130 for every EUR 200,000Up to EUR 20,000,000 an increase of EUR 150 for every EUR 250,000Up to EUR 30,000,000 an increase of EUR 280 for every EUR 500,000Above EUR 30,000,000 an increase of EUR 120 for every EUR 1,000,000 Obtain waiver of preemption rights with the municipality The consent or negative attest of the competent authority regarding any statutory pre-emption rights is required and applicable to all properties in Berlin. The civil council ("Bezirksamt") issues the consent or a negative attest to the transaction. The time limit given by the statute is that the civil council may exercise the right of pre-emption two months (preclusion period) after the delivery of a copy of the notarised sale and transfer agreement (The notary is usually requested to execute the agreement). The city council usually responds within two months even if 2 weeks and up it does not exercise the pre-emption right. The respective preemption to 2 months EUR 100 (consent right for the public authorities/civil council mentioned in the survey is (simultaneous of negative attest 2 regulated under Section 24, 25 and 28 German Federal Building Code with Procedure 3 of city council) (Baugesetzbuch) and Section 66 German Federal Nature Conservation and 4) Act (Bundesnaturschutzgesetz). Under specific circumstances the public authorities could have a statutory preemption right to coordinate the urban land-use planning. These rules are applicable to all properties in Berlin. It is necessary therefore to provide the land register with either a consent of the public authorities to the transfer or an attest that the statutory right of preemption either does not exist or is not exercised. Agency: Muncipality Doing Business 2015 Germany 42 Time to No. Procedure Cost to complete complete * Fulfillment of the pre-conditions for the validity of the purchase price and notarize sale agreement The following pre conditions have to be fulfilled for the maturity of the purchase price: (i) Consent or negative attest of the competent authority regarding any statutory pre-emption rights, applicable to all properties in Berlin. (ii) Registration of the priority notice in the Land Register (not mandatory but usual practice to secure the purchasers rank in the land register and avoid a third party purchasing the property in good faith). (iii) Consent to the cancellation of existing encumbrances (i)The civil council ("Bezirksamt") issues the consent or a negative attest to the transaction. The time limit given by the statute is that the civil council may exercise the right of pre-emption two months after informing the civil council of the notarised sale and transfer agreement. (ii)The priority notice prevents a purchase by a third party of good faith between the conclusion of the purchase agreement and registration of the purchaser; it usually ranks after the existing encumbrances and prior to any future encumbrances at the time of notarisation. This notice provides a very high level of legal and economic security and certainty. Upon registration, the notice protects against all intervening interests (including seller’s insolvency) pending completion of the transaction and actual change in registered ownership. By use of this notice, a purchaser 20 days EUR 1388 is legally protected against potential risks at an extremely early stage of (simultaneous (registration fee of 3 the conveyancing transaction. Therefore, such notation is generally with Procedure 2 priority notice, entered in the public register by the notary immediately following and 4) 5/10 fee) authentication of the purchase contract. From that moment onward, the purchaser can rest assured that he can acquire title to the property if all prerequisites to maturity of the purchase price are fulfilled. The items (i, ii, and iii) above which are not accepted or taken over by the purchaser have to be in place. It might take substantial time to obtain them, particularly if they have come from public authorities. Such consents will be delivered to the notary and will usually be presented to the land register later when applying for the registration of the new owner (Procedure 4). Registration fee of the priority notice depends on the value of the property. If all pre-conditions to the maturity "Fälligkeit" of the purchase price, usually collected and examined by the notary, have been fulfilled, the notary issues a statement of maturity "Fälligkeitsmitteilung" to the purchaser. The purchaser is then obliged to pay the purchase price. The payment is evidenced by the seller confirming payment or a bank statement. If the respective declarations in rem have already been provided for in the sale and transfer agreement, the notary is usually bound by an escrow agreement not to forward them to the land register until the purchase price has been paid. In case of real property the law says the agreement has to be notarized Doing Business 2015 Germany 43 Time to No. Procedure Cost to complete complete (Section 311b German Civil Code). The transfer of title of a real property, governed by the law of disposition "Sachenrecht", also has to be in a certain form: the declarations in rem, which are in a format according to the land register regulation (Grundbuchordnung), and the transfer has to be registered in the land register. Such declarations in rem which are pre-conditions to the registration of the purchaser to be registered as new owner may either already be in the notarial deed or be given in a separate notarial deed. Agency: Land Registry * Payment of the transfer tax and obtaining the confirmation The notary is obliged to provide a copy of each notarised sale and transfer agreement to the responsible tax authority. The tax authority will then issue a tax assessment and send it to the purchaser. The land register clerk will not register the purchaser as new owner if the transfer tax has not been paid. After payment of the real estate transfer tax, the 15 days, possibly tax authority will issue a statement of innocuousness up to one month 6% of purchase 4 (Unbedenklichkeitsbescheinigung) and send it to the notary for (simultaneous price presentation to the land register. It may be expected that such statement with Procedure 2 will be issued within two months following the notarisation. The tax and 3) amounts to 5% of the purchase price in Berlin; the tax in the remaining states within Germany is 3.5% to 5% of the purchase price. Agency: Tax Authority 'Finanzamt' Application for the registration of the new owner and deletion of the priority notice to the land register After the purchase price has been paid and the tax authorities have provided the innocuousness statement, an application for the registration of the purchaser as new owner and deletion of the priority notice is submitted. A registration fee is paid depending on the property value. The deletion fee for the cancellation of the priority notice also depends on the value. It is important to note that there is a possibility to EUR 2,775 register the title through an expedited Procedure, whereby the notary (Registration Fee, acts as a Trustee and the client can pay through a trust account a 10/10 fee) + EUR 5 up to one month (Notartreuhandkonto). This makes it possible to obtain the legal title 694 (¼ fee for the faster, possibly in 2-5 days. However, this occurs only with a small deletion of the proportion of property title transfers. The documentation shall include: priority notice) • Statement of Innocuousness (obtained in Procedure 3) • Consent of public authority/civil council to the transfer or attest that the statutory right of pre-emption either does not exist or is not exercised (obtained after Procedure 2) • Consents to the cancellation (obtained in Procedure 2 and sent to the notary) • Declarations in rem ‘dingliche Erklärungen” for the registration of the purchaser as owner Agency: Land Register Doing Business 2015 Germany 44 Time to No. Procedure Cost to complete complete * Takes place simultaneously with another procedure. Note: Online procedures account for 0.5 days in the total time calculation. Source: Doing Business database. Doing Business 2015 Germany 45 GETTING CREDIT Two types of frameworks can facilitate access to WHAT THE GETTING CREDIT INDICATORS credit and improve its allocation: credit information MEASURE systems and borrowers and lenders in collateral and bankruptcy laws. Credit information systems enable Strength of legal rights index (0–12) 3 lenders’ rights to view a potential borrower’s financial history (positive or negative)—valuable information to Rights of borrowers and lenders through consider when assessing risk. And they permit collateral laws borrowers to establish a good credit history that will Protection of secured creditors’ rights through allow easier access to credit. Sound collateral laws bankruptcy laws enable businesses to use their assets, especially Depth of credit information index (0–8) 4 movable property, as security to generate capital— while strong creditors’ rights have been associated Scope and accessibility of credit information with higher ratios of private sector credit to GDP. distributed by credit bureaus and credit registries What do the indicators cover? Credit bureau coverage (% of adults) Doing Business assesses the sharing of credit information and the legal rights of borrowers and Number of individuals and firms listed in lenders with respect to secured transactions through largest credit bureau as percentage of adult 2 sets of indicators. The depth of credit information population index measures rules and practices affecting the Credit registry coverage (% of adults) coverage, scope and accessibility of credit Number of individuals and firms listed in information available through a credit registry or a credit registry as percentage of adult credit bureau. The strength of legal rights index population measures whether certain features that facilitate lending exist within the applicable collateral and bankruptcy laws. Doing Business uses two case scenarios, Case A and Case B, to determine the scope of the secured transactions system, involving a  Has up to 50 employees. secured borrower and a secured lender and  Is 100% domestically owned, as is the lender. examining legal restrictions on the use of movable collateral (for more details on each case, see the Data The ranking of economies on the ease of getting Notes section of the Doing Business 2015 report). credit is determined by sorting their distance to These scenarios assume that the borrower: frontier scores for getting credit. These scores are the distance to frontier score for the strength of legal  Is a private limited liability company. rights index and the depth of credit information  Has its headquarters and only base of index. operations in the largest business city. For the 11 economies with a population of more than 100 million, data for a second city have been added. 3 For the legal rights index, 2 new points are added in Doing Business 2015 for new data collected to assess the overall legal framework for secured transactions and the functioning of the collateral registry. 4 For the credit information index, 2 new points are added in Doing Business 2015 for new data collected on accessing borrowers’ credit information online and availability of credit scores. Doing Business 2015 Germany 46 GETTING CREDIT Where does the economy stand today? How well do the credit information system and collateral Globally, Germany stands at 23 in the ranking of 189 and bankruptcy laws in Germany facilitate access to economies on the ease of getting credit (figure 6.1). The credit? The economy has a score of 8 on the depth of rankings for comparator economies and the regional credit information index and a score of 6 on the strength average ranking provide other useful information for of legal rights index (see the summary of scoring at the assessing how well regulations and institutions in end of this chapter for details). Higher scores indicate Germany support lending and borrowing. more credit information and stronger legal rights for borrowers and lenders. Figure 6.1 How Germany and comparator economies rank on the ease of getting credit Source: Doing Business database. Doing Business 2015 Germany 47 GETTING CREDIT One way to put an economy’s score on the getting credit rights index for Germany and shows the scores for indicators into context is to see where the economy comparator economies as well as the regional average stands in the distribution of scores across economies. score. Figure 6.3 shows the same for the depth of credit Figure 6.2 highlights the score on the strength of legal information index. Figure 6.2 How strong are legal rights for borrowers Figure 6.3 How much credit information is shared — and lenders? and how widely? Economy scores on strength of legal rights index Economy scores on depth of credit information index Note: Higher scores indicate that collateral and bankruptcy Note: Higher scores indicate the availability of more credit laws are better designed to facilitate access to credit. information, from either a credit registry or a credit bureau, Source: Doing Business database. to facilitate lending decisions. If the credit bureau or registry is not operational or covers less than 5% of the adult population, the total score on the depth of credit information index is 0. Source: Doing Business database. Doing Business 2015 Germany 48 GETTING CREDIT What are the details? The getting credit indicators reported here for Germany The data on the legal rights of borrowers and lenders are are based on detailed information collected in that gathered through a survey of financial lawyers and economy. The data on credit information sharing are verified through analysis of laws and regulations as well collected through a survey of a credit registry and/or as public sources of information on collateral and credit bureau (if one exists). To construct the depth of bankruptcy laws. For the strength of legal rights index, a credit information index, a score of 1 is assigned for each score of 1 is assigned for each of 10 aspects related to of 8 features of the credit registry or credit bureau (see legal rights in collateral law and 2 aspects in bankruptcy summary of scoring below). law. Strength of legal rights index (0–12) Index score: 6 Does an integrated or unified legal framework for secured transactions that extends to the creation, publicity and enforcement of functional equivalents to security interests in movable No assets exist in the economy? Does the law allow businesses to grant a non possessory security right in a single category of Yes movable assets, without requiring a specific description of collateral? Does the law allow businesses to grant a non possessory security right in substantially all of No its assets, without requiring a specific description of collateral? May a security right extend to future or after-acquired assets, and may it extend automatically Yes to the products, proceeds or replacements of the original assets? Is a general description of debts and obligations permitted in collateral agreements; can all types of debts and obligations be secured between parties; and can the collateral agreement Yes include a maximum amount for which the assets are encumbered? Is a collateral registry in operation for both incorporated and non-incorporated entities, that is unified geographically and by asset type, with an electronic database indexed by debtor's No name? Does a notice-based collateral registry exist in which all functional equivalents can be No registered? Does a modern collateral registry exist in which registrations, amendments, cancellations and No searches can be performed online by any interested third party? Are secured creditors paid first (i.e. before tax claims and employee claims) when a debtor Yes defaults outside an insolvency procedure? Are secured creditors paid first (i.e. before tax claims and employee claims) when a business is Yes liquidated? Are secured creditors subject to an automatic stay on enforcement when a debtor enters a court-supervised reorganization procedure? Does the law protect secured creditors’ rig hts by No providing clear grounds for relief from the stay and/or sets a time limit for it? Doing Business 2015 Germany 49 Strength of legal rights index (0–12) Index score: 6 Does the law allow parties to agree on out of court enforcement at the time a security interest is created? Does the law allow the secured creditor to sell the collateral through Yes public auction and private tender, as well as, for the secured creditor to keep the asset in satisfaction of the debt? Depth of credit information index (0–8) Credit bureau Credit registry Index score: 8 Are data on both firms and individuals distributed? Yes No 1 Are both positive and negative credit data distributed? Yes No 1 Are data from retailers or utility companies - in addition to data from banks and financial institutions - Yes No 1 distributed? Are at least 2 years of historical data distributed? (Credit bureaus and registries that distribute more than 10 years of negative data or erase data on Yes No 1 defaults as soon as they are repaid obtain a score of 0 for this component.) Are data on loan amounts below 1% of income per Yes No 1 capita distributed? By law, do borrowers have the right to access their Yes No 1 data in the credit bureau or credit registry? Can banks and financial institutions access borrowers’ credit information online (for example, through an Yes No 1 online platform, a system-to-system connection or both)? Are bureau or registry credit scores offered as a value- added service to help banks and financial institutions Yes No 1 assess the creditworthiness of borrowers? Note: Prior to Doing Business 2015, the depth of credit information index covered only the first 6 features listed above. An economy receives a score of 1 if there is a "yes" to either bureau or registry. If the credit bureau or registry is not operational or covers less than 5% of the adult population, the total score on the depth of credit information index is 0. Credit bureau Credit registry Coverage (% of adults) (% of adults) Number of firms 4,200,000 492,000 Number of individuals 66,300,000 204,000 Percent of total 100.0 1.3 Doing Business 2015 Germany 50 Source: Doing Business database. Doing Business 2015 Germany 51 PROTECTING MINORITY INVESTORS Protecting minority investors matters for the ability of companies to raise the capital they need to grow, WHAT THE PROTECTING MINORITY innovate, diversify and compete. Effective regulations INVESTORS INDICATORS MEASURE define related-party transactions precisely, promote clear and efficient disclosure requirements, require shareholder participation in major decisions of the Extent of disclosure index (0–10) company and set detailed standards of accountability Review and approval requirements for related-party for company insiders. transactions ; Disclosure requirements for related-party transactions What do the indicators cover? Doing Business measures the protection of minority Extent of director liability index (0–10) investors from conflicts of interest through one set of Ability of minority shareholders to sue and hold interested indicators and shareholders’ rights in corporate directors liable for prejudicial related-party transactions; governance through another. The ranking of economies Available legal remedies (damages, disgorgement of on the strength of minority investor protections is profits, fines, imprisonment, rescission of the transaction) determined by sorting their distance to frontier scores Ease of shareholder suits index (0–10) for protecting minority investors. These scores are the Access to internal corporate documents; Evidence simple average of the distance to frontier scores for the obtainable during trial and allocation of legal expenses extent of conflict of interest regulation index and the extent of shareholder governance index. To make the Extent of conflict of interest regulation index data comparable across economies, a case study uses (0–10) several assumptions about the business and the Sum of the extent of disclosure, extent of director liability transaction. and ease of shareholder indices, divided by 3 The business (Buyer): Extent of shareholder rights index (0-10.5)  Is a publicly traded corporation listed on the Shareholders’ rights and role in major corporate decisions economy’s most important stock exchange (or at least a large private company with Strength of governance structure index (0- multiple shareholders). 10.5) Governance safeguards protecting shareholders from  Has a board of directors and a chief executive undue board control and entrenchment officer (CEO) who may legally act on behalf of Buyer where permitted, even if this is not Extent of corporate transparency index (0-9) specifically required by law. Corporate transparency on ownership stakes, The transaction involves the following details: compensation, audits and financial prospects  Mr. James, a director and the majority Extent of shareholder governance index shareholder of the company, proposes that (0–10) the company purchase used trucks from Sum of the extent of shareholders rights, strength of another company he owns. governance structure and extent of corporate transparency indices, divided by 3  The price is higher than the going price for used trucks, but the transaction goes forward. Strength of investor protection index (0–10)  All required approvals are obtained, and all Simple average of the extent of conflict of interest required disclosures made, though the regulation and extent of shareholder governance indices transaction is prejudicial to Buyer.  Shareholders sue the interested parties and the members of the board of directors. Doing Business 2015 Germany 52 PROTECTING MINORITY INVESTORS Where does the economy stand today? How strong are minority investor protections against protection index (figure 7.1). While the indicator does self-dealing in Germany? The economy has a score of 5.9 not measure all aspects related to the protection of on the strength of minority investor protection index, minority investors, a higher ranking does indicate that an with a higher score indicating stronger protections. economy’s regulations offer stronger minority investor protections against self-dealing in the areas measured. Globally, Germany stands at 51 in the ranking of 189 economies on the strength of minority investor Figure 7.1 How Germany and comparator economies perform on the strength of minority investor protection index Source: Doing Business database. Doing Business 2015 Germany 53 PROTECTING MINORITY INVESTORS One way to put an economy’s scores on the protecting indices for Germany in 2014. A summary of scoring for minority investors indicators into context is to see where the protecting minority investors indicators at the end of the economy stands in the distribution of scores across this chapter provides details on how the indices were comparator economies. Figures 7.2 through 7.7 highlight calculated. the scores on the various minority investor protection Figure 7.2 How extensive are disclosure Figure 7.3 How extensive is the liability regime for directors? requirements? Extent of director liability index (0-10) Extent of disclosure index (0-10) Note: Higher scores indicate greater liability of directors. Note: Higher scores indicate greater disclosure. Source: Doing Business database. Source: Doing Business database. Doing Business 2015 Germany 54 PROTECTING MINORITY INVESTORS Figure 7.4 How easy is accessing internal corporate documents? Ease of shareholder suits index (0-10) Note: Higher scores indicate greater minority shareholder access to evidence before and during trial. Source: Doing Business database. Doing Business 2015 Germany 55 PROTECTING MINORITY INVESTORS Figure 7.5 How extensive are shareholder rights? Extent of shareholder rights index (0-10.5) Note: The higher the score, the stronger the protections. Source: Doing Business database. Figure 7.6 How strong is the governance structure? Strength of governance structure index (0-10.5) Note: Higher scores indicate more stringent governance structure requirements. Source: Doing Business database. Doing Business 2015 Germany 56 Figure 7.7 How extensive is corporate transparency? Extent of corporate transparency index (0-9) Note: Higher scores indicate greater transparency. Source: Doing Business database. Doing Business 2015 Germany 57 PROTECTING MINORITY INVESTORS What are the details? The protecting minority investors indicators reported to disclosure, director liability, shareholder suits, here for Germany are based on detailed information shareholder rights, governance structure and corporate collected through a survey of corporate and securities transparency in a standard case study (for more details, lawyers about securities regulations, company laws and see the Data Notes section of the Doing Business 2015 court rules of evidence and procedure. To construct the report). The summary below shows the details underlying six indicators on minority investor protection, scores are the scores for Germany. assigned to each based on a range of conditions relating Table 7.2 Summary of scoring for the protecting minority investors indicators in Germany Answer Score Extent of disclosure index (0-10) 5.0 Which corporate body can provide legally sufficient Board of directors excluding 2 approval for the Buyer-Seller transaction? (0-3) interested members Is disclosure by the interested director to the board of Existence of a conflict without any 1 directors required? (0-2) specifics Is disclosure of the transaction in published periodic filings Disclosure on the transaction only 1 (annual reports) required? (0-2) Is immediate disclosure of the transaction to the public Disclosure on the transaction only 1 and/or shareholders required? (0-2) Must an external body review the terms of the transaction No 0 before it takes place? (0-1) Extent of director liability index (0-10) 5.0 Can shareholders sue directly or derivatively for the damage caused by the Buyer-Seller transaction to the company? (0- Yes 1 1) Can shareholders hold the interested director liable for the Liable if negligent 1 damage caused by the transaction to the company? (0-2) Can shareholders hold members of the approving body liable for the damage cause by the transaction to the Liable if negligent 1 company? (0-2) Must the interested director pay damages for the harm caused to the company upon a successful claim by a Yes 1 shareholder plaintiff? (0-1) Must the interested director repay profits made from the transaction upon a successful claim by a shareholder No 0 plaintiff? (0-1) Can both fines and imprisonment be applied against the Yes 1 interested indrector? (0-1) Can a court void the transaction upon a successful claim by Only in case of fraud or bad faith 0 a shareholder plaintiff? (0-2) Ease of shareholder suits index (0-10) 5.0 Before filing suit, can shareholders owning 10% of the company’s share capital inspect the transaction documents? Yes 1 (0-1) Can the plaintiff obtain any documents from the defendant No 3 Doing Business 2015 Germany 58 and witnesses during trial? (0-3) Can the plaintiff request categories of documents from the No 0 defendant without identifying specific ones? (0-1) Can the plaintiff directly question the defendant and No 0 witnesses during trial? (0-2) Is the level of proof required for civil suits lower than that of No 0 criminal cases? (0-1) Can shareholder plaintiffs recover their legal expenses from Yes if successful 1 the company? (0-2) Strength of minority investor protection index (0-10) 5.9 Extent of conflict of interest regulation index (0-10) 5.0 Extent of shareholder rights index (0-10.5) 9.0 Can shareholders amend company bylaws or statutes with a Yes 1.5 simple majority? Can shareholders owning 10% of the company's share Yes 1.5 capital call for an extraordinary meeting of shareholders? Can shareholders remove members of the board of No 0 directors before the end of their term. Must a company obtain its shareholders’ approval every Yes 1.5 time it issues new shares? Are shareholders automatically granted subscription rights Yes 1.5 on new shares? Must shareholders approve the election and dismissal of the Yes 1.5 external auditor? Can shareholders freely trade shares prior to a major Yes 1.5 corporate action or meeting of shareholders? Strength of governance structure index (0-10.5) 5.0 Is the CEO barred from also serving as chair of the board of No 0 directors? Must the board of directors include independent board Yes for listed companies 1 members? Must a company have a separate audit committee? No 0 Must changes to the voting rights of a series or class of shares be approved only by the holders of the affected Yes 1.5 shares? Must a potential acquirer make a tender offer to all Yes for listed companies 1 shareholders upon acquiring 50% of a company? Is cross-shareholding between 2 independent companies No 0 limited to 10% of outstanding shares? Is a subsidiary barred from acquiring shares issued by its Yes 1.5 parent company? Extent of corporate transparency index (0-9) 6.5 Must ownership stakes representing 10% be disclosed? Yes for listed companies 1 Must information about board members’ other directorships as well as basic information on their primary employment Yes for listed companies 1 be disclosed? Must the compensation of individual managers be No 0 disclosed? Must financial statements contain explanatory notes on significant accounting policies, trends, risks, uncertainties Yes 1.5 and other factors influencing the reporting? Must annual financial statements be audited by an external Yes 1.5 Doing Business 2015 Germany 59 auditor? Must audit reports be disclosed to the public? Yes 1.5 Extent of shareholder governance index (0-10) 6.8 Source: Doing Business database. PAYING TAXES Taxes are essential. The level of tax rates needs to be carefully chosen—and needless complexity in tax WHAT THE PAYING TAXES INDICATORS rules avoided. Firms in economies that rank better MEASURE on the ease of paying taxes in the Doing Business study tend to perceive both tax rates and tax Tax payments for a manufacturing company administration as less of an obstacle to business in 2013 (number per year adjusted for according to the World Bank Enterprise Survey electronic and joint filing and payment) research. Total number of taxes and contributions paid, What do the indicators cover? including consumption taxes (value added tax, sales tax or goods and service tax) Using a case scenario, Doing Business measures the taxes and mandatory contributions that a medium- Method and frequency of filing and payment size company must pay in a given year as well as the Time required to comply with 3 major taxes administrative burden of paying taxes and (hours per year) contributions. This case scenario uses a set of financial statements and assumptions about Collecting information and computing the tax payable transactions made over the year. Information is also compiled on the frequency of filing and payments as Completing tax return forms, filing with well as time taken to comply with tax laws. The proper agencies ranking of economies on the ease of paying taxes is Arranging payment or withholding determined by sorting their distance to frontier scores on the ease of paying taxes. These scores are Preparing separate tax accounting books, if required the simple average of the distance to frontier scores for each of the component indicators, with a Total tax rate (% of profit before all taxes) threshold and a nonlinear transformation applied to Profit or corporate income tax one of the component indicators, the total tax rate . 5 The financial statement variables have been updated Social contributions and labor taxes paid by to be proportional to 2012 income per capita; the employer previously they were proportional to 2005 income Property and property transfer taxes per capita. To make the data comparable across Dividend, capital gains and financial economies, several assumptions are used. transactions taxes  TaxpayerCo is a medium-size business that Waste collection, vehicle, road and other taxes started operations on January 1, 2012.  Taxes and mandatory contributions include  The business starts from the same financial corporate income tax, turnover tax and all position in each economy. All the taxes labor taxes and contributions paidof by the 5 The nonlinear distance to frontier for the total tax rate is equal to the distance to frontier for the total tax rate to the power 0.8. The threshold is defined as and mandatory the total contributions tax rate at the 15th percentilepaid during of the company. overall distribution for all years included in the analysis. It is calculated and adjusted on a the yearly basis. second The thresholdyear of is not operation based are recorded. on any economic theory of an “optimal tax rate” that minimizes distortions or maximizes efficiency in the tax system of an economy overall. Instead, it is mainly empirical in nature, set  range Alower at the end ofstandard of deductions the distribution and of tax rates levied on medium-size  Taxes and mandatory contributions are exemptions enterprises in the manufacturing sector as observed through the paying taxes indicators. are also This reduces recorded. the bias in the indicators toward economies that do not need to levyat measured all levels significant government. ofon taxes companies like the Doing Business standardized case study company because they raise public revenue in other ways—for example, through taxes on foreign companies, through taxes on sectors other than manufacturing or from natural resources (all of which are outside the scope of the methodology). This year’s threshold is 26.1%. Doing Business 2015 Germany 60 PAYING TAXES Where does the economy stand today? What is the administrative burden of complying with 2 largest business cities. See the chapter on distance to taxes in Germany—and how much do firms pay in taxes? frontier and ease of doing business ranking at the end of On average, firms make 9.0 tax payments a year, spend this profile for more details. 218.0 hours a year filing, preparing and paying taxes and Globally, Germany stands at 68 in the ranking of 189 pay total taxes amounting to 48.8% of profit (see the economies on the ease of paying taxes (figure 8.1). The summary at the end of this chapter for details). Most rankings for comparator economies and the regional indicator sets refer to a case scenario in the largest average ranking provide other useful information for business city of an economy, except for 11 economies for assessing the tax compliance burden for businesses in which the data are a population-weighted average of the Germany. Figure 8.1 How Germany and comparator economies rank on the ease of paying taxes Source: Doing Business database. Doing Business 2015 Germany 61 PAYING TAXES Economies around the world have made paying taxes concrete results. Some economies simplifying tax faster and easier for businesses—such as by payment and reducing rates have seen tax revenue rise. consolidating filings, reducing the frequency of What tax reforms has Doing Business recorded in payments or offering electronic filing and payment. Germany (table 8.1)? Many have lowered tax rates. Changes have brought Table 8.1 How has Germany made paying taxes easier—or not? By Doing Business report year from DB2010 to DB2015 DB year Reform Germany made paying taxes more convenient for companies by DB2013 canceling ELENA procedures and implementing electronic filing and payment system for most taxes. Note: For information on reforms in earlier years (back to DB2006), see the Doing Business reports for these years, available at http://www.doingbusiness.org. Source: Doing Business database. Doing Business 2015 Germany 62 PAYING TAXES What are the details? The indicators reported here for Germany are based LOCATION OF STANDARDIZED COMPANY on the taxes and contributions that would be paid by a standardized case study company used by Doing Business in collecting the data (see the section in this City: Berlin chapter on what the indicators cover). Tax practitioners are asked to review a set of financial statements as well as a standardized list of assumptions and transactions that the company The taxes and contributions paid are listed in the completed during its 2nd year of operation. summary below, along with the associated number of Respondents are asked how much taxes and payments, time and tax rate. mandatory contributions the business must pay and how these taxes are filed and paid. Table 8.2 Summary of tax rates and administration Total tax Notes on Tax or mandatory Payments Notes on Time Statutory Tax base rate (% of total tax contribution (number) payments (hours) tax rate profit) rate taxable Corporate income tax 1 online filing 41 15% 11.5 profit taxable Trade tax 1 online filing 0 11-17% 11.1 profit gross Social security contributions 1 online filing 134 9.45% 10.6 salaries Health insurance gross 0 paid jointly 0 7.3% 7.8 contributions salaries less than property Property tax 1 0 2.9 0.1% value gross Unemployment contributions 0 paid jointly 0 1.5% 1.7 salaries EUR 0.183 Road tax (only for trucks) 1 0 per 1.2 kilometer gross Long term care insurance 0 paid jointly 0 1.025% 1.1 salaries interest included in Tax on interest 0 0 25% 0.7 income other taxes Doing Business 2015 Germany 63 Total tax Notes on Tax or mandatory Payments Notes on Time Statutory Tax base rate (% of total tax contribution (number) payments (hours) tax rate profit) rate corporate Solidarity surcharge 0 paid jointly 0 5.5% 0.6 income tax insurance Tax on insurance contracts 1 0 19% 0.2 premium Vehicle tax 1 online filing 0 EUR 556 0 value not Value added tax (VAT) 1 online filing 43 19% 0 added included included in small Fuel tax 1 0 0 fuel price amount depends on wage tax employee not Wage tax 0 online filing 0 classificatio 0 income included n of employee Social security contributions gross 0 0 20.175% 0 on employee salaries Totals 9.0 218.0 48.8 Source: Doing Business database. Doing Business 2015 Germany 64 TRADING ACROSS BORDERS In today’s globalized world, making trade between WHAT THE TRADING ACROSS BORDERS economies easier is increasingly important for INDICATORS MEASURE business. Excessive document requirements, burdensome customs procedures, inefficient port operations and inadequate infrastructure all lead to Documents required to export and import extra costs and delays for exporters and importers, (number) stifling trade potential. Research shows that Bank documents exporters in developing countries gain more from a Customs clearance documents 10% drop in their trading costs than from a similar reduction in the tariffs applied to their products in Port and terminal handling documents global markets. Transport documents What do the indicators cover? Time required to export and import (days) Doing Business measures the time and cost Obtaining, filling out and submitting all the (excluding tariffs and the time and cost for sea documents transport) associated with exporting and importing a Inland transport and handling standard shipment of goods by sea transport, and the number of documents necessary to complete the Customs clearance and inspections transaction. The indicators cover predefined stages Port and terminal handling such as documentation requirements and procedures Does not include sea transport time at customs and other regulatory agencies as well as at the port. They also cover trade logistics, including Cost required to export and import (US$ per the time and cost of inland transport to the largest container) business city. The ranking of economies on the ease All documentation of trading across borders is determined by sorting their distance to frontier scores for trading across Inland transport and handling borders. These scores are the simple average of the Customs clearance and inspections distance to frontier scores for each of the component Port and terminal handling indicators. To make the data comparable across economies, Doing Business uses several assumptions Official costs only, no bribes about the business and the traded goods. The business:  Is located in the economy’s largest The traded product: business city. For the 11 economies with a population of more than 100 million, data  Is not hazardous nor includes military items. for a second city have been added.  Does not require refrigeration or any other  Is a private, limited liability company, special environment. domestically owned and does not operate  Do not require any special phytosanitary or with special export or import privileges. environmental safety standards other than  Conducts export and import activities, but accepted international standards. does not have any special accreditation  Is one of the economy’s leading export or such as an authorized economic operator import products. status.  Is transported in a dry-cargo, 20-foot full container load. Doing Business 2015 Germany 65 TRADING ACROSS BORDERS Where does the economy stand today? What does it take to export or import in Germany? average of the 2 largest business cities. See the chapter According to data collected by Doing Business, exporting on distance to frontier and ease of doing business a standard container of goods requires 4 documents, ranking at the end of this profile for more details. takes 9.0 days and costs $1015.0. Importing the same Globally, Germany stands at 18 in the ranking of 189 container of goods requires 4 documents, takes 7.0 days economies on the ease of trading across borders (figure and costs $1050.0 (see the summary of four predefined 9.1). The rankings for comparator economies and the stages and documents at the end of this chapter for regional average ranking provide other useful details). Most indicator sets refer to a case scenario in information for assessing how easy it is for a business in the largest business city of an economy, except for 11 Germany to export and import goods. economies for which the data are a population-weighted Figure 9.1 How Germany and comparator economies rank on the ease of trading across borders Source: Doing Business database. Doing Business 2015 Germany 66 TRADING ACROSS BORDERS What are the details? The indicators reported here for Germany are based LOCATION OF STANDARDIZED COMPANY on a set of specific predefined stages for trading a standard shipment of goods by ocean transport (see the section in this chapter on what the indicators Port Name: Hamburg cover). Information on the required documents and the time and cost to complete export and import is City: Berlin collected from local freight forwarders, shipping lines, The predefined stages, and the associated time and cost, customs brokers, port officials and banks. for exporting and importing a standard shipment of goods are listed in the summary below, along with the required documents. Table 9.2 Summary of predefined stages and documents for trading across borders in Germany Stages to export Time (days) Cost (US$) Customs clearance and inspections 1 30 Documents preparation 4 175 Inland transportation and handling 2 500 Ports and terminal handling 2 310 Totals 9 1,015 Stages to import Time (days) Cost (US$) Customs clearance and inspections 1 55 Documents preparation 3 185 Inland transportation and handling 2 500 Ports and terminal handling 1 310 Totals 7 1,050 Doing Business 2015 Germany 67 Documents to export Bill of lading Commercial Invoice Customs export declaration Packing List Documents to import Bill of lading Commercial invoice Customs import declaration Packing list Source: Doing Business database. Doing Business 2015 Germany 68 ENFORCING CONTRACTS Effective commercial dispute resolution has many WHAT THE ENFORCING CONTRACTS benefits. Courts are essential for entrepreneurs INDICATORS MEASURE because they interpret the rules of the market and protect economic rights. Efficient and transparent courts encourage new business relationships because Procedures to enforce a contract through businesses know they can rely on the courts if a new the courts (number) customer fails to pay. Speedy trials are essential for Steps to file and serve the case small enterprises, which may lack the resources to Steps for trial and judgment stay in business while awaiting the outcome of a long court dispute. Steps to enforce the judgment What do the indicators cover? Time required to complete procedures (calendar days) Doing Business measures the efficiency of the judicial system in resolving a commercial dispute before Time to file and serve the case local courts. Following the step-by-step evolution of Time for trial and obtaining judgment a standardized case study, it collects data relating to Time to enforce the judgment the time, cost and procedural complexity of resolving a commercial lawsuit. The ranking on the ease of Cost required to complete procedures (% of enforcing contracts is the simple average of the claim) percentile rankings on its component indicators: Average attorney fees procedures, time and cost. Court costs The dispute in the case study involves the breach of a sales contract between 2 domestic businesses. The Enforcement costs case study assumes that the court hears an expert on the quality of the goods in dispute. This distinguishes the case from simple debt enforcement. To make the data comparable across economies, Doing Business uses several assumptions about the case:  The seller and buyer are located in the economy’s largest business city. For the 11 economies with a population of more than  The seller requests a pretrial attachment to 100 million, data for a second city have secure the claim. been added.  The dispute on the quality of the goods  The buyer orders custom-made goods, requires an expert opinion. then fails to pay.  The judge decides in favor of the seller; there  The seller sues the buyer before a is no appeal. competent court.  The seller enforces the judgment through a  The value of the claim is 200% of the public sale of the buyer’s movable assets. income per capita or the equivalent in local currency of USD 5,000, whichever is greater. Doing Business 2015 Germany 69 ENFORCING CONTRACTS Where does the economy stand today? How efficient is the process of resolving a commercial business cities. See the chapter on distance to frontier dispute through the courts in Germany? According to and ease of doing business ranking at the end of this data collected by Doing Business, contract enforcement profile for more details. takes 394.0 days, costs 14.4% of the value of the claim Globally, Germany stands at 13 in the ranking of 189 and requires 31.0 procedures (see the summary at the economies on the ease of enforcing contracts (figure end of this chapter for details). Most indicator sets refer 10.1). The rankings for comparator economies and the to a case scenario in the largest business city of an regional average ranking provide other useful economy, except for 11 economies for which the data benchmarks for assessing the efficiency of contract are a population-weighted average of the 2 largest enforcement in Germany. Figure 10.1 How Germany and comparator economies rank on the ease of enforcing contracts Source: Doing Business database. Doing Business 2015 Germany 70 ENFORCING CONTRACTS What are the details? The indicators reported here for Germany are based COURT NAME on a set of specific procedural steps required to resolve a standardized commercial dispute through the courts (see the section in this chapter on what Claim value: EUR 66,137 the indicators cover). These procedures, and the time and cost of completing them, are identified through Court name: Berlin Regional Court study of the codes of civil procedure and other court regulations, as well as through questionnaires City: Berlin completed by local litigation lawyers (and, in a quarter of the economies covered by Doing Business, by judges as well). Table 10.2 Summary of time, cost and procedures for enforcing a contract in Germany OECD high Indicator Germany income average Time (days) 394 540 Filing and service 29 Trial and judgment 310 Enforcement of judgment 55 Cost (% of claim) 14.4 21.4 Attorney cost (% of claim) 6.6 Court cost (% of claim) 5.4 Enforcement Cost (% of claim) 2.4 Procedures (number) 31 32 Number of procedures (without bonus points) 32 Specialized commercial courts -1 Total number of procedures (including bonus points) 31 Doing Business 2015 Germany 71 No. Procedures Filing and service: Plaintiff requests payment: Plaintiff or his lawyer asks Defendant orally or in writing to comply with the 1 contract. 2 Plaintiff hires a lawyer: Plaintiff hires a lawyer. Plaintiff files a summons and complaint: Plaintiff files a summons and complaint with the court (orally or * in writing). Plaintiff pays court fees: Plaintiff pays court fees (e.g. court duties, stamp duties, or any other type of court * fees). Answer ‘yes’ even if Plaintiff recovers these costs. Registration of court case: Registration of court case by the court administration (this can include 3 assigning a reference number to the case). Assignment of court case to a judge: Assignment of court case to a judge (through a random procedure, * automated system, ruling of an administrative judge, court officer, etc). Judicial scrutiny of summons and complaint: Judge examines Plaintiff's summons and complaint for 4 formal requirements as a matter of law or standard practice. Mailing of summons and complaint: Court or process server, including (private) bailiff, mails summons * and complaint to Defendant. Attempt at physical delivery: An attempt to physically deliver summons and complaint to Defendant is 5 made. Application for pre-judgment attachment: Plaintiff submits an application in writing for the attachment of * Defendant's property prior to judgment. Decision on pre-judgment attachment: Judge decides whether to grant Plaintiff’s request for pre- * judgment attachment of Defendant’s property and notifies Plaintiff and Defendant of the decision. Pre-judgment attachment order: Defendant's property is attached prior to judgment. Attachment order 6 either involves physical attachment, or is achieved by freezing, registering, marking, or otherwise separating and restricting Defendant’s movement of specific moveable assets. Hearing on pre-judgment attachment: A hearing takes place as a matter of law or standard practice to 7 resolve the question of whether Defendant’s assets can be attached prior to judgment. This process may include the submission of separate summons and petitions. Trial and judgment: Defendant files an answer to Plaintiff’s claim: Defendant files a written pleading which includes his answer 8 or defense on the merits of the case (see assumption 4). Deadline for Plaintiff to reply to Defendant's defense or answer: Judge sets a deadline for Plaintiff’s 9 submission of a reply to the Defendant's defense or answer. Plaintiff’s written reply to Defendant's answer: Plaintiff responds to Defendant’s answer with a written 10 pleading, which may or may not include witness statements or expert (witness) statements. Doing Business 2015 Germany 72 No. Procedures Filing of written submissions: Plaintiff and Defendant file written pleadings and submissions with the court 11 and transmit copies of the written pleadings or submissions to one another. The pleadings may or may not include witness statements or expert (witness) statements. Adjournments: Court procedure is delayed because one or both parties request and obtain an 12 adjournment to submit written pleadings. Check as ‘yes’ if this commonly happens. Court appointment of independent expert: Judge appoints, either at the parties' request or at his own * initiative, an independent expert to decide whether the quality of the goods Plaintiff delivered to Defendant is adequate. (see assumption 5-b). Notification of court-appointment of independent expert: The court notifies both parties that the court is 13 appointing an independent expert (see assumption 5-b). Delivery of expert report by court-appointed expert: The independent expert, appointed by the court, * delivers his or her expert report to the court (see assumption 5-b). Setting of date for mediation hearing: The judge sets a date for a mediation hearing, sometimes also * called a 'pre-trial conference,' and notifies the parties of the hearing date. * Setting of date(s) for oral hearing or trial: Judge sets the date(s) for the oral hearing or trial. Summoning of (expert) witnesses: The court summons (expert) witnesses to appear in court for the oral 14 hearing or trial (see assumption 5-a). Oral hearing (prevalent in civil law): The parties argue the merits of the case at an oral hearing before the 15 judge. Witnesses and a court-appointed independent expert may be heard and questioned at the oral hearing. Adjournments: Court proceedings are delayed because one or both parties request and obtain an 16 adjournment during the oral hearing or trial, resulting in an additional or later trial or hearing date. 17 Judgment date: The judge sets a date for delivery of the judgment. 18 Notification of judgment in court: The parties are notified of the judgment at a court hearing. 19 Writing of judgment: The judge produces a written copy of the judgment. Registration of judgment: The court office registers the judgment after receiving a written copy of the 20 judgment. Plaintiff receives a copy of the judgment: Plaintiff receives a copy of the written judgment which is 100% 21 in favor of Plaintiff (see assumption 6). Defendant is formally notified of the judgment: Plaintiff or court formally notifies the Defendant of the 22 judgment. The appeal period starts to run from the day the Defendant is formally notified of the judgment. Appeal period: By law Defendant has the opportunity to appeal the judgment during a specified period. 23 Defendant decides not to appeal. Seller decides to start enforcing the judgment when the appeal period ends (see assumption 8). Order for reimbursement by Defendant of Plaintiff's court fees: The judgment orders Defendant to 24 reimburse Plaintiff for the court fees Plaintiff has advanced, because Defendant has lost the case. Doing Business 2015 Germany 73 No. Procedures Enforcement of judgment: Plaintiff hires a lawyer: Plaintiff hires a lawyer to enforce the judgment or continues to be represented by * a lawyer during the enforcement of judgment phase. Plaintiff retains an enforcement agent to enforce the judgment.: Plaintiff retains the services of a court 25 enforcement officer such as a court bailiff or sheriff, or a private bailiff. Plaintiff requests an enforcement order: Plaintiff applies to the court to obtain the enforcement order * ('seal' on judgment). 26 Plaintiff advances enforcement fees: Plaintiff pays the fees related to the enforcement of the judgment. Delivery of enforcement order: The court's enforcement order is delivered to a court enforcement officer * or a private bailiff. Request to Defendant to comply voluntarily with judgment: Plaintiff, a court enforcement officer or a 27 private bailiff requests Defendant to voluntarily comply with the judgment. Identification of Defendant's assets by court official or Defendant for purposes of enforcement: The judge, 28 a court enforcement officer, a private bailiff or the Defendant himself identifies Defendant's movable assets for the purposes of enforcing the judgment through a sale of Defendant’s assets. Attachment: Defendant’s movable goods are attached (physically or by registering, marking or separating 29 assets). Enforcement disputes before court: The enforcement of the judgment is delayed because Defendant 30 opposes aspects of the enforcement process before the judge. 31 Sale through public auction: The Defendant’s movable property is sold at public auction. Reimbursement of Plaintiff’s enforcemen t fees: Defendant reimburses Plaintiff's enforcement fees which 32 Plaintiff had advanced previously. * Not counted in the total number of procedures. Source: Doing Business database. Doing Business 2015 Germany 74 RESOLVING INSOLVENCY A robust bankruptcy system functions as a filter, WHAT THE RESOLVING INSOLVENCY ensuring the survival of economically efficient INDICATORS MEASURE companies and reallocating the resources of inefficient ones. Fast and cheap insolvency proceedings result in the speedy return of businesses Time required to recover debt (years) to normal operation and increase returns to Measured in calendar years creditors. By improving the expectations of creditors Appeals and requests for extension are and debtors about the outcome of insolvency included proceedings, well-functioning insolvency systems can facilitate access to finance, save more viable Cost required to recover debt (% of debtor’s businesses and thereby improve growth and estate) sustainability in the economy overall. Measured as percentage of estate value What do the indicators cover? Court fees Doing Business studies the time, cost and outcome of Fees of insolvency administrators insolvency proceedings involving domestic legal Lawyers’ fees entities. These variables are used to calculate the recovery rate, which is recorded as cents on the Assessors’ and auctioneers’ fees dollar recouped by secured creditors through Other related fees reorganization, liquidation or debt enforcement (foreclosure) proceedings. To determine the present Outcome value of the amount recovered by creditors, Doing Whether business continues operating as a Business uses the lending rates from the International going concern or business assets are sold Monetary Fund, supplemented with data from piecemeal central banks and the Economist Intelligence Unit. Recovery rate for creditors In addition, Doing Business evaluates the adequacy Measures the cents on the dollar recovered and integrity of the existing legal framework by secured creditors applicable to liquidation and reorganization proceedings through the strength of insolvency Outcome for the business (survival or not) determines the maximum value that can be framework index. The index tests whether economies recovered adopted internationally accepted good practices in four areas: commencement of proceedings, Official costs of the insolvency proceedings management of debtor’s assets, reorganization are deducted proceedings and creditor participation. Depreciation of furniture is taken into The ranking of the Resolving Insolvency indicator is account based on the recovery rate and the total score of the Present value of debt recovered strength of insolvency framework index. The Strength of insolvency framework index (0- Resolving Insolvency indicator does not measure 16) insolvency proceedings of individuals and financial institutions. The data are derived from survey Sum of the scores of four component indices: responses by local insolvency practitioners and Commencement of proceedings index (0-3) verified through a study of laws and regulations as well as public information on bankruptcy systems. Management of debtor’s assets index (0-6) Reorganization proceedings index (0-3) Creditor participation index (0-4) Doing Business 2015 Germany 75 RESOLVING INSOLVENCY Where does the economy stand today? Combination of quality regulations and efficient practice According to data collected by Doing Business, Germany characterize the top-performing economies. How scores 3.0 out of 3 points on the commencement of efficient are insolvency proceedings in Germany? proceedings index, 6.0 out of 6 points on the According to data collected by Doing Business, resolving management of debtor’s assets index, 3.0 out of 3 points insolvency takes 1.2 years on average and costs 8.0% of on the reorganization proceedings index, and 3.0 out of the debtor’s estate, with the most likely outcome being 4 points on the creditor participation index. Germany’s that the company will be sold as going concern. The total score on the strength of insolvency framework average recovery rate is 83.4 cents on the dollar. Most index is 15.0 out of 16. indicator sets refer to a case scenario in the largest Globally, Germany stands at 3 in the ranking of 189 business city of an economy, except for 11 economies for economies on the ease of resolving insolvency (figure which the data are a population-weighted average of the 11.1). The rankings for comparator economies and the 2 largest business cities. See the chapter on distance to regional average ranking provide other useful frontier and ease of doing business ranking at the end of benchmarks for assessing the efficiency of insolvency this profile for more details. proceedings in Germany. Figure 11.1 How Germany and comparator economies rank on the ease of resolving insolvency Doing Business 2015 Germany 76 Source: Doing Business database. Doing Business 2015 Germany 77 Figure 11.2 Recovery Rate (0-100) - Germany Source: Doing Business database. Figure 11.3 Strength of insolvency framework index (0-16) - Germany Source: Doing Business database. Doing Business 2015 Germany 78 RESOLVING INSOLVENCY A well-balanced bankruptcy system distinguishes change. Many recent reforms of bankruptcy laws have companies that are financially distressed but been aimed at helping more of the viable businesses economically viable from inefficient companies that survive. What insolvency reforms has Doing Business should be liquidated. But in some insolvency systems recorded in Germany (table 11.1)? even viable businesses are liquidated. This is starting to Table 11.1 How has Germany made resolving insolvency easier—or not? By Doing Business report year from DB2010 to DB2015 DB year Reform Germany enhanced its insolvency process through the Act on the Implementation of Measures to Stabilize the Financial DB2010 Market (Finanzmarktstabilisierungsgesetz), which removed the requirement for potentially viable companies to file for immediate insolvency in cases of overindebtedness. Germany strengthened its insolvency process by adopting a DB2013 new insolvency law that facilitates in-court restructurings of distressed companies and increases participation by creditors. Note: For information on reforms in earlier years (back to DB2005), see the Doing Business reports for these years, available at http://www.doingbusiness.org. Source: Doing Business database. Doing Business 2015 Germany 79 LABOR MARKET REGULATION Doing Business measures flexibility in the regulation of Doing Business 2015 presents the data for the labor employment, specifically as it affects the hiring and market regulation indicators in an annex. The report redundancy of workers and the rigidity of working hours. does not present rankings of economies on these This year, for the first time, the indicators measuring indicators nor include the topic in the aggregate distance flexibility in labor market regulations focus on those to frontier score or ranking on the ease of doing affecting the food retail industry, using a standardized business. Detailed data collected on labor market case study of a cashier in a supermarket. Also new is that regulations are available on the Doing Business website Doing Business collects data on regulations applying to (http://www.doingbusiness.org). The data on labor employees hired through temporary-work agencies as market regulations are based on a detailed survey of well as on those applying to permanent employees or employment regulations that is completed by local employees hired on fixed-term contracts. The indicators lawyers and public officials. Employment laws and also cover additional areas of labor market regulation, regulations as well as secondary sources are reviewed to including social protection schemes and benefits as well ensure accuracy. To make the data comparable across as labor disputes. economies, several assumptions about the worker and the business are used. Over the period from 2007 to 2011 improvements were made to align the methodology for the labor market The worker: regulation indicators (formerly the employing workers  Is a cashier in a supermarket or a grocery store indicators) with the letter and spirit of the International  Is a full-time employee Labour Organization (ILO) conventions. Only 6 of the 188  Is not a member of the labor union, unless ILO conventions cover areas measured by Doing membership is mandatory Business: employee termination, weekend work, holiday The business: with pay, night work, protection against unemployment  Is a limited liability company (or the equivalent and medical care and sickness benefits. The Doing in the economy) with 60 employees. Business methodology is fully consistent with these 6  Operates a supermarket or grocery store in the conventions. The ILO conventions covering areas related economy’s largest business city. For 11 to the labor market regulation indicators do not include economies the data are also collected for the the ILO core labor standards—8 conventions covering second largest business city. the right to collective bargaining, the elimination of  Is subject to collective bargaining agreements if forced labor, the abolition of child labor and equitable such agreements cover more than 50% of the treatment in employment practices. food retail sector and they apply even to firms that are not party to them. Between 2009 and 2011 the World Bank Group worked  Abides by every law and regulation but does not with a consultative group—including labor lawyers, grant workers more benefits than those employer and employee representatives, and experts mandated by law, regulation or (if applicable) from the ILO, the Organisation for Economic Co- collective bargaining agreements. operation and Development (OECD), civil society and the private sector—to review the methodology for the labor market regulation indicators and explore future areas of research. A full report with the conclusions of the consultative group is available at: http://www.doingbusiness.org/methodology/employing-workers. Doing Business 2015 Germany LABOR MARKET REGULATION What are the details? The data reported here for Germany are based on a Employment laws and regulations as well as secondary detailed survey of labor market regulation that is sources are reviewed to ensure accuracy. completed by local lawyers and public officials. Difficulty of hiring index Difficulty of hiring covers 4 areas: (i) whether fixed-term wage to the average value added per worker. The contracts are prohibited for permanent tasks; (ii) the average value added per worker is the ratio of an maximum cumulative duration of fixed-term contracts; economy’s GNI per capita to the working-age population (iii) the minimum wage for a cashier, age 19, with 1 year as a percentage of the total population. of work experience; and (iv) the ratio of the minimum Difficulty of hiring index Data Fixed-term contracts prohibited for permanent tasks? No No maximum duration for fixed-term contract with objective cause; 24 months Maximum length of a single fixed-term contract (months) for fixed-term contract without objective cause (Sect. 14 para. 2 TzBfG) Maximum length of fixed-term contracts, including renewals (months) 24 Minimum wage applicable to the worker assumed in the case study 0.00 (US$/month) Ratio of minimum wage to value added per worker 0.00 Source: Doing Business database. Doing Business 2015 Germany 81 LABOR MARKET REGULATION Rigidity of hours index Rigidity of hours covers 7 areas: (i) whether the premium for work on a weekly rest day (as a percentage workweek can extend to 50 hours or more (including of hourly pay); (v) whether there are restrictions on night overtime) for 2 months in a year to respond to a work; (vi) whether there are restrictions on weekly seasonal increase in workload; (ii) the maximum number holiday work; and (vii) the average paid annual leave for of days allowed in the workweek; (iii) the premium for workers with 1 year of tenure, 5 years of tenure and 10 night work (as a percentage of hourly pay); (iv) the years of tenure. Rigidity of hours index Data 50-hour workweek allowed for 2 months a year in case of a seasonal Yes increase in workload? Maximum working days per week 6.0 Premium for night work (% of hourly pay) 0% Premium for work on weekly rest day (% of hourly pay) 0% Major restrictions on night work? No Major restrictions on weekly holiday? No Paid annual leave for a worker with 1 year of tenure (in working days) 24.0 Paid annual leave for a worker with 5 years of tenure (in working days) 24.0 Paid annual leave for a worker with 10 years of tenure (in working days) 24.0 Paid annual leave (average for workers with 1, 5 and 10 years of tenure, in 24.0 working days) Source: Doing Business database. Doing Business 2015 Germany 82 LABOR MARKET REGULATION Difficulty of redundancy index Difficulty of redundancy index looks at 9 questions: (i) whether the employer needs approval from a third party what the length is in months of the maximum to terminate 1 redundant worker; (vi) whether the probationary period; (ii) whether redundancy is employer needs approval from a third party to terminate disallowed as a basis for terminating workers; (iii) a group of 9 redundant workers; (vii) whether the law whether the employer needs to notify a third party (such requires the employer to reassign or retrain a worker as a government agency) to terminate 1 redundant before making the worker redundant; (viii) whether worker; (iv) whether the employer needs to notify a third priority rules apply for redundancies; and (ix) whether party to terminate a group of 9 redundant workers; (v) priority rules apply for reemployment. Difficulty of redundancy index Data Maximum length of probationary period (months) 6.0 Dismissal due to redundancy allowed by law? Yes Third-party notification if 1 worker is dismissed? Yes Third-party approval if 1 worker is dismissed? No Third-party notification if 9 workers are dismissed? Yes Third-party approval if 9 workers are dismissed? No Retraining or reassignment obligation before redundancy? Yes Priority rules for redundancies? Yes Priority rules for reemployment? No Source: Doing Business database. Doing Business 2015 Germany 83 LABOR MARKET REGULATION Redundancy cost Redundancy cost measures the cost of advance notice requirements and severance payments applicable to a requirements, severance payments and penalties due worker with 1 year of tenure, a worker with 5 years and when terminating a redundant worker, expressed in a worker with 10 years is considered. One month is weeks of salary. The average value of notice recorded as 4 and 1/3 weeks. Redundancy cost indicator (in salary weeks) Data Notice period for redundancy dismissal for a worker with 1 year of tenure 4.0 Notice period for redundancy dismissal for a worker with 5 years of tenure 8.7 Notice period for redundancy dismissal for a worker with 10 years of tenure 17.3 Notice period for redundancy dismissal (average for workers with 1, 5 and 10 years 10.0 of tenure) Severance pay for redundancy dismissal for a worker with 1 year of tenure 2.2 Severance pay for redundancy dismissal for a worker with 5 years of tenure 10.8 Severance pay for redundancy dismissal for a worker with 10 years of tenure 21.7 Severance pay for redundancy dismissal (average for workers with 1, 5 and 10 years 11.6 of tenure) Source: Doing Business database. Social protection schemes and benefits & Labor disputes Doing Business collects data on the existence of Doing Business also assesses the mechanisms available unemployment protection schemes as well as data on to resolve labor disputes. More specifically, it collects whether employers are legally required to provide data on what courts would be competent to hear labor health insurance for employees with permanent disputes and whether the competent court is contracts. specialized in resolving labor disputes. Social protection schemes and benefits & Labor disputes indicator Data Availability of unemployment protection scheme? Yes Health insurance existing for permanent employees? Yes Availability of courts or court sections specializing in labor disputes? Yes Source: Doing Business database. Doing Business 2015 Germany 84 Doing Business 2015 Germany 85 DISTANCE TO FRONTIER AND EASE OF DOING BUSINESS RANKING This year’s report presents results for 2 aggregate defined as the total tax rate at the 15th percentile of the measures: the distance to frontier score and the ease of overall distribution for all years included in the analysis. doing business ranking, which for the first time this year For the time to pay taxes the frontier is defined as the is based on the distance to frontier score. The ease of lowest time recorded among all economies that levy the doing business ranking compares economies with one 3 major taxes: profit tax, labor taxes and mandatory another; the distance to frontier score benchmarks contributions, and value added tax (VAT) or sales tax. In economies with respect to regulatory best practice, addition, the cost to export and cost to import for each showing the absolute distance to the best performance year are divided by the GDP deflator, to take the general on each Doing Business indicator. When compared price level into account when benchmarking these across years, the distance to frontier score shows how absolute-cost indicators across economies with different much the regulatory environment for local entrepreneurs inflation trends. The base year for the deflator is 2013 for in an economy has changed over time in absolute terms, all economies. while the ease of doing business ranking can show only In the same formulation, to mitigate the effects of how much the regulatory environment has changed extreme outliers in the distributions of the rescaled data relative to that in other economies. for most component indicators (very few economies Distance to Frontier need 700 days to complete the procedures to start a business, but many need 9 days), the worst performance The distance to frontier score captures the gap between is calculated after the removal of outliers. The definition an economy’s performance and a measure of best of outliers is based on the distribution for each practice across the entire sample of 31 indicators for 10 component indicator. To simplify the process, 2 rules Doing Business topics (the labor market regulation were defined: the 95th percentile is used for the indicators are excluded). For starting a business, for indicators with the most dispersed distributions example, Canada and New Zealand have the smallest (including time, cost, minimum capital and number of number of procedures required (1), and New Zealand the payments to pay taxes), and the 99th percentile is used shortest time to fulfill them (0.5 days). Slovenia has the for number of procedures and number of documents to lowest cost (0.0), and Australia, Colombia and 110 other trade. No outlier was removed for component indicators economies have no paid-in minimum capital bound by definition or construction, including legal requirement (table 15.1 in the Doing Business 2015 index scores (such as the depth of credit information report). index, extent of conflict of interest regulation index and strength of insolvency framework index) and the Calculation of the distance to frontier score recovery rate (figure 15.1 in the Doing Business 2015 Calculating the distance to frontier score for each report). economy involves 2 main steps. First, individual Second, for each economy the scores obtained for component indicators are normalized to a common unit individual indicators are aggregated through simple where each of the 31 component indicators y (except for averaging into one distance to frontier score, first for the total tax rate) is rescaled using the linear each topic and then across all 10 topics: starting a transformation (worst − y)/(worst − frontier). In this business, dealing with construction permits, getting formulation the frontier represents the best performance electricity, registering property, getting credit, protecting on the indicator across all economies since 2005 or the minority investors, paying taxes, trading across borders, third year after data for the indicator were collected for enforcing contracts and resolving insolvency. More the first time. For legal indicators such as those on complex aggregation methods—such as principal getting credit or protecting minority investors, the components and unobserved components —yield a frontier is set at the highest possible value. For the total ranking nearly identical to the simple average used by tax rate, consistent with the use of a threshold in Doing Business . Thus Doing Business uses the simplest 6 calculating the rankings on this indicator, the frontier is 6 See Djankov, Manraj and others (2005). Principal components and unobserved components methods yield a ranking nearly identical to Doing Business 2015 Germany 86 method: weighting all topics equally and, within each overall tax system. Instead, it is mainly empirical in topic, giving equal weight to each of the topic nature. The nonlinear transformation along with the components . threshold reduces the bias in the indicator toward 7 economies that do not need to levy significant taxes on An economy’s distance to frontier score is indicated on a companies like the Doing Business standardized case scale from 0 to 100, where 0 represents the worst study company because they raise public revenue in performance and 100 the frontier. All distance to frontier other ways—for example, through taxes on foreign calculations are based on a maximum of 5 decimals. companies, through taxes on sectors other than However, indicator ranking calculations and the ease of manufacturing or from natural resources (all of which are doing business ranking calculations are based on 2 outside the scope of the methodology). In addition, it decimals. The difference between an economy’s distance acknowledges the need of economies to collect taxes to frontier score in any previous year and its score in from firms. 2014 illustrates the extent to which the economy has closed the gap to the regulatory frontier over time. And Calculation of scores for economies with 2 cities in any given year the score measures how far an covered economy is from the best performance at that time. For each of the 11 economies for which a second city Treatment of the total tax rate was added in this year’s report, the distance to frontier score is calculated as the population-weighted average This year, for the first time, the total tax rate component of the distance to frontier scores for the 2 cities covered of the paying taxes indicator set enters the distance to (table 12.1). This is done for the aggregate score, the frontier calculation in a different way than any other scores for each topic and the scores for all the indicator. The distance to frontier score obtained for the component indicators for each topic. total tax rate is transformed in a nonlinear fashion before it enters the distance to frontier score for paying taxes. Table 12.1 Weights used in calculating the distance to As a result of the nonlinear transformation, an increase in frontier scores for economies with 2 cities covered the total tax rate has a smaller impact on the distance to Economy City Weight (%) frontier score for the total tax rate—and therefore on the Dhaka 78 distance to frontier score for paying taxes—for Bangladesh Chittagong 22 economies with a below-average total tax rate than it São Paulo 61 would have in the calculation done in previous years (line Brazil Rio de Janeiro 39 B is smaller than line A in figure 15.2 of the Doing Shanghai 55 China Business 2015 report). And for economies with an Beijing 45 extreme total tax rate (a rate that is very high relative to Mumbai 47 India the average), an increase has a greater impact on both Delhi 53 these distance to frontier scores than before (line D is Jakarta 78 Indonesia bigger than line C in figure 15.2 of the Doing Business Surabaya 22 Tokyo 65 2015 report). Japan Osaka 35 The nonlinear transformation is not based on any Mexico City 83 Mexico economic theory of an “optimal tax rate” that minimizes Monterrey 17 distortions or maximizes efficiency in an economy’s Lagos 77 Nigeria Kano 23 Karachi 65 Pakistan that from the simple average method because both these methods Lahore 35 assign roughly equal weights to the topics, since the pairwise Moscow 70 Russian Federation correlations among indicators do not differ much. An alternative to the St. Petersburg 30 simple average method is to give different weights to the topics, New York 60 depending on which are considered of more or less importance in the United States Los Angeles 40 context of a specific economy. Source: United Nations, Department of Economic and Social 7 For getting credit, indicators are weighted proportionally, according to their contribution to the total score, with a weight of 60% assigned Affairs, Population Division, World Urbanization Prospects, to the strength of legal rights index and 40% to the depth of credit 2014 Revision. http://esa.un.org/unpd/wup/CD- information index. Indicators for all other topics are assigned equal ROM/Default.aspx. weights Doing Business 2015 Germany 87 Economies that improved the most across 3 or more Selecting the economies that implemented regulatory Doing Business topics in 2013/14 reforms in at least 3 topics and had the biggest improvements in their distance to frontier scores is Doing Business 2015 uses a simple method to calculate intended to highlight economies with ongoing, broad- which economies improved the ease of doing business based reform programs. The improvement in the the most. First, it selects the economies that in 2013/14 distance to frontier score is used to identify the top implemented regulatory reforms making it easier to do improvers because this allows a focus on the absolute business in 3 or more of the 10 topics included in this improvement—in contrast with the relative improvement year’s aggregate distance to frontier score. Twenty-one shown by a change in rankings—that economies have economies meet this criterion: Azerbaijan; Benin; the made in their regulatory environment for business. Democratic Republic of Congo; Côte d’Ivoire; the Czech Republic; Greece; India; Ireland; Kazakhstan; Lithuania; the former Yugoslav Republic of Macedonia; Poland; Ease of Doing Business ranking Senegal; the Seychelles; Spain; Switzerland; Taiwan, China; Tajikistan; Togo; Trinidad and Tobago; and the The ease of doing business ranking ranges from 1 to 189. United Arab Emirates. Second, Doing Business sorts these The ranking of economies is determined by sorting the economies on the increase in their distance to frontier aggregate distance to frontier scores, rounded to 2 score from the previous year using comparable data. decimals. Doing Business 2015 Germany 88 RESOURCES ON THE DOING BUSINESS WEBSITE Current features Law library News on the Doing Business project Online collection of business laws and regulations http://www.doingbusiness.org relating to business http://www.doingbusiness.org/law-library Rankings How economies rank—from 1 to 189 Contributors http://www.doingbusiness.org/rankings More than 10,700 specialists in 189 economies who participate in Doing Business Data http://www.doingbusiness.org/contributors/doing- All the data for 189 economies—topic rankings, business indicator values, lists of regulatory procedures and details underlying indicators Entrepreneurship data http://www.doingbusiness.org/data Data on business density (number of newly registered companies per 1,000 working-age Reports people) for 139 economies Access to Doing Business reports as well as http://www.doingbusiness.org/data/exploretopics/ent subnational and regional reports, reform case repreneurship studies and customized economy and regional profiles Distance to frontier http://www.doingbusiness.org/reports Data benchmarking 189 economies to the frontier in regulatory practice Methodology http://www.doingbusiness.org/data/distance-to- The methodologies and research papers underlying frontier Doing Business http://www.doingbusiness.org/methodology Information on good practices Showing where the many good practices identified Research by Doing Business have been adopted Abstracts of papers on Doing Business topics and http://www.doingbusiness.org/data/good-practice related policy issues http://www.doingbusiness.org/research Doing Business iPhone App Doing Business at a Glance—presenting the full Doing Business reforms report, rankings and highlights for each topic for Short summaries of DB2015 business regulation the iPhone, iPad and iPod touch reforms, lists of reforms since DB2008 and a ranking http://www.doingbusiness.org/specialfeatures/ simulation tool iphone http://www.doingbusiness.org/reforms Historical data Customized data sets since DB2004 http://www.doingbusiness.org/custom-query Doing Business 2015 Germany 89