50480 Doing Business 2010 Germany © 2009 The International Bank for Reconstruction and Development / The World Bank 1818 H Street NW Washington, D.C. 20433 Telephone 202-473-1000 Internet www.worldbank.org E-mail feedback@worldbank.org All rights reserved. 1 2 3 4 08 07 06 05 A copublication of The World Bank and the International Finance Corporation. This volume is a product of the staff of the World Bank Group. The findings, interpretations, and conclusions expressed in this volume do not necessarily reflect the views of the Executive Directors of the World Bank or the governments they represent. The World Bank does not guarantee the accuracy of the data included in this work. Rights and Permissions The material in this publication is copyrighted. Copying and/or transmitting portions or all of this work without permission may be a violation of applicable law. 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Additional copies of Doing Business 2010: Reforming through Difficult Times, Doing Business 2009, Doing Business 2008, Doing Business 2007: How to Reform, Doing Business in 2006: Creating Jobs, Doing Business in 2005: Removing Obstacles to Growth and Doing Business in 2004: Understanding Regulations may be purchased at www.doingbusiness.org ISBN: 978-0-8213-7961-5 E-ISBN: 978-0-8213-7965-3 DOI: 10.1596/978-0-8213-7961-5 ISSN: 1729-2638 Library of Congress Cataloging-in-Publishing Data has been applied for. Printed in the United States. Current features News on the Doing Business project www.doingbusiness.org Rankings How economies rank-from 1 to 183 www.doingbusiness.org/economyrankings Contents Reformers Short summaries of DB2010 reforms, lists of reformers since DB2004 Introduction 1 and a ranking simulation tool and Aggregate Rankings www.doingbusiness.org/reformers Starting a Business 5 Historical data Customized data sets since DB2004 Dealing with www.doingbusiness.org/customquery Construction Permits 10 Methodology and research Employing Workers 15 The methodologies and research papers underlying Doing Business www.doingbusiness.org/MethodologySurveys Registering Property 19 Getting Credit 24 Download reports Access to Doing Business reports as well as subnational and regional reports, reform case studies and customized country and regional Protecting Investors 28 profiles www.doingbusiness.org/downloads Paying Taxes 32 Subnational and regional projects Trading Across Borders 36 Differences in business regulations at the subnational and regional level Enforcing Contracts 40 www.doingbusiness.org/subnational Closing a Business 44 Law Library Online collection of business laws and regulations relating to Doing Business 2010 48 business and gender issues Reforms www.doingbusiness.org/lawlibrary www.doingbusiness.org/genderlawlibrary Local partners More than 8,000 specialists in 183 economies who participate in Doing Business www.doingbusiness.org/LocalPartners Reformers' Club Celebrating the top 10 Doing Business reformers www.doingbusiness.org/Reformers/ReformersClub.aspx Business Planet Interactive map on the ease of doing business http://www.doingbusiness.org/map Doing Business 2010: Reforming Through Difficult Times is the seventh in a series of annual reports investigating regulations that enhance business activity and those that constrain it. Doing Business presents quantitative indicators on business regulations and the protection of property rights that can be compared across 183 economies, from Afghanistan to Zimbabwe, over time. A set of regulations affecting 10 stages of a business's life are measured: starting a business, dealing with construction permits, employing workers, registering property, getting credit, protecting investors, paying taxes, trading across borders, enforcing contracts and closing a business. Data in Doing Business 2010: Reforming Through Difficult Times are current as of June 1, 2009*. The indicators are used to analyze economic outcomes and identify what reforms have worked, where, and why. The Doing Business methodology has limitations. Other areas important to business such as an economy's proximity to large markets, the quality of its infrastructure services (other than those related to trading across borders), the security of property from theft and looting, the transparency of government procurement, macroeconomic conditions or the underlying strength of institutions, are not studied directly by Doing Business. To make the data comparable across economies, the indicators refer to a specific type of business, generally a local limited liability company operating in the largest business city. Because standard assumptions are used in the data collection, comparisons and benchmarks are valid across economies. The data not only highlight the extent of obstacles to doing business; they also help identify the source of those obstacles, supporting policymakers in designing reform. The data set covers 183 economies: 46 in Sub-Saharan Africa, 32 in Latin America and The Caribbean, 27 in Eastern Europe and Central Asia, 24 in East Asia and Pacific, 19 in the Middle East and North Africa and 8 in South Asia, as well as 27 OECD high-income economies as benchmarks. The following pages present the summary Doing Business indicators for Germany. The data used for this country profile come from the Doing Business database and are summarized in graphs. These graphs allow a comparison of the economies in each region not only with one another but also with the "good practice" economy for each indicator. The good-practice economies are identified by their position in each indicator as well as their overall ranking and by their capacity to provide good examples of business regulation to other countries. These good-practice economies do not necessarily rank number 1 in the topic or indicator, but they are in the top 10. More information is available in the full report. Doing Business 2010: Reforming Through Difficult Times presents the indicators, analyzes their relationship with economic outcomes and recommends reforms. The data, along with information on ordering the report, are available on the Doing Business website (www.doingbusiness.org). * Except for the Paying Taxes indicator that refers to the period January to December of 2008. Note: Doing Business 2008 and Doing Business 2009 data and rankings have been recalculated to reflect changes to the methodology and the addition of new countries (in the case of the rankings). 1 Economy Rankings - Ease of Doing Business Germany is ranked 25 out of 183 economies. Singapore is the top ranked economy in the Ease of Doing Business. Germany - Compared to global good practice economy as well as selected economies: Germany's ranking in Doing Business 2010 Rank Doing Business 2010 Ease of Doing Business 25 Starting a Business 84 Dealing with Construction Permits 18 Employing Workers 158 Registering Property 57 Getting Credit 15 Protecting Investors 93 Paying Taxes 71 Trading Across Borders 14 Enforcing Contracts 7 2 Closing a Business 35 Summary of Indicators - Germany Starting a Business Procedures (number) 9 Time (days) 18 Cost (% of income per capita) 4.7 Min. capital (% of income per capita) 0.0 Dealing with Construction Permits Procedures (number) 12 Time (days) 100 Cost (% of income per capita) 60.2 Employing Workers Difficulty of hiring index (0-100) 33 Rigidity of hours index (0-100) 53 Difficulty of redundancy index (0-10) 40 Rigidity of employment index (0-100) 42 Redundancy costs (weeks of salary) 69 Registering Property Procedures (number) 4 Time (days) 40 Cost (% of property value) 5.2 Getting Credit Strength of legal rights index (0-10) 7 Depth of credit information index (0-6) 6 Public registry coverage (% of adults) 0.8 Private bureau coverage (% of adults) 98.3 Protecting Investors Extent of disclosure index (0-10) 5 Extent of director liability index (0-10) 5 Ease of shareholder suits index (0-10) 5 Strength of investor protection index (0-10) 5.0 Paying Taxes Payments (number per year) 16 Time (hours per year) 196 Profit tax (%) 8.6 Labor tax and contributions (%) 22.0 Other taxes (%) 14.3 Total tax rate (% profit) 44.9 4 Trading Across Borders Documents to export (number) 4 Time to export (days) 7 Cost to export (US$ per container) 872 Documents to import (number) 5 Time to import (days) 7 Cost to import (US$ per container) 937 Enforcing Contracts Procedures (number) 30 Time (days) 394 Cost (% of claim) 14.4 Closing a Business Recovery rate (cents on the dollar) 52.2 Time (years) 1.2 Cost (% of estate) 8 When entrepreneurs draw up a business plan and try to get under way, the first hurdles they face are the procedures required to incorporate and register the new firm before they can legally operate. Economies differ greatly in how they regulate the entry of new businesses. In some the process is straightforward and affordable. In others the procedures are so burdensome that entrepreneurs may have to bribe officials to speed up the process or may decide to run their business informally. Analysis shows that burdensome entry regulations do not increase the quality of products, make work safer or reduce pollution. Instead, they constrain private investment; push more people into the informal economy; increase consumer prices and fuel corruption. Methodology The data on starting a business is based on a survey and research investigating the procedures that a standard small to medium -size company needs to complete to start operations legally. This includes obtaining all necessary permits and licenses and completing all required inscriptions, verifications and notifications with authorities to enable the company to formally operate. Procedures are recorded only where interaction is required with an external party. It is assumed that the founders complete all procedures themselves unless professional services (such as by a notary or lawyer) are required by law. Voluntary procedures are not counted, nor are industry­specific requirements and utility hook-ups. Lawful shortcuts are counted. It is assumed that all in formation is readily available to the entrepreneur, that there has been no prior contact with officials and that all government and nongovernment entities involved in the process function without corruption. Survey Case Study The business: is a limited l iability company conducting general commercial activities is located in the largest business city is 100% domestically owned has a start-up capital of 10 times income per capita has a turnover of at least 100 times income per capita has between 10 and 50 employees does not qualify for any special benefits does not own real estate 5 1. Historical data: Starting a Business in Germany Starting a Business data Doing Business 2008 Doing Business 2009 Doing Business 2010 Rank .. 101 84 Procedures (number) 9 9 9 Time (days) 18 18 18 Cost (% of income per capita) 5.7 5.6 4.7 Min. capital (% of income per capita) 42.8 42.2 0.0 2. The following graphs illustrates the Starting a Business indicators in Germany over the past 3 years: 6 3. Steps to Starting a Business in Germany It requires 9 procedures, takes 18 days, and costs 4.73 % GNI per capita to start a business in Germany. List of Procedures: 1. Clear the name of company at the local chamber of industry and commerce 2. A notary notarizes the articles of association and foundation agreement 3. Open a bank account and deposit paid-in capital 4. Notary public files the articles of association with the local commercial register, kept at local courts 5. Notify the local office of business and standards of the establishment of the company 6. Register with the professional association of the relevant trade 7. Notify the local labor office of the establishment of the company 8. Register employees for health and social insurance 9. Mail out the documentation to the Tax Office 7 More detail is included in the appendix. 4. Benchmarking Starting a Business Regulations: Germany is ranked 84 overall for Starting a Business. Ranking of Germany in Starting a Business - Compared to good practice and selected economies: 8 The following table shows Starting a Business data for Germany compared to good practice and comparator economies: Good Practice Procedures Time (days) Cost (% of Min. capital (number) income per (% of income Economies capita) per capita) Denmark* 0.0 New Zealand* 1 1 0.0 Selected Economy Germany 9 18 4.7 0.0 Comparator Economies Denmark 4 6 0.0 38.6 Finland 3 14 0.9 7.2 France 5 7 0.9 0.0 Iceland 5 5 3.0 15.8 Norway 5 7 1.9 18.7 * The following economies are also good practice economies for : Procedures (number): Canada Cost (% of income per capita): Slovenia 9 Once entrepreneurs have registered a business, what regulations do they face in operating it? To measure such regulation, Doing Business focuses on the construction sector. Construction companies are under constant pressure from government to comply with i nspections, with licensing and safety regulations, from customers to be quick and cost-effective. These conflicting pressures point to the tradeoff in building regulation; the tradeoff between protecting people (construction workers, tenants, passersby) and keeping the cost of building affordable. In many economies, especially poor ones, complying with building regulations is so costly in time and money that many builders opt out. Builders may pay bribes to pass inspections or simply build illegally, leadi ng to hazardous construction. Where the regulatory burden is large, entrepreneurs may tend to move their activity into the informal economy. There they operate with less concern for safety, leaving everyone worse off. In other economies compliance is simple, straightforward and inexpensive, yielding better results. Methodology The indicators on dealing with construction permits record all procedures officially required for an entrepreneur in the construction industry to build a warehouse. These include su bmitting project documents (building plans, site maps) to the authorities, obtaining all necessary licenses and permits, completing all required notifications and receiving all necessary inspections. They also include procedures for obtaining utility conne ctions, such as electricity, telephone, water and sewerage. The time and cost to complete each procedure under normal circumstances are calculated. All official fees associated with legally completing the procedures are included. Time is recorded in calendar days. The survey assumes that the entrepreneur is aware of all existing regulations and does not use an intermediary to complete the procedures unless required to do so by law. Survey Case Study The business: is a small to medium-size limited liabilit y company is located in the largest business city is domestically owned and operated, in the construction business has 20 qualified employees The warehouse to be built : is a new construction (there was no previous construction on the land) has complete architectural and technical plans prepared by a licensed architect will be connected to electricity, water, sewerage (sewage system, septic tank or their equivalent) and one land phone line. The connection to each utility network will be 32 feet, 10 inches ( 10 meters) long. will be used for general storage, such as of books or stationery. The warehouse will not be used for any goods requiring special conditions, such as food, chemicals or pharmaceuticals. will take 30 weeks to construct (excluding all delays due to administrative and regulatory requirements). 10 1. Historical data: Dealing with Construction Permits in Germany Dealing with Construction Permits data Doing Business 2008 Doing Business 2009 Doing Business 2010 Rank .. 15 18 Procedures (number) 12 12 12 Time (days) 100 100 100 Cost (% of income per capita) 63.1 62.2 60.2 2. The following graphs illustrates the Dealing with Construction Permits indicators in Germany over the past 3 years: 11 3. Steps to Building a Warehouse in Germany It requires 12 procedures, takes 100 days, and costs 60.15 % GNI per capita to build a warehouse in Germany. List of Procedures: 1. Obtain building permit 12. Obtain telephone line 2. Application for approval of static calculation 3. Receive inspection from District Chimney Sweeper 4. Receive inspection of the building shell 5. Receive inspection after completion of the building ("Foermliche Bauabnahme") 6. Apply for water connection 7. Receive inspection by water company 8. Obtain water connection 9. Apply for electricity connection 10. Receive inspection by electricity company 11. Obtain power connection 12 More detail is included in the appendix. 4. Benchmarking Dealing with Construction Permits Regulations: Germany is ranked 18 overall for Dealing with Construction Permits. Ranking of Germany in Dealing with Construction Permits - Compared to good practice and selected economies: 13 The following table shows Dealing with Construction Permits data for Germany compared to good practice and comparator economies: Good Practice Procedures Time (days) Cost (% of (number) income per Economies capita) Denmark 6 Qatar 0.6 Singapore 25 Selected Economy Germany 12 100 60.2 Comparator Economies Denmark 6 69 58.7 Finland 18 38 119.7 France 13 137 22.9 Iceland 18 75 22.2 Norway 14 252 41.4 14 Economies worldwide have established a system of laws and institutions intended to protect workers and guarantee a minimum standard of living for its population. This system generally encompasses four bodies of law: employment, industrial relations, social security and occupational health and safety laws. Employment regulations are needed to allow efficient contracting between employers and workers and to protect workers from discriminatory or unfair treatment by employers. Doing Business measures flexibility in the regulation of hiring, working hours and dismissal in a manner consistent with the conventions of the International Labour Organization (ILO). An economy can have the most flexible labor regulations as measured by Doing Business while ratifying and complying with all conventions directly relevant to the factors measured by Doing Business and with the ILO core labor standards. No economy can achieve a better score by failing to comply with these conventions. Governments all over the world face the challenge of finding the right balance between worker protection and labor market flexibility. But in developing countries especially, regulators often err to one extreme, pushing employers and workers into the informal sector. Analysis across economies shows that while employment regulation generally increases the tenure and wages of incumbent workers, overly rigid regulations may have undesirable side effects. These include less job creation, smaller company size, less investment in research and develop ment, and longer spells of unemployment and thus the obsolescence of skills, all of which may reduce productivity growth. Methodology Two measures are presented: a rigidity of employment index and a redundancy cost measure. The rigidity of employment in dex is the average of three sub-indices: difficulty of hiring, rigidity of hours and difficulty of redundancy. Each index takes values between 0 and 100, with higher values indicating more rigid regulation. The difficulty of hiring index measures the flexi bility of contracts and the ratio of the minimum wage to the value added per worker. The rigidity of hours index covers restrictions on weekend and night work, requirements relating to working time and the workweek taking into account legal provisions that refer specifically to small to medium-size companies in the manufacturing industry in which continuous operation is economically necessary, as well as mandated days of annual leave with pay. The difficulty of redundancy index covers workers' legal protec tions against dismissal, including the grounds permitted for dismissal and procedures for dismissal (individual and collective): notification and approval requirements, retraining or reassignment obligations and priority rules for dismissals and reemployme nt. The Redundancy cost indicator measures the cost of advance notice requirements, severance payments and penalties due when terminating a redundant worker, expressed in weeks of salary. Survey Case Study The business: is a limited liability company o perating in the manufacturing sector is located in the largest business city is 100% domestically owned has 60 employees The company is also assumed to be subject to collective bargaining agreements in economies where such agreements cover more than half the manufacturing sector and apply even to firms not party to them. 15 1. Historical data: Employing Workers in Germany Employing Workers data Doing Business 2008 Doing Business 2009 Doing Business 2010 Rank .. 157 158 Redundancy costs (weeks of salary) 69 69 69 Rigidity of employment index (0-100) 42 42 42 2. The following graphs illustrates the Employing Workers indicators in Germany over the past 3 years: 16 3. Benchmarking Employing Workers Regulations: Germany is ranked 158 overall for Employing Workers. Ranking of Germany in Employing Workers - Compared to good practice and selected economies: 17 The following table shows Employing Workers data for Germany compared to good practice and comparator economies: Good Practice Rigidity of Redundancy employment costs (weeks Economies index (0-100) of salary) Hong Kong, China* 0 New Zealand* 0 Selected Economy Germany 42 69 Comparator Economies Denmark 7 0 Finland 41 26 France 52 32 Iceland 21 13 Norway 44 13 * The following economies are also good practice economies for : Rigidity of employment index (0-100): Australia, Brunei Darussalam, Kuwait, Marshall Islands, Singapore, St. Lucia, Uganda, United States Redundancy costs (weeks of salary): Denmark, Iraq, Marshall Islands, Micronesia, Fed. Sts., Palau, Puerto Rico, Tonga, United States 18 Formal property titles help promote the transfer of land, encourage investment and give entrepreneurs access to formal credit markets. But a large share of property in developing economies is not formally registered. Informal titles cannot be used as secur ity in obtaining loans, which limits financing opportunities for businesses. Many governments have recognized this and started extensive property titling programs. But bringing assets into the formal sector is only part of the story. The more difficult and costly it is to formally transfer property, the greater the chances that formalized titles will quickly become informal again. Eliminating unnecessary obstacles to registering and transferring property is therefore important for economic development. Efficient property registration reduces transaction costs and helps to formalize property titles. Simple procedures to register property are also associated with greater perceived security of property rights and less corruption. That s, benefits all entrepreneur especially women, the young and the poor. The rich have few problems protecting their property rights. They can afford to invest in security systems and other measures to defend their property. But small entrepreneurs cannot. Reform can change this. Methodology Doing Business records the full sequence of procedures necessary for a business (buyer) to purchase a property from another business (seller) and to transfer the property title to the buyer's name. The property of land and building will be tran sferred in its entirety. The transaction is considered complete when the buyer can use the property as collateral for a bank loan. Local property lawyers and officials in property registries provide information on required procedures as well as the time and cost to complete each one. For most economies the data are based on responses from both. Based on the responses, three indicators are constructed: number of procedures to register property time to register property (in calendar days) official costs to register property (as a percentage of the property value) Survey Case Study The buyer and seller: are limited liability companies are private nationals (no foreign ownership) are located in periurban area of the largest business city conduct general commercial activities The property: consists of land and a 2 -story building (warehouse) is located in the periurban commercial zone of the largest business city The land area is 557.4 m 2 (6,000 square feet). The warehouse has a total area of 929 m2 (10,000 square feet). has a value equal to 50 times income per capita The seller company owned the property for the last 10 years. is registered in the land registry and/or cadastre and is free of all disputes . 19 1. Historical data: Registering Property in Germany Registering Property data Doing Business 2008 Doing Business 2009 Doing Business 2010 Rank .. 54 57 Procedures (number) 4 4 4 Time (days) 40 40 40 Cost (% of property value) 5.2 5.2 5.2 2. The following graphs illustrates the Registering Property indicators in Germany over the past 3 years: 20 3. Steps to Registering Property in Germany It requires 4 procedures, takes 40 days, and costs 5.16 % of property value to register the property in Germany. List of Procedures: 1. The notary obtains an extract from the Land Registry and notarizes the transfer agreement 2. Fulfillment of the pre-conditions for the validity of the purchase price 3. Payment of the transfer tax and obtaining the confirmation 4. Application for the registration of the new owner and deletion of the priority notice to the land register More detail is included in the appendix. 21 4. Benchmarking Registering Property Regulations: Germany is ranked 57 overall for Registering Property. Ranking of Germany in Registering Property - Compared to good practice and selected economies: 22 The following table shows Registering Property data for Germany compared to good practice and comparator economies: Good Practice Procedures Time (days) Cost (% of (number) property Economies value) New Zealand* 2 Norway* 1 Saudi Arabia 0.0 Selected Economy Germany 4 40 5.2 Comparator Economies Denmark 6 42 0.6 Finland 3 14 4.1 France 8 98 6.1 Iceland 3 4 2.4 Norway 1 3 2.5 * The following economies are also good practice economies for : Procedures (number): United Arab Emirates Time (days): Saudi Arabia, Thailand, United Arab Emirates 23 Firms consistently rate access to credit as among the greatest barriers to their operation and growth. Doing Business constructs two sets of indicators of how well credit markets function: one on credit registries and the other on legal rights of borrowers and lenders. Credit registries, institutions that collect and distribute credit information on borrowers, can greatly expand access to credit. By sharing credit information, they help lenders assess risk and allocate credit more efficiently. They also free entrepreneurs from having to rely on personal connections alone when trying to obtain credit. Methodology Credit information: three indicators are constructed: depth of credit information index, which measures the extent to which the rules of a credit information system facilitate lending based on the scope of information distributed, the ease of access to information and the quality of information public registry coverage, which reports the number of individuals and firms covered by a public credit re gistry as a percentage of the adult population private bureau coverage, which reports the number of individuals and firms, covered by a private credit bureau as a percentage of the adult population Legal Rights: the strength of legal rights index measures the degree to which collateral and bankruptcy laws protect the rights of borrowers and lenders. Ten points are analyzed: Can a business use movable assets as collateral while keeping possession of the assets, and can any financial institution accept such assets as collateral? Does the law allow a business to grant a non -possessory security right in a single category of revolving movable assets, without requiring a specific description of the secured assets? Does the law allow a business to grant a non pos sessory security right in substantially all of its assets, without requiring a specific description of the secured assets? Can a security right extend to future or after -acquired assets and extend automatically to the products, proceeds or replacements of the original assets? Is general description of debts and obligations permitted in collateral agreements and in registration documents, so that all types of obligations and debts can be secured by stating a maximum rather than a specific amount between the parties? Is a collateral registry in operation that is unified geographically and by asset type as well as being indexed by the name of the grantor of a security right? Are secured creditors paid first when a debtor defaults outside an insolvency procedure or when a business is liquidated? Are secured creditors subject to an automatic stay or moratorium on enforcement procedures when a debtor enters a court-supervised reorganization procedure? Are parties allowed to agree in a collateral agreement that the lender may enforce its security right out of court? Legal Rights Survey Case Study The Debtor: is a Private Limited Liability Company has its headquarters and only base of operations in the largest business city obtains a loan from a local bank (the Cred itor) for an amount up to 10 times income (GNI) per capita Both debtor and creditor are 100% domestically owned. 24 1. Historical data: Getting Credit in Germany Getting Credit data Doing Business 2008 Doing Business 2009 Doing Business 2010 Rank .. 12 15 Strength of legal rights index (0-10) 8 7 7 Depth of credit information index (0-6) 6 6 6 Private bureau coverage (% of adults) 0.7 98.4 98.3 Public registry coverage (% of adults) 98.1 0.7 0.8 2. The following graphs illustrates the Getting Credit indicators in Germany over the past 3 years: 25 3. Benchmarking Getting Credit Regulations: Germany is ranked 15 overall for Getting Credit. Ranking of Germany in Getting Credit - Compared to good practice and selected economies: 26 The following table shows Getting Credit data for Germany compared to good practice and comparator economies: Good Practice Strength of Depth of Public Private legal rights credit registry bureau Economies index (0-10) information coverage (% coverage (% index (0-6) of adults) of adults) New Zealand* 100.0 Portugal 81.3 Singapore* 10 United Kingdom 6 Selected Economy Germany 7 6 0.8 98.3 Comparator Economies Denmark 9 4 0.0 5.2 Finland 7 5 0.0 14.7 France 7 4 32.5 0.0 Iceland 7 5 0.0 100.0 Norway 7 4 0.0 100.0 * The following economies are also good practice economies for : Strength of legal rights index (0-10): Hong Kong, China, Kenya, Kyrgyz Republic, Malaysia Private bureau coverage (% of adults): Argentina, Australia, Canada, Iceland, Ireland, Norway, Sweden, United Kingdom, United States 27 countries have the highest credit information index. 27 Companies grow by raising capital, either through a bank loan or by attracting equity investors. Selling shares allows companies to expand without the need to provide collateral and repay bank loans. However, investors worry about their money, and look for laws that protect them. A study finds that the presence of legal and regulatory protections for investors explains up to 73% of the decision to invest. In contrast, company characteristics explain only between 4% and 22%*. Good protections for minority sh areholders are associated with larger and more active stock markets. Thus both governments and businesses have an interest in reforms strengthening investor protections. Methodology To document some of the protections investors have, Doing Business mea sures how economies regulate a standard case of self- dealing, use of corporate assets for personal gain. Three indices of investor protection are constructed based on the answers to these and other questions. All indices range from 0 to 10, with higher values indicating more protections or greater disclosure. The three indices are: The extent of disclosure index covers approval procedures, requirements for immediate disclosure to the public and shareholders of proposed transactions, requirements for disclosure in periodic filings and reports and the availability of external review of transactions before they take place. The extent of director liability index covers the ability of investors to hold Mr. James and the board of directors liable for damages, the ability to rescind the transaction, the availability of fines and jail time associated with self -dealing, the availability of direct or derivative suits and the ability to require Mr. James to pay back his personal profits from the transaction. The ease of shareholder suits index covers the availability of documents that can be used during trial, the ability of the investor to examine the defendant and other witnesses, shareholders' access to internal documents of the company, the appointment of an inspect or to investigate the transaction and the standard of proof applicable to a civil suit against the directors. These three indices are averaged to create the strength of investor protection index. Survey case study Mr. James, a director and the majority shareholder of a public company, proposes that the company purchase used trucks from another company he owns. The price is higher than the going price for used trucks. The transaction goes forward. All required approvals are obtained, and all required disclosures made, though the transaction is prejudicial to the purchasing company. Shareholders sue the interested parties and the members of the board of directors. Several questions arise: Who approves the transaction? What information must be disclosed ? What company documents can investors access? What do minority shareholders have to prove to get the transaction stopped or to receive compensation from Mr. James? *Doidge, Kardyi and Stulz (2007) 28 1. Historical data: Protecting Investors in Germany Protecting Investors data Doing Business 2008 Doing Business 2009 Doing Business 2010 Rank .. 88 93 Strength of investor protection index (0-10) 5.0 5.0 5.0 2. The following graph illustrates the Protecting Investors index in Germany compared to best practice and selected Economies: 9.7 6.7 6.3 5.7 5.3 5.3 5.0 k d ay ar y nd ce d an an an m w an a nl or en m al el Fi Fr N Ic Ze er D G ew N Note: The higher the score, the greater the investor protection. 29 3. Benchmarking Protecting Investors Regulations: Germany is ranked 93 overall for Protecting Investors. Ranking of Germany in Protecting Investors - Compared to good practice and selected economies: 30 The following table shows Protecting Investors data for Germany compared to good practice and comparator economies: Good Practice Strength of investor Economies protection index (0-10) New Zealand 9.7 Selected Economy Germany 5.0 Comparator Economies Denmark 6.3 Finland 5.7 France 5.3 Iceland 5.3 Norway 6.7 31 Taxes are essential. Without them there would be no money to provide public amenities, infrastructure and services which are crucial for a properly functioning economy. But particularly for small and medium size companies, they may opt out and choose to op erate in the informal sector. One way to enhance tax compliance is to ease and simplify the process of paying taxes for such businesses. Methodology The Doing Business tax survey records the effective tax that a small and medium company must pay and the administrative costs of doing so. Three indicators are constructed: number of tax payments, which takes into account the method of payment, the frequency of payments and the number of agencies involved in our standardized case study. time, which measures the number of hours per year necessary to prepare and file tax returns and to pay the corporate income tax, value added tax, sales tax or goods and service tax and labor taxes and mandatory contributions. total tax rate, which measures the amount of taxes and mandatory contributions payable by the company during the second year of operation. This amount, expressed as a percentage of commercial profit, is the sum of all the different taxes payable after accounting for various deductions and exemptions. Survey case study TaxpayerCo is a medium-size business that started operations last year. Doing Business asks tax practitioners in 183 economies to review TaxpayerCo's financial statements and a standard list of transactions that the company completed during the year. Respondents are asked how much in taxes and mandatory contributions the business must pay and what the process is for doing so. The business starts from the same financial position in each economy. All the taxes and mandatory contributions paid during the second year of operation are recorded. Taxes and mandatory contributions are measured at all levels of government and include corporate income tax, turnover tax, all labor taxes and contributions paid by the company (including mandatory contrib utions paid to private pension or insurance funds), property tax, property transfer tax, dividend tax, capital gains tax, financial transactions tax, vehicle tax, sales tax and other small taxes (such as fuel tax, stamp duty and local taxes). A range of standard deductions and exemptions are also recorded. 32 1. Historical data: Paying Taxes in Germany Paying Taxes data Doing Business 2008 Doing Business 2009 Doing Business 2010 Rank .. 80 71 Total tax rate (% profit) 50.1 50.5 44.9 Payments (number per year) 15 16 16 Time (hours per year) 196 196 196 2. The following graphs illustrates the Paying Taxes indicators in Germany over the past 3 years: 33 3. Benchmarking Paying Taxes Regulations: Germany is ranked 71 overall for Paying Taxes. Ranking of Germany in Paying Taxes - Compared to good practice and selected economies: 34 The following table shows Paying Taxes data for Germany compared to good practice and comparator economies: Good Practice Payments Time (hours Total tax rate (number per per year) (% profit) Economies year) Maldives* 1 0 Timor-Leste 0.2 Selected Economy Germany 16 196 44.9 Comparator Economies Denmark 9 135 29.2 Finland 8 243 47.7 France 7 132 65.8 Iceland 31 140 25.0 Norway 4 87 41.6 * The following economies are also good practice economies for : Payments (number per year): Qatar 35 The benefits of trade are well documented; as are the obstacles to trade. Tariffs, quotas and distance from large markets greatly increase the cost of goods or prevent trading altogether. But with bigger ships and faster planes, the world is shrinking. Glo bal and regional trade agreements have reduced trade barriers. Yet Africa's share of global trade is smaller today than it was 25 years ago. So is the Middle East's, excluding oil exports. Many entrepreneurs face numerous hurdles to exporting or importing goods, including delays at the border. They often give up. Others never try. In fact, the potential gains from trade facilitation may be greater than those arising from only tariff reductions. Methodology Doing Business compiles procedural requirements for trading a standard shipment of goods by ocean transport. Every procedure and the associated documents, time and cost, for importing and exporting the goods is recorded, starting with the contractual agreement between the two parties and ending with delivery of the goods. For importing the goods, the procedures measured range from the vessel's arrival at the port of entry to the shipment's delivery at the importer's warehouse. For exporting the goods, the procedures measured range from the packing of thegoods at the factory to their departure from the port of exit. Payment is by letter of credit and the time and cost for issuing or securing a letter of credit is taken into account. Documents recorded include port filing documents, customs declaration and clearance documents, as well as official documents exchanged between the parties to the transaction. Time is recorded in calendar days, from the beginning to the end of each procedure. Cost includes the fees levied on a 20 -foot container in U.S. dollars . All the fees associated with completing the procedures to export or import the goods are included, such as costs for documents, administrative fees for customs clearance and technical control, terminal handling charges and inland transport. The cost measure does not include tariffs or duties. Economies that have efficient customs, good transport networks and fewer document requirements, making compliance with export and import procedures faster and cheaper, are more competitive globally. That can lead to more exports; and exports are associated with faster growth and more jobs. Conversely, a need to file many documents is associated with more corruption in customs. Faced with long delays and frequent demands for bribes, many traders may avoid customs altogether. Instead, they smuggle goods across the border. This defeats the very purpose in having border control of trade to levy taxes and ensure high quality of goods. Survey case study To make the data comparable across countries, several assumptions about the business and the traded goods are used: The business is of medium size . The business employs 60 people . The business is located in the peri-urban area of the economy'slargest business city . The business is a private, limited liability company, dom estically owned, formally registered and operating under commercial laws and regulations of the economy. The traded goods are ordinary, legally manufactured products transported in a dry-cargo, 20-foot FCL (full container load) container. 36 1. Historical data: Trading Across Borders in Germany Trading Across Borders data Doing Business 2008 Doing Business 2009 Doing Business 2010 Rank .. 11 14 Cost to export (US$ per container) 740 822 872 Cost to import (US$ per container) 765 887 937 Documents to export (number) 4 4 4 Documents to import (number) 5 5 5 Time to export (days) 7 7 7 Time to import (days) 7 7 7 2. The following graphs illustrates the Trading Across Borders indicators in Germany over the past 3 years: 37 3. Benchmarking Trading Across Borders Regulations: Germany is ranked 14 overall for Trading Across Borders. Ranking of Germany in Trading Across Borders - Compared to good practice and selected economies: 38 The following table shows Trading Across Borders data for Germany compared to good practice and comparator economies: Good Practice Documents to Time to Cost to Documents to Time to Cost to export export (days) export (US$ import import (days) import (US$ Economies (number) per (number) per container) container) Denmark* 5 France 2 2 Malaysia 450 Singapore 3 439 Selected Economy Germany 4 7 872 5 7 937 Comparator Economies Denmark 4 5 744 3 5 744 Finland 4 8 540 5 8 620 France 2 9 1078 2 11 1248 Iceland 5 19 1532 5 14 1674 Norway 4 7 830 4 7 729 * The following economies are also good practice economies for : Time to export (days): Estonia 39 Where contract enforcement is efficient, businesses are more likely to engage with new borrowers or customers. Doing Business tracks the efficiency of the judicial system in resolving a commercial dispute, following the step -by- step evolution of a commercial sale dispute before local courts. The data is collected through study of the codes of civil procedure and other court regulations as well as through surveys completed by local litigation lawyers (and, in a quarter of the countries, by judges as well). Justice delayed is often justice denied. And in many economies only the rich can afford to go to court. For the rest, justice is out of reach. In the absence of efficient courts, firms undertake fewer investments or business transactions. And they prefer to involve only a small group of people who know each other from previous dealings. Methodology Rankings on enforcing contracts are based on 3 sub-indicators: number of procedures, which are defined as any interaction between the parties or between them and the judge or court officer. This includes steps to file the case, steps for trial and judgment and steps necessary to enforce the judgment. time, which counts the number of calendar days from the moment the Seller files the lawsuit in court until payme nt is received. This includes both the days on which actions take place and the waiting periods in between. cost, which is recorded as a percentage of the claim (assumed to be equivalent to 200% of income per capita). Three types of costs are recorded: court costs (including expert fees), enforcement costs (including costs for a public sale of Buyer's assets) and attorney fees. Survey case Study The dispute concerns a contract for the sale of goods between two businesses (the Seller and the Buyer). Both are located in the economy's largest business city. The Seller sells and delivers goods, worth 200% of the economy's income per capita, to the Buyer. The Buyer refuses to pay on the grounds that they were not of adequate quality. The Seller sues the Buyer to recover the amount under the sales agreement (200% of the economy's income per capita). The claim is filed before a court in the economy's largest business city with jurisdiction over commercial cases worth 200% of the income per capita and is disputed on the merits. Judgment is 100% in favor of the Seller and is not appealed. The Seller enforces the judgment and the money is successfully collected through a public sale of Buyer's assets. 40 1. Historical data: Enforcing Contracts in Germany Enforcing Contracts data Doing Business 2008 Doing Business 2009 Doing Business 2010 Rank .. 9 7 Procedures (number) 30 30 30 Time (days) 394 394 394 Cost (% of claim) 14.4 14.4 14.4 2. The following graphs illustrates the Enforcing Contracts indicators in Germany over the past 3 years: 41 3. Benchmarking Enforcing Contracts Regulations: Germany is ranked 7 overall for Enforcing Contracts. Ranking of Germany in Enforcing Contracts - Compared to good practice and selected economies: 42 The following table shows Enforcing Contracts data for Germany compared to good practice and comparator economies: Good Practice Procedures Time (days) Cost (% of (number) claim) Economies Bhutan 0.1 Ireland 20 Singapore 150 Selected Economy Germany 30 394 14.4 Comparator Economies Denmark 34 380 23.3 Finland 32 375 10.4 France 29 331 17.4 Iceland 26 417 6.2 Norway 33 280 9.9 43 The economic crises of the 1990s in emerging markets, from East Asia to Latin America, from Russia to Mexico, raised concerns about the design of bankruptcy systems and the ability of such systems to help reorganize viable companies and close down unviable ones. In countries where bankruptcy is inefficient, unviable businesses linger for years, keeping assets and human capital from being reallocated to more productive uses. Bottlenecks in bankruptcy cut into the amount claimants can recover. In countries w here bankruptcy laws are inefficient, this is a strong deterrent to investment. Access to credit shrinks, and nonperforming loans and financial risk grow because creditors cannot recover overdue loans. Conversely, efficient bankruptcy laws can encourage entrepreneurs. The freedom to fail, and to do so through an efficient process, puts people and capital to their most effective use. The result is more productive businesses and more jobs. The Doing Business indicators identify weaknesses in the bankruptcy l aw as well as the main procedural and administrative bottlenecks in the bankruptcy process. In many developing countries bankruptcy is so inefficient that creditors hardly ever use it. In countries such as these, reform would best focus on improving contra ct enforcement outside bankruptcy. Methodology Three measures are constructed from the survey responses: the time to go through the insolvency process, the cost to go through the process and the recovery rate, how much of the insolvency estate is recovered by stakeholders, taking into account the time, cost, depreciation of assets and the outcome of the insolvency proceeding. Survey case study The data on closing a business are developed using a standard s et of case assumptions to track a company going through the step -by- step procedures of the bankruptcy process. It is assumed that: the company is a domestically owned the company is a limited liability corporation operating a hotel in the country's largest business city the company has 201 employees, 1 main secured creditor and 50 unsecured creditors Assumptions are also made about the future cash flows. The case is designed so that the company has a higher value as a going concern, that is, the efficient outcome is either reorganization or sale as a going concern, not piecemeal liquidation. The data are derived from questionnaires answered by attorneys at private law firms. 44 1. Historical data: Closing Business in Germany Closing a Business data Doing Business 2008 Doing Business 2009 Doing Business 2010 Rank .. 35 35 Time (years) 1.2 1.2 1.2 Cost (% of estate) 8 8 8 Recovery rate (cents on the dollar) 53.1 52.2 52.2 2. The following graphs illustrates the Closing Business indicators in Germany over the past 3 years: 45 3. Benchmarking Closing Business Regulations: Germany is ranked 35 overall for Closing a Business. Ranking of Germany in Closing Business - Compared to good practice and selected economies: 46 The following table shows Closing Business data for Germany compared to good practice and comparator economies: Good Practice Recovery rate Time (years) Cost (% of (cents on the estate) Economies dollar) Ireland 0.4 Japan 92.5 Singapore* 1 Selected Economy Germany 52.2 1.2 8 Comparator Economies Denmark 86.5 1.1 4 Finland 87.3 0.9 4 France 44.7 1.9 9 Iceland 76.6 1.0 4 Norway 89.0 0.9 1 * The following economies are also good practice economies for : Cost (% of estate): Colombia, Kuwait, Norway 47 Number of reforms in Doing Business 2010 Dealing with Construction Trading Across Borders Positive Reform Registering Property Enforcing Contracts Employing Workers Protecting Investors Starting a Business Closing a Business Negative Reform Total Getting Credit Paying Taxes number Permits of Rank reforms Economy 1 Rwanda 7 2 Kyrgyz Republic 7 3 Macedonia, FYR 7 4 Belarus 6 5 United Arab Emirates 3 6 Moldova 3 7 Colombia 8 8 Tajikistan 5 9 Egypt, Arab Rep. 4 10 Liberia 3 Germany 2 Denmark Finland Iceland 1 Norway 1 France 2 Note: Economies are ranked on the number and impact of reforms, Doing Business selects the economies that reformed in 3 or more of the Doing Business topics. Second, it ranks these economies on the increase in rank in Ease of Doing Business from the previous year. The larger the improvement, the higher the ranking as a reformer. 48 Belarus Belarus eased the process for getting construction permits by simplifying approval processes. Restrictions relating to redundancy dismissals were eased by raising the threshold for prior notification requirements. Tax payments were made more convenient through increased use of electronic systems--reducing tax compliance times--while lower ecological and turnover tax rates and a reduction in the number of payments for property tax reduced the tax burden on businesses. Property registration continues to improve, with faster processing and elimination of the requirement for notarization. Business start-up was eased by simplifying registration formalities, abolishing the minimum capital requirement, limiting the role of notaries, and removing the need for a company seal approval. Implementation of a risk-based management system and improvement of border crossing operations reduced transit times for trade. Colombia Colombia passed several decrees continuing its efforts to regulate the profession of insolvency administrators. The government eased the construction permit process with a new construction decree that categorizes building projects based on risk and allows electronic verification for certain documents. Access to credit improved thanks to a new credit information law that guarantees the right of borrowers to inspect their own data and new rules that make it mandatory for credit providers to consult and share information with credit bureaus. The tax burden on businesses was eased with the introduction of electronic tax filing and payment, and some payments were reduced. An amendment to the Company Law strengthened investor protections by making it easier to sue directors in cases of prejudicial transactions between interested parties. Property registration was made easier by making it possible to obtain required certificates online and by making standard preliminary sale agreements available free of charge. Business start-up was made easier by creating a public-private health provider that enables faster affiliation of employees and through a tool that allows online pre-enrollment with the social security office. Implementation of an electronic declaration system has expedited customs clearance. Denmark In Denmark no major reform was recorded. Egypt, Arab Rep. The Arab Republic of Egypt, a former global leading reformer and a regional leading reformer in 2008/09, continued to make it easier to deal with construction permits by issuing executive articles for the 2008 construction law and eliminating most preapprovals for construction permits. Contract enforcement was expedited with the creation of commercial courts. Access to credit information has expanded with the addition of retailers to the database of the private credit bureau. Finally, company start-up was eased by the removal of the minimum capital requirement. Finland Finland made it easier to pay taxes by extending electronic filing to corporate income taxes and reduced the burden on business and the cost of employment by cutting labor taxes. France France improved the insolvency process by encouraging preinsolvency workouts and no longer requiring estimation of the value of assets by a public auctioneer. A fuller electronic connection between notaries and the land registry reduced the time to transfer property in France and made it easier to obtain encumbrance and ownership documents from the registry. Germany Germany's recent Act on the Implementation of Measures to Stabilize the Financial Market (Finanzmarktstabilisierungsgesetz) removes the requirement for potentially viable companies to file for immediate insolvency in cases of overindebtedness. The business start-up process was eased by reducing the minimum capital requirement to a value that is merely symbolic. Iceland Iceland eased the tax burden on companies by reducing the corporate income tax rate from 18 percent to 15 percent. 49 Kyrgyz Republic The Kyrgyz Republic eased the process for getting construction permits by streamlining the fee structure, introducing a risk-based system of approval and building control, allowing low-risk projects to conduct an internal building control process, and simplifying the process for obtaining utility connections. Requirements relating to redundancy dismissals and worker reassignment were eased. Access to credit was enhanced by making secured lending more flexible and allowing general descriptions of encumbered assets and of debts and obligations. In addition, amendments to the Civil Code provide for automatic extension of security rights to proceeds of the original assets. The tax burden on businesses was eased by reducing the rates for several taxes and the number of payments for several. Surveying and notarization requirements were made optional for property registration, and business start-up was eased by eliminating the minimum capital requirement, reducing the registration time, and abolishing various post-registration fees and the need to open a bank account before registration. The elimination of six previously required documents and the simplification of inspection procedures has sped up trading across borders. Liberia Liberia eased the process for getting construction permits by lowering the permit fee and cost of obtaining a power generator, abolishing the requirement to obtain a tax waiver certificate before submitting documents to obtain a building permit, and making fixed telephone connections more readily available for public use with the reopening of the national phone company. Business start-up was eased by removing the need to obtain an environmental impact assessment when forming a general trading company. The trade process was expedited by creating a one-stop shop bringing together various ministries and agencies, and streamlining the inspection regime. Macedonia, FYR The Former Yugoslav Republic of Macedonia has been reforming the construction permit process, shortening waiting times but raising fees. Worker hiring was made more flexible by allowing greater use of fixed-term contracts, easing restrictions on working hours, and making redundancy dismissals more flexible. The public credit bureau increased its coverage by introducing a better database that includes more information and by lowering the minimum loan threshold. Social security payments were classified in five groups, and social security contribution rates reduced. Investor protections were increased by regulating the approval of transactions between interested parties, increasing disclosure requirements in annual reports, and making it easier to sue directors in cases of prejudicial transactions between interested parties. Property registration was eased with the introduction of new time limits at the real estate cadastre--reducing the average time to register a title deed by eight days--and a non-encumbrance certificate can now be obtained from the real estate registry instead of through the court. Business start-up was simplified by integrating procedures at a one-stop shop. Moldova Moldova lowered the rates for social security contributions paid by employers. Property registration was simplified by eliminating the requirement for a cadastral sketch, reducing procedures from six to five and days from 48 to 5. Business start-up was eased by implementing an expedited company registration service. Norway Norway sped up contract enforcement with the introduction and monitoring of tighter deadlines. Rwanda Rwanda improved the process for dealing with distressed companies with a new law aimed at streamlining reorganization. Employing workers was made easier by abolishing the maximum duration for fixed-term contracts and allowing unlimited renewals of such contracts, as well as by allowing redundancy procedures to be more flexible, with consultation and notification of third parties no longer required. Getting credit was made easier with a new secured transactions act and insolvency act to make secured lending more flexible, allowing a wider range of assets to be used as collateral and a general description of debts and obligations. In addition, out of court enforcement of collateral has become available to secured creditors, who also now have top priority within bankruptcy. A new company law has strengthened investor protections by requiring greater corporate disclosure, director liability, and shareholder access to information. Property registration was simplified by decreasing the number of days required to transfer a property. Business start-up was eased by eliminating a notarization requirement; introducing standardized memorandums of association; enabling online publication; consolidating name checking, registration fee payment, tax registration, and company registration procedures; and shortening the time required to process completed applications. By implementing administrative changes--such as increased operating hours and enhanced cooperation at the border, along with the removal of some documentation requirements for importers and exporters--Rwanda has improved trading times. 50 Tajikistan Tajikistan amended its insolvency law, aiming to reduce statutory time limits and the costs of proceedings. Changes were introduced that simplified the construction permit process, reducing procedures and time. A new law on credit histories improves access to credit information by creating a private credit bureau. Investor protections were strengthened with amendments to the joint stock company law, increasing disclosure requirements for transactions involving conflicts of interest, allowing for greater director liability, and giving shareholders the chance to request that harmful related-party transactions be rescinded. The state duty for property transfer has quadrupled, raising the cost of registering property by 2.8 percent of a property's value. Business start-up was eased by reducing the minimum capital requirement and shortening the time to obtain a tax identification number. United Arab Emirates The United Arab Emirates shortened the time for delivering building permits by improving its online system for processing applications. Business start-up was eased by simplifying the documents needed for registration, abolishing the minimum capital requirement, and removing the requirement that proof of deposit of capital be shown for registration. Greater capacity at the container terminal, elimination of the terminal handling receipt as a required document, and an increase in trade finance products, have improved trade processes. 51 APPENDICES Starting a Business in Germany This table summarizes the procedures and costs associated with setting up a business in Germany. STANDARDIZED COMPANY Legal Form: Gesellschaft mit beschränkter Haftung (GmbH) Minimum Capital Requirement: City: Berlin Registration Requirements: No: Procedure Time to complete Cost to complete 1 Clear the name of company at the local chamber of industry and 1 0 commerce 2 A notary notarizes the articles of association and foundation 1 1014 agreement 3 Open a bank account and deposit paid-in capital 1 0 4 Notary public files the articles of association with the local 10 403.5 commercial register, kept at local courts 5 Notify the local office of business and standards of the establishment 3 31 of the company 6 * Register with the professional association of the relevant trade 1 0 7 * Notify the local labor office of the establishment of the company 1 0 8 * Register employees for health and social insurance 1 0 9 * Mail out the documentation to the Tax Office 1 0 * Takes place simultaneously with another procedure. 52 Procedure 1 Clear the name of company at the local chamber of industry and commerce Time to complete: 1 Cost to complete: 0 Comment: Procedure 2 A notary notarizes the articles of association and foundation agreement Time to complete: 1 Cost to complete: 1014 Comment: The fees depend on value of the share capital, with a basic 10/10 fee calculated as follows: - Up to EUR 1,000: fee is EUR 10. - From EUR 1,000 to EUR 5,000: fee of EUR 8 is added for each EUR 1,000 of share capital. - From EUR 5,000 to EUR 50,000: fees of EUR 6 are added for each EUR 3,000 of share capital. - From EUR 50,000 to EUR 5,000,000: fees of EUR 15 are added for each EUR 10,000 of share capital. For a share capital value of EUR 25,000, for example, the 10/10 fee is EUR 84 (EUR 10 + 4xEUR 8 + 2xEUR 6 + 2xEUR 15). The 10/10 fee is the basis for the specific fees for notary services. The notarization of the articles of association requires a 20/10 fee. As of January 1, 2007, VAT increased from 16% to 19%. Procedure 3 Open a bank account and deposit paid-in capital Time to complete: 1 Cost to complete: 0 Comment: A fourth of each share (at least EUR 12,500) has to be paid by the time of registration. In-kind contributions must be made in full. Capital must be paid in to the free disposition of the management. Capital cannot validly be deposited before the notarization of the articles of association. Procedure 4 Notary public files the articles of association with the local commercial register, kept at local courts Time to complete: 10 Cost to complete: 403.5 Comment: Applicants must submit to the Commercial Register in electronic form, among other documents (a) the notarized articles of association; (b) the deed of appointment of the directors, if not included in the articles; (c) a list of the company's shareholders; and (d) the assurance that the statutory minimum paid-in capital has been paid in to the free disposition of the management. Pursuant to the applicable registration laws, the Commercial Register must decide on the company's registration without undue delay. The Commercial Register publishes the 53 registration on a central electronic platform (www.handelsregister.de). For a transitional period ending on December 31, 2008, the registration must also be published in a local newspaper. Costs to file the articles of association with the local Commercial Register include the following: - Notary fees for registration are half the fees for the notarization of the articles and foundation agreement. No extra notary fees apply if the notarization and filing of the articles of association (by notary public) are combined. The application for registration with the Commercial Register must be notarized. The applicable fees amount to a quarter of the fees set forth under Procedure 2. All amounts are plus 19% VAT. If the application for registration is notarized together with the articles of association, the notarization of the application does not trigger any additional fees. - Registration fees with local court: EUR 100 (if in-kind capital contributions, the statutory registration fee amounts to EUR 150). - Announcement in local newspaper: about EUR 50. The company registry in Berlin was computerized, and a new law on registration fees and procedures (Handelsregistergebühren Neuordnungsgesetz HRegGebNeuOG) became effective as of December 1, 2004, with two relevant changes: - Statutory time limits were introduced for the registration process. According to Article 3 of HRegGebNeuOG, a decision on the company's registration is to be made within a month of the company filing for registration. - Court registration fees have been lowered (Article 1 of HRegGebNeuOG). Fees are no longer calculated on the basis of start-up capital and are set to fixed amounts. The registration of a new GmbH incurs fees of EUR 100 if the capital contributions are made in cash and EUR 150 if part or all are made in kind. The Act on the Maintenance of Electronic Commercial Registers, Cooperative Registers, and the Companies Register (Gesetz über elektronische Handelsregister und Genossenschaftsregister sowie das Unternehmensregister, EHUG--effective January 1, 2007) implemented an electronic registration and publication platform for the Commercial Register. As a result, registration with the Commercial Register is no longer announced in the Federal Gazette (Bundesanzeiger), but instead in the electronic Commercial Registry. Fees for publication in the Federal Gazette thus no longer apply. The Commercial Register still publishes the notice in at least one local newspaper, and it notifies the local Chamber of Industry and Commerce and the tax office of the new company. The fee for the announcement in the daily newspaper is about EUR 50 for 2008. In 2009 this announcement will also be eliminated. The applicable VAT rate has, however, been increased from 16% to 19%. Procedure 5 Notify the local office of business and standards of the establishment of the company Time to complete: 3 Cost to complete: 31 Comment: While certain businesses (e.g., restaurants, brokers) must apply for a trading permit (Gewerbeerlaubnis) and present it to the Commercial Register when filing the application for registration (Procedure 4), all other startup companies must simply notify the local Office of Business and Standards (Gewerbeamt), which issues the company 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, and the social security and federal health insurance office. Procedure 6 Register with the professional association of the relevant trade Time to complete: 1 54 Cost to complete: 0 Comment: The professional associations are carriers of occupational accident insurance. Registration must be done within a week of the founding of the business (that is, the notarization of the articles of association). Procedure 7 Notify the local labor office of the establishment of the company Time to complete: 1 Cost to complete: 0 Comment: The registration can be informal, both in writing and by phone. The Labor Office then assigns an eight-digit operating number, which is needed to report social security. Procedure 8 Register employees for health and social insurance Time to complete: 1 Cost to complete: 0 Comment: The social security and federal health insurance office notifies the local labor office and the annuity insurance carrier (Bundesversicherungsanstalt für Angestellte, BfA).The competent social security and federal health insurance office collects payment for mandatory health, unemployment, and annuity insurance. Procedure 9 Mail out the documentation to the Tax Office Time to complete: 1 Cost to complete: 0 Comment: Registration must be done within a month of the opening of the business, and not later than a month of the notarizing of the articles of association. After the tax office is notified of the company's business activity by the trade office, the tax office sends the company a questionnaire requesting the company's business data. 55 Dealing with Construction Permits in Germany The table below summarizes the procedures, time, and costs to build a warehouse in Germany. BUILDING A WAREHOUSE Date as of: January 2009 Estimated Warehouse Value: City: Berlin Registration Requirements: No: Procedure Time to complete Cost to complete 1 Obtain building permit 25 days EUR 4,000 2 Application for approval of static calculation 21 days EUR 1,500 3 Receive inspection from District Chimney Sweeper 1 day EUR 31 4 Receive inspection of the building shell 1 day EUR 2,600 5 Receive inspection after completion of the building ("Foermliche 1 day no charge Bauabnahme") 6 * Apply for water connection 1 day EUR 7,500 7 Receive inspection by water company 1 day no charge 8 Obtain water connection 45 days no charge 9 * Apply for electricity connection 1 day EUR 2,500 10 Receive inspection by electricity company 1 day no charge 11 Obtain power connection 45 days no charge 12 * Obtain telephone line 45 days EUR 300 * Takes place simultaneously with another procedure. 56 Procedure 1 Obtain building permit Time to complete: 25 days Cost to complete: EUR 4,000 The building permit grants the right to build on a plot and authorizes construction as well. Comment: To obtain a construction permit, BuildCo shall 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, planning department). Under a revised Berlin state law (effective February 1, 2006), certain constructions require only a simple building permit (Section 64 BauO BlN) or a waiver (Section 63 BauO BlN). In the case of a simplified building permit under § 64 BauO BlN, the application will be deemed to be complete and sufficient unless the building department notifies the applicant to the contrary within 3 weeks of receiving the application. If the building department remains silent for 4 weeks, the application will be deemed to be granted and construction may commence (Sections 70 Sect. 3 and 4, 71 Section 7 No. 1 BauOBln). 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 Sect. 1 and 2 BauBln). 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 authority will contact other departments involved (for example, 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 purposes 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. Procedure 2 Application for approval of static calculation Time to complete: 21 days Cost to complete: EUR 1,500 The building authority appoints an independent engineer (either from a private company Comment: or from within the authority), responsible for verifying the static calculations before and during construction (the "Pruefstatiker"). The cost for an independent engineer to double-check the static calculations in the warehouse case considered here is EUR 19,119.95, or 0.49 percent of the construction costs of the outside works (see No. 3000 of the Appendix to the BauGebO). If no independent expert is required, the administrative fee for the building department is EUR 5,853.05, or 0.15 percent of the construction costs of the outside works (see No. 2005 of the Appendix to the BauGebO). 57 Procedure 3 Receive inspection from District Chimney Sweeper Time to complete: 1 day Cost to complete: EUR 31 Before completion of the building shell, BuildCo shall provide the building authority with Comment: a certificate confirming the suitability of the chimneys. Such a certificate by the District Chimney Sweeper is mentioned in §81 Section 4 BauOBln The cost is EUR 31.20 per hour (see §-§ 1 Sect. 3 No. 2a and 12 of the applicable city ordinance: Verordnung über die Kosten für Kehr- und Überprüfungsarbeiten und Messungen durch Bezirksschonsteinfegermeister in Berlin [KÜGebO] promulgated January 14, 1999, amended January 20, 2004). The inspection may take more than an hour, but it will not take more than a day. An appointment can be made on short notice, probably 1­2 weeks before the day of inspection. Procedure 4 Receive inspection of the building shell Time to complete: 1 day Cost to complete: EUR 2,600 The notification shall be made 2 weeks before the completion of the building shell; the Comment: building authority may then decide in its own discretion whether it will inspect the site (the likelihood is 10%); 2 weeks after the notification, BuildCo may start with interior fittings. Procedure 5 Receive inspection after completion of the building ("Foermliche Bauabnahme") Time to complete: 1 day Cost to complete: no charge Notification shall be made 2 weeks before the completion of the building; the building Comment: authority may then decide in its own discretion whether it will inspect the site (the likelihood is 10%); 2 weeks after the notification, BuildCo may start to use the building. Procedure 6 Apply for water connection Time to complete: 1 day Cost to complete: EUR 7,500 Comment: Procedure 7 Receive inspection by water company Time to complete: 1 day Cost to complete: no charge Comment: Procedure 8 Obtain water connection 58 Time to complete: 45 days Cost to complete: no charge Comment: Procedure 9 Apply for electricity connection Time to complete: 1 day Cost to complete: EUR 2,500 Comment: Procedure 10 Receive inspection by electricity company Time to complete: 1 day Cost to complete: no charge Comment: Procedure 11 Obtain power connection Time to complete: 45 days Cost to complete: no charge Comment: Procedure 12 Obtain telephone line Time to complete: 45 days Cost to complete: EUR 300 Comment: 59 Employing Workers in Germany Employing workers indices are based on responses to survey questions. The table below shows these responses in Germany. Employing Workers Indicators (2009) Answer Score 33.3 Difficulty of hiring index (0-100) Are fixed-term contracts prohibited for permanent tasks? No 0 What is the maximum duration of fixed-term contracts (including renewals)? (in months) 24 1.0 What is the ratio of mandated minimum wage to the average value added per worker? 0.21 0.00 40.0 Difficulty of redundancy index (0-10) Is the termination of workers due to redundancy legally authorized? Yes 0 Must the employer notify a third party before terminating one redundant worker? Yes 1 Does the employer need the approval of a third party to terminate one redundant worker? No 0 Must the employer notify a third party before terminating a group of 9 redundant workers? Yes 1 Does the employer need the approval of a third party to terminate a group of 9 redundant No 0 workers? Is there a retraining or reassignment obligation before an employer can make a worker Yes 1 redundant? Are there priority rules applying to redundancies? Yes 1 Are there priority rules applying to re-employment? No 0 69.3 Redundancy costs (weeks of salary) What is the notice period for redundancy dismissal after 20 years of continuous 26.0 employment? (weeks of salary) What is the severance pay for redundancy dismissal after 20 years of employment? (weeks of 43.3 salary) What is the legally mandated penalty for redundancy dismissal? (weeks of salary) 0.0 42.2 Rigidity of employment index (0-100) 53.3 Rigidity of hours index (0-100) Can the workweek extend to 50 hours (including overtime) for 2 months per year to Yes 0 respond to a seasonal increase in production? 60 What is the maximum number of working days per week? 6 0 Are there restrictions on night work and do these apply when continuous operations are Yes 0.67 economically necessary? Are there restrictions on "weekly holiday" work and do these apply when continuous Yes 1.00 operations are economically necessary? What is the paid annual vacation (in working days) for an employee with 20 years of 24 1 service? Note: The first three indices measure how difficult it is to hire a new worker, how rigid the regulations are on working hours, and how difficult it is to dismiss a redundant worker. Each index assigns values between 0 and 100, with higher values representing more rigid regulations. The overall Rigidity of Employment Index is an average of the three indices. 61 Registering Property in Germany This topic examines the steps, time, and cost involved in registering property in Germany. STANDARDIZED PROPERTY Property Value: 1,532,056.53 City: Berlin Registration Requirements: No: Procedure Time to complete Cost to complete 1 The notary obtains an extract from the Land Registry and 5 days EUR 10-20 (extract) + EUR notarizes the transfer agreement 4584 to 7465.75 2 * Fulfillment of the pre-conditions for the validity of the 7 days, possibly up to EUR 1146 (registration fee purchase price 2 months of priority notice) + EUR (simultaneous with 25 (consent of negative procedure 3) attest of city council) 3 * Payment of the transfer tax and obtaining the confirmation 15 days, possibly up to 4.5% of purchase price one month (simultaneous with procedure 2) 4 Application for the registration of the new owner and 7 days, possibly up to EUR 2292 (Registration deletion of the priority notice to the land register one month Fee) + EUR 573 (fee for cancellation of priority) * Takes place simultaneously with another procedure. 62 Procedure 1 The notary obtains an extract from the Land Registry and notarizes the transfer agreement Time to complete: 5 days Cost to complete: EUR 10-20 (extract) + EUR 4584 to 7465.75 Comment: The notary obtains the information referred to the property, e.g. from the land registry to "name" the object in the contract and to see if it is free of burdens and mortgages. A notary has a privileged access to the land register to obtain the extracts. Some of the notaries have on-line access to such land registers which are already converted to electronic land registers. They are in the position to review the extracts very shortly before the notarization from their own offices. The land registry in Berlin is partially computerized, and so extracts can be obtained online. It is possible to retrieve the extract in a shorter period of time (1-2 days), but this is rare. The notary will also notarize the sale and transfer agreement. This is a necessary form requirement according to Germany statutory law. Notary's fees are fixed at EUR 4584 plus other fixed costs ranging up to EUR 7465.75. A notary will generally examine the land register extracts. In exceptional cases there might not be sufficient time, for example because he has been asked by the parties to notarize a sale and transfer agreement within a very short time period. If he is willing in such cases to notarize the agreement he will provide for a clause to exclude his liability that he has not reviewed the land register but that the parties have asked him, nevertheless, to notarize the document. If the notary has not prepared the draft sale and transfer agreement he asks for the draft agreement to be provided in advance for his review. The usual procedure is that the notary examines the draft and provides the parties with comments as regards legal and technical aspects. Procedure 2 Fulfillment of the pre-conditions for the validity of the purchase price Time to complete: 7 days, possibly up to 2 months (simultaneous with procedure 3) Cost to complete: EUR 1146 (registration fee of priority notice) + EUR 25 (consent of negative attest of city council) Comment: The following pre conditions must 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 (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 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 the delivery of a copy of the notarized sale and transfer agreement. 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 notarization. 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 63 (Procedure 4). Registration fee of the priority notice depends on the value of the property. If all pre-conditions to the maturity "Fäligkeit" of the purchase price, usually collected and examined by the notary, have been fulfilled, the notary issues a statement of maturity "Fäligkeitsmitteilung" 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. 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. Procedure 3 Payment of the transfer tax and obtaining the confirmation Time to complete: 15 days, possibly up to one month (simultaneous with procedure 2) Cost to complete: 4.5% of purchase price Comment: The notary is obliged to provide a copy of each notarized 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 tax authority will issue a statement of innocuousness (Unbedenklichkeitsbescheinigung) and send it to the notary for presentation to the land register. It may be expected that such statement will be issued within one month following the notarization. The tax amounts to 4.5% of the purchase price in Berlin (and Hamburg); the tax in the remaining states within Germany is 3.5% of the purchase price. Procedure 4 Application for the registration of the new owner and deletion of the priority notice to the land register Time to complete: 7 days, possibly up to one month Cost to complete: EUR 2292 (Registration Fee) + EUR 573 (fee for cancellation of priority) Comment: 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 register the title through an expedited procedure, whereby the notary acts as a Trustee and the client can pay through a trust account (Notartreuhandkonto). This makes it possible to obtain the legal title faster, possibly in 2-5 days. However, this occurs only with a small proportion of property title transfers. The documentation shall include: Statement of Innocuousness (obtained in Procedure 3) 64 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. 65 Getting Credit in Germany The following table summarize legal rights of borrowers and lenders, and the availability and legal framework of credit registries in Germany. Getting Credit Indicators (2009) Indicator score Private credit Public credit Private bureau coverage (% of adults) 6 bureau registry Are data on both firms and individuals distributed? Yes Yes 1 Are both positive and negative data distributed? Yes No 1 Does the registry distribute credit information from retailers, trade Yes No 1 creditors or utility companies as well as financial institutions? Are more than 2 years of historical credit information distributed? Yes No 1 Is data on all loans below 1% of income per capita distributed? Yes No 1 Is it guaranteed by law that borrowers can inspect their data in the Yes Yes 1 largest credit registry? Coverage 98.3 0.8 Number of individuals 66,000,000 195,257 Number of firms 3,500,000 393,424 Strength of legal rights index (0-10) 7 Can any business use movable assets as collateral while keeping possession of the assets; and any financial Yes institution accept such assets as collateral ? Does the law allow businesses to grant a non possessory security right in a single category of revolving movable Yes assets, without requiring a specific description of the secured assets ? Does the law allow businesses to grant a non possessory security right in substantially all of its assets, without No requiring a specific description of the secured assets ? May a security right extend to future or after-acquired assets, and may it extend automatically to the products, Yes proceeds or replacements of the original assets ? Is a general description of debts and obligations permitted in collateral agreements, so that all types of obligations Yes and debts can be secured by stating a maximum amount rather than a specific amount between the parties ? Is a collateral registry in operation, that is unified geographically and by asset type, as well as indexed by the No grantor's name of a security right ? Do secured creditors have absolute priority to their collateral outside bankruptcy procedures? Yes Do secured creditors have absolute priority to their collateral in bankruptcy procedures? Yes 66 During reorganization, are secured creditors' claims exempt from an automatic stay on enforcement? No Does the law authorize parties to agree on out of court enforcement? Yes 67 Protecting Investors in Germany The table below provides a full breakdown of how the disclosure, director liability, and shareholder suits indexes are calculated in Germany. Protecting Investors Data (2009) Indicator Extent of disclosure index (0-10) 5 2 What corporate body provides legally sufficient approval for the transaction? (0-3; see notes) 1 Immediate disclosure to the public and/or shareholders (0-2; see notes) 1 Disclosures in published periodic filings (0-2; see notes) 1 Disclosures by Mr. James to board of directors (0-2; see notes) 0 Requirement that an external body review the transaction before it takes place (0=no, 1=yes) Extent of director liability index (0-10) 5 1 Shareholder plaintiff's ability to hold Mr. James liable for damage the Buyer-Seller transaction causes to the company. (0-2; see notes) 1 Shareholder plaintiff's ability to hold the approving body (the CEO or board of directors) liable for damage to the company. (0-2; see notes) 0 Whether a court can void the transaction upon a successful claim by a shareholder plaintiff (0-2; see notes) 1 Whether Mr. James pays damages for the harm caused to the company upon a successful claim by the shareholder plaintiff (0=no, 1=yes) 0 Whether Mr. James repays profits made from the transaction upon a successful claim by the shareholder plaintiff (0=no, 1=yes) 1 Whether fines and imprisonment can be applied against Mr. James (0=no, 1=yes) 1 Shareholder plaintiff's ability to sue directly or derivatively for damage the transaction causes to the company (0-1; see notes) Ease of shareholder suits index (0-10) 5 4 Documents available to the plaintiff from the defendant and witnesses during trial (0-4; see notes) 0 Ability of plaintiffs to directly question the defendant and witnesses during trial (0-2; see notes) 0 Plaintiff can request categories of documents from the defendant without identifying specific ones (0=no, 1=yes) 1 Shareholders owning 10% or less of Buyer's shares can request an inspector investigate the transaction (0=no, 1=yes) 68 0 Level of proof required for civil suits is lower than that for criminal cases (0=no, 1=yes) 0 Shareholders owning 10% or less of Buyer's shares can inspect transaction documents before filing suit (0=no, 1=yes) Strength of investor protection index (0-10) 5.0 Notes: Extent of Disclosure Index What corporate body provides legally sufficient approval for the transaction? 0=CEO or managing director alone; 1=shareholders or board of directors vote and Mr. James can vote; 2=board of directors votes and Mr. James cannot vote; 3 = shareholders vote and Mr. James cannot vote Immediate disclosure to the public and/or shareholders 0=none; 1=disclosure on the transaction only; 2=disclosure on the transaction and Mr. James' conflict of interest Disclosures in published periodic filings 0=none; 1=disclosure on the transaction only; 2=disclosure on the transaction and Mr. James' conflict of interest Disclosures by Mr. James to board of directors 0=none; 1=existence of a conflict without any specifics; 2= full disclosure of all material facts Director Liability Index Shareholder plaintiff's ability to hold Mr. James liable for damage the Buyer-Seller transaction causes to the company 0= Mr. James is not liable or liable only if he acted fraudulently or in bad faith; 1= Mr. James is liable if he influenced the approval or was negligent; 2= Mr. James is liable if the transaction was unfair, oppressive or prejudicial to minority shareholders Shareholder plaintiff's ability to hold the approving body (the CEO or board of directors) liable for for damage to the company 0=members of the approving body are either not liable or liable only if they acted fraudulently or in bad faith; 1=liable for negligence in the approval of the transaction; 2=liable if the transaction is unfair, oppressive, or prejudicial to minority shareholders Whether a court can void the transaction upon a successful claim by a shareholder plaintiff 0=rescission is unavailable or available only in case of Seller's fraud or bad faith; 1=available when the transaction is oppressive or prejudicial to minority shareholders; 2=available when the transaction is unfair or entails a conflict of interest Shareholder plaintiffs' ability to sue directly or derivatively for damage the transaction causes to the company 0=not available; 1=direct or derivative suit available for shareholders holding 10% of share capital or less Shareholder Suits Index Documents available to the plaintiff from the defendant and witnesses during trail Score 1 each for (1) information that the defendant has indicated he intends to rely on for his defense; (2) information that directly proves specific facts in the plaintiff's claim; (3) any information that is relevant to the subject matter of the claim; and (4) any information that may lead to the discovery of relevant information. Ability of plaintiffs to directly question the defendant and witnesses during trial 0=no; 1=yes, with prior approval by the court of the questions posed; 2=yes, without prior approval 69 Paying Taxes in Germany The table below addresses the taxes and mandatory contributions that a medium-size company must pay or withhold in a given year in Germany, as well as measures of administrative burden in paying taxes. Tax or mandatory Payments Notes on Time Statutory tax Tax Totaltax rate Notes on contribution (number) Payments (hours) rate base (% profit) TTR Value added tax (VAT) 1 online 43 19% value added filing vehicle tax 1 EUR 5-30 per 100 cubic 0.08 meter Property tax 5 less than property 0.10 0.1% value Solidarity surcharge 0 paid 5.5% corporate 0.47 together income tax with CIT Tax on interest 0 30% interest 0.77 income Long term care insurance 1 online 0,9125% gross salaries 0.95 filing Road tax (only for 1 0.13 Euros 1.04 trucks) per Km Fuel tax 1 included in 1.22 fuel price Unemployment 1 online 1.65% gross salaries 2.36 contributions filing Tax on insurance 1 18% insurance 3.14 contracts premium Health insurance 1 online 7.0% gross salaries 7.47 contributions filing Trade tax 1 online 11-17% taxable 8.27 filing profits Corporate income tax 1 online 30 15% taxable 8.63 filing profits Social security 1 online 123 10% gross salaries 11.17 contributions filing Totals 16 196 44.9 70 Notes: a) data not collected b) VAT is not included in the total tax rate because it is a tax levied on consumers c) very small amount d) included in other taxes e) Withheld tax f) electronic filling available g) paid jointly with another tax Name of taxes have been standardized. For instance income tax, profit tax, tax on company's income are all named corporate income tax in this table. When there is more than one statutory tax rate, the one applicable to TaxpayerCo is reported. The hours for VAT include all the VAT and sales taxes applicable. The hours for Social Security include all the hours for labor taxes and mandatory contributions in general. 71 Trading Across Borders in Germany These tables list the procedures necessary to import and exports a standardized cargo of goods in Germany. The documents required to export and import the goods are also shown. Nature of Export Procedures (2009) Duration (days) US$ Cost Documents preparation 3 142 Customs clearance and technical control 1 30 Ports and terminal handling 2 250 Inland transportation and handling 1 450 Totals 7 872 Nature of Import Procedures (2009) Duration (days) US$ Cost Documents preparation 3 182 Customs clearance and technical control 1 55 Ports and terminal handling 1 250 Inland transportation and handling 2 450 Totals 7 937 Export Bill of lading Commercial invoice Customs import declaration Packing list Import Bill of lading Certificate of origin Commercial invoice Customs import declaration Packing list 72 Enforcing Contracts in Germany This topic looks at the efficiency of contract enforcement in Germany. Nature of Procedure (2009) Indicator Procedures (number) 30 Time (days) 394 Filing and service 29.0 Trial and judgment 310.0 Enforcement of judgment 55.0 Cost (% of claim)* 14.40 Attorney cost (% of claim) 8.8 Court cost (% of claim) 3.2 Enforcement Cost (% of claim) 2.4 Court information: Berlin Regional Court ("Landgericht Berlin") * Claim assumed to be equivalent to 200% of income per capita. 73 74 75