58477 Germany © 2010 The International Bank for Reconstruction and Development / The World Bank 1818 H Street NW Washington, DC 20433 Telephone 202-473-1000 Internet www.worldbank.org All rights reserved. 1 2 3 4 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. The World Bank encourages dissemination of its work and will normally grant permission to reproduce portions of the work promptly. 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ISBN: 978-0-8213-7960-8 E-ISBN: 978-0-8213-8630-9 DOI: 10.1596/978-0-8213-7960-8 ISSN: 1729-2638 Library of Congress Cataloging-in-Publication data has been applied for. Printed in the United States Current features News on the Doing Business project http://www.doingbusiness.org Rankings How economies rank-from 1 to 183 http://www.doingbusiness.org/rankings/ Contents Reformers Short summaries of DB2011 reforms, lists of reformers since DB2004 Introduction and a ranking simulation tool and Aggregate Rankings http://www.doingbusiness.org/reforms/ 5 - Year Measure of Historical data Cumulative Change Customized data sets since DB2004 http://www.doingbusiness.org/custom-query/ Starting a Business Methodology and research Dealing with The methodologies and research papers underlying Doing Business Construction Permits http://www.doingbusiness.org/Methodology/ Registering Property Download reports Access to Doing Business reports as well as subnational and regional Getting Credit reports, reform case studies and customized country and regional profiles Protecting Investors http://www.doingbusiness.org/reports/ Paying Taxes Subnational and regional projects Differences in business regulations at the subnational and regional Trading Across Borders level http://www.doingbusiness.org/subnational-reports/ Enforcing Contracts Law Library Closing a Business Online collection of business laws and regulations relating to business and gender issues Doing Business 2011 http://www.doingbusiness.org/law-library/ Business Reforms http://wbl.worldbank.org/ Local partners More than 8,200 specialists in 183 economies who participate in Doing Business http://www.doingbusiness.org/Local-Partners/Doing-Business/ Business Planet Interactive map on the ease of doing business http://rru.worldbank.org/businessplanet Doing Business 2011 : Making a Difference for Entrepreneurs is the eighth 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 9 stages of a business's life are measured: starting a business, dealing with construction permits, registering property, getting credit, protecting investors, paying taxes, trading across borders, enforcing contracts and closing a business. Data in Doing Business 2011 are current as of June 1, 2010*. 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, 25 in Eastern Europe and Central Asia, 24 in East Asia and Pacific, 18 in the Middle East and North Africa and 8 in South Asia, as well as 30 OECD high-income economies. The following pages present the summary Doing Business indicators for Germany. The data used for this economy 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 2011 : Making a Difference for Entrepreneurs 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 2009. Note: 2008-2010 Doing Business data and rankings have been recalculated to reflect changes to the methodology and the addition of new economies (in the case of the rankings). 1 Economy Rankings - Ease of Doing Business Germany is ranked 22 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 2011 Rank Doing Business 2011 Ease of Doing Business 22 Starting a Business 88 Dealing with Construction Permits 18 Registering Property 67 Getting Credit 15 Protecting Investors 93 Paying Taxes 88 Trading Across Borders 14 Enforcing Contracts 6 Closing a Business 35 2 Summary of Indicators - Germany Starting a Business Procedures (number) 9 Time (days) 15 Cost (% of income per capita) 4.8 Min. capital (% of income per capita) 0.0 Dealing with Construction Permits Procedures (number) 12 Time (days) 100 Cost (% of income per capita) 61.8 Registering Property Procedures (number) 5 Time (days) 40 Cost (% of property value) 5.1 Getting Credit Strength of legal rights index (0-10) 7 Depth of credit information index (0-6) 6 Public registry coverage (% of adults) 1.0 Private bureau coverage (% of adults) 98.4 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) 215 Profit tax (%) 23.0 Labor tax and contributions (%) 22.0 Other taxes (%) 3.3 Total tax rate (% profit) 48.2 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 3 Enforcing Contracts Procedures (number) 30 Time (days) 394 Cost (% of claim) 14.4 Closing a Business Recovery rate (cents on the dollar) 53.1 Time (years) 1.2 Cost (% of estate) 8 The 5 year measure of cumulative change illustrates how the business regulatory environment has changed in 174 economies from Doing Business 2006 to Doing Business 2011. Instead of highlighting which countries currently have the most business friendly environment, this new approach shows the extent to which an economy's regulatory environment for business has changed compared with 5 years ago. This snapshot reflects all cumulative changes in an economy's business regulation as measured by the Doing Business indicators-such as a reduction in the time to start a business thanks to a one-stop shop or an increase in the strength of investor protection index thanks to new stock exchange rules that tighten disclosure requirements for related -party transactions. This figure shows the distribution of cumulative change across the 9 indicators and time between Doing Business 2006 and Doing Business 2011 0.14 0.12 0.10 Doing business has 0.08 become easier (DB 0.06 change score) 0.04 0.02 0.00 Doing business has -0.02 become more difficult or more -0.04 France Denmark Germany Finland Norway Iceland costly 6 1. Benchmarking Starting a Business Regulations: Germany is ranked 88 overall for Starting a Business. Ranking of Germany in Starting a Business - Compared to good practice and selected economies: 7 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 15 4.8 0.0 Comparator Economies Denmark 4 6 0.0 26.0 Finland 3 14 1.1 7.9 France 5 7 0.9 0.0 Iceland 5 5 2.3 12.0 Norway 5 7 1.8 20.0 * The following economies are also good practice economies for : Procedures (number): Canada Cost (% of income per capita): Slovenia 8 2. Historical data: Starting a Business in Germany Starting a Business data Doing Business Doing Business Doing Business Doing Business 2008 2009 2010 2011 Rank .. .. 84 88 Procedures (number) 9 9 9 9 Time (days) 18 18 18 15 Cost (% of income per capita) 5.7 5.6 4.7 4.8 Min. capital (% of income per capita) 42.8 42.2 0.0 0.0 3. The following graphs illustrate the Starting a Business sub indicators in Germany over the past 4 years: 9 Starting a Business Summary - Germany This table summarizes the procedures and costs associated with setting up a business in Germany. STANDARDIZED COMPANY Legal Form: Unternehmergesellschaft (haftungsbeschränkt) : UG 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 no charge commerce 2 A notary notarizes the articles of association and memorandum of 1 EUR 1,044 association 3 Open a bank account 1 no charge 4 Notary public files the articles of association with the local 7 EUR 361 commercial register, kept at local courts 5 Notify the local office of business and standards of the establishment 3 EUR 31 of the company 6 * Register with the professional association of the relevant trade 1 no charge 7 * Notify the local labor office of the establishment of the company 1 no charge 10 8 * Register employees for health and social insurance 1 no charge 9 * Mail out the documentation to the Tax Office 1 no charge * Takes place simultaneously with another procedure. 11 Starting a Business Details - Germany Procedure 1 Clear the name of company at the local chamber of industry and commerce Time to complete: 1 Cost to complete: no charge Comment: Procedure 2 A notary notarizes the articles of association and memorandum of association Time to complete: 1 Cost to complete: EUR 1,044 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. If more than one contract partners (shareholders) are involved, the German Cost Regulation Act provides for a double fee (so-called "20/10-fee" / "20/10-Gebühr"), which amounts to EUR 1,014. Procedure 3 Open a bank account Time to complete: 1 Cost to complete: no charge Comment: 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: 7 Cost to complete: EUR 361 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 registration on a central electronic platform (www.handelsregister.de). Costs to file the articles of association with the local Commercial Register include the following: 12 - 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 applicable fees amount to a quarter of the fees set forth under Procedure 2 when the notary used in proc 2 differs from the one of proc 4. 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). Since the law on registration fees and procedures (Handelsregistergebühren Neuordnungsgesetz HRegGebNeuOG) which became effective as of December 1, 2004: - 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 notifies the local Chamber of Industry and Commerce and the tax office of the new company. Procedure 5 Notify the local office of business and standards of the establishment of the company Time to complete: 3 Cost to complete: EUR 31 Comment: While certain businesses (e.g., restaurants, brokers) must apply for a trading permit (Gewerbeerlaubnis), 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 Cost to complete: no charge 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: no charge 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 13 Time to complete: 1 Cost to complete: no charge Comment: The social security and federal health insurance office notifies the local labor office and the annuity insurance carrier (Deutsche Rentenversicherung Bund).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: no charge 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. 14 15 1. 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: 16 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 0.8 Singapore 25 Selected Economy Germany 12 100 61.8 Comparator Economies Denmark 6 69 61.7 Finland 18 66 134.2 France 13 137 23.6 Iceland 18 75 19.6 Norway 14 252 43.8 17 2. Historical data: Dealing with Construction Permits in Germany Dealing with Construction Permits data Doing Business Doing Business Doing Business Doing Business 2008 2009 2010 2011 Rank .. .. 18 18 Procedures (number) 12 12 12 12 Time (days) 100 100 100 100 Cost (% of income per capita) 63.1 62.2 60.2 61.8 3. The following graphs illustrate the Dealing with Construction Permits sub indicators in Germany over the past 4 years: 18 Dealing with Construction Permits in Germany The table below summarizes the procedures, time, and costs to build a warehouse in Germany. BUILDING A WAREHOUSE City: Berlin Registration Requirements: No: Procedure Time to complete Cost to complete 1 Obtain a building permit 25 days EUR 4,000 2 Apply 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 an inspection by water company 1 day no charge 8 Obtain water connection 45 days no charge 19 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. 20 Dealing with Construction Permits Details - Germany Procedure 1 Obtain a building permit Time to complete: 25 days Cost to complete: EUR 4,000 Agency: Building Department Comment: The building permit grants the right to build on a plot and authorizes construction as well. 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 Apply for approval of static calculation Time to complete: 21 days Cost to complete: EUR 1,500 Agency: Independent Engineer Comment: The building authority appoints an independent engineer (either from a private company 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 21 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). Procedure 3 Receive inspection from District Chimney Sweeper Time to complete: 1 day Cost to complete: EUR 31 Agency: District Chimney Sweeper Comment: Before completion of the building shell, BuildCo shall provide the building authority with 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 Agency: Building Department Comment: The notification shall be made 2 weeks before the completion of the building shell; the 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 Agency: Building Department Comment: Notification shall be made 2 weeks before the completion of the building; the 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 to use the building. Procedure 6 Apply for water connection Time to complete: 1 day Cost to complete: EUR 7,500 Agency: Stadtwerke 22 Comment: Procedure 7 Receive an inspection by water company Time to complete: 1 day Cost to complete: no charge Agency: Stadtwerke Comment: Procedure 8 Obtain water connection Time to complete: 45 days Cost to complete: no charge Agency: Stadtwerke Comment: Procedure 9 Apply for electricity connection Time to complete: 1 day Cost to complete: EUR 2,500 Agency: Local Electricity Utility Comment: Procedure 10 Receive inspection by electricity company Time to complete: 1 day Cost to complete: no charge Agency: Local Electricity Utility Comment: Procedure 11 Obtain power connection Time to complete: 45 days Cost to complete: no charge Agency: Local Electricity Utility 23 Comment: Procedure 12 Obtain telephone line Time to complete: 45 days Cost to complete: EUR 300 Agency: Deutsche Telekom Comment: 24 25 1. Benchmarking Registering Property Regulations: Germany is ranked 67 overall for Registering Property. Ranking of Germany in Registering Property - Compared to good practice and selected economies: 26 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 5 40 5.1 Comparator Economies Denmark 3 42 0.6 Finland 3 14 4.0 France 8 59 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 27 2. Historical data: Registering Property in Germany Registering Property data Doing Business Doing Business Doing Business Doing Business 2008 2009 2010 2011 Rank .. .. 68 67 Procedures (number) 5 5 5 5 Time (days) 40 40 40 40 Cost (% of property value) 5.2 5.2 5.2 5.1 3. The following graphs illustrate the Registering Property sub indicators in Germany over the past 4 years: 28 Registering Property in Germany This topic examines the steps, time, and cost involved in registering property in Germany. STANDARDIZED PROPERTY Property Value: 1,491,983.70 City: Berlin Registration Requirements: No: Procedure Time to complete Cost to complete 1 The notary obtains an extract from the Land Registry 5 days EUR 8 (extract) + EUR and notarizes the transfer agreement 4584 to 7465.75 2 * Obtain waiver of preemtion rights with the 2 weeks and up to 2 EUR 25 (consent of municipality months negative attest of city council) 3 * Fulfillment of the pre-conditions for the validity of 20 days (simultaneous EUR 1184 (registration fee the purchase price and notarize sale agreement with procedure 4) of priority notice) 4 * Payment of the transfer tax and obtaining the 15 days, possibly up to 4.5% of purchase price confirmation one month (simultaneous with procedure 3) 5 Application for the registration of the new owner and 7 days, possibly up to EUR 2337 (Registration deletion of the priority notice to the land register one month Fee) + EUR 584.24 (fee for cancellation of priority) * Takes place simultaneously with another procedure. 29 Registering Property Details - Germany 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 8 (extract) + EUR 4584 to 7465.75 Agency: Land Registry 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 Obtain waiver of preemtion rights with the municipality Time to complete: 2 weeks and up to 2 months Cost to complete: EUR 25 (consent of negative attest of city council) Agency: Muncipality Comment: The consent or negative attest of the competent authority regarding any statutory pre-emption rights is required and applicable to all properties in Berlin. The civil council ("Bezirksamt") issues the consent or a negative attest to the transaction. The time limit given by the statute is that the civil council may exercise the right of pre-emption two months after the delivery of a copy of the notarised sale and transfer agreement. The respective preemption right for the public authorities/civil council mentioned in the survey is regulated under Section 24, 25 and 28 German Federal Building Code (Baugesetzbuch). Under specific circumstances the public authorities could have a statutory preemption right to coordinate the urban land-use planning. These rules are applicable to all properties in Berlin. It is necessary therefore to provide the land register with either a consent of the public authorities to the transfer or an attest that the statutory right of preemption either does not exist or is not exercised. The notary is usually requested to execute the agreement. He will inform the city council immediately after notarisation of the document. If the city council does not respond within two 30 weeks following the receipt of the property purchase agreement, it cannot exercise its right (preclusion period). However, the city council usually responds within two months even if it does not exercise the pre-emption right. Procedure 3 Fulfillment of the pre-conditions for the validity of the purchase price and notarize sale agreement Time to complete: 20 days (simultaneous with procedure 4) Cost to complete: EUR 1184 (registration fee of priority notice) Comment: The following pre conditions have to be fulfilled for the maturity of the purchase price: (i) Consent or negative attest of the competent authority regarding any statutory pre-emption rights, applicable to all properties in Berlin. (ii) Registration of the priority notice in the Land Register (not mandatory but usual practice to secure the purchasers rank in the land register and avoid a third party purchasing the property in good faith). (iii) Consent to the cancellation of existing encumbrances (i)The civil council ("Bezirksamt") issues the consent or a negative attest to the transaction. The time limit given by the statute is that the civil council may exercise the right of pre-emption two months after the delivery of a copy of the notarised sale and transfer agreement. (ii)The priority notice prevents a purchase by a third party of good faith between the conclusion of the purchase agreement and registration of the purchaser; it usually ranks after the existing encumbrances and prior to any future encumbrances at the time of notarisation. This notice provides a very high level of legal and economic security and certainty. Upon registration, the notice protects against all intervening interests (including seller's insolvency) pending completion of the transaction and actual change in registered ownership. By use of this notice, a purchaser is legally protected against potential risks at an extremely early stage of the conveyancing transaction. Therefore, such notation is generally entered in the public register by the notary immediately following authentication of the purchase contract. From that moment onward, the purchaser can rest assured that he can acquire title to the property if all prerequisites to maturity of the purchase price are fulfilled. The items (i, ii, and iii) above which are not accepted or taken over by the purchaser have to be in place. It might take substantial time to obtain them, particularly if they have come from public authorities. Such consents will be delivered to the notary and will usually be presented to the land register later when applying for the registration of the new owner (Procedure 4). Registration fee of the priority notice depends on the value of the property. If all pre-conditions to the maturity "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 (Section 311b German Civil Code). The transfer of title of a real property, governed by the law of disposition "Sachenrecht", also has to be in a certain form: the declarations in rem, which are in a format according to the land register regulation (Grundbuchordnung), and the transfer has to be registered in the land register. Such declarations in rem which are pre-conditions to the registration of the purchaser to be registered as new owner may either already be in the notarial deed or be given in a separate notarial deed. Procedure 4 Payment of the transfer tax and obtaining the confirmation Time to complete: 15 days, possibly up to one month (simultaneous with procedure 3) 31 Cost to complete: 4.5% of purchase price Agency: Tax Authority Comment: The notary is obliged to provide a copy of each notarised sale and transfer agreement to the responsible tax authority. The tax authority will then issue a tax assessment and send it to the purchaser. The land register clerk will not register the purchaser as new owner if the transfer tax has not been paid. After payment of the real estate transfer tax, the 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 notarisation. 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 5 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 2337 (Registration Fee) + EUR 584.24 (fee for cancellation of priority) Agency: Land Register 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) · 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. 32 33 1. 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: 34 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 67.1 Singapore* 10 United Kingdom 6 Selected Economy Germany 7 6 1.0 98.4 Comparator Economies Denmark 9 4 0.0 5.4 Finland 7 5 0.0 14.9 France 7 4 33.3 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. 35 2. Historical data: Getting Credit in Germany Getting Credit data Doing Business Doing Business Doing Business Doing Business 2008 2009 2010 2011 Rank .. .. 14 15 Strength of legal rights index (0-10) 8 7 7 7 Depth of credit information index (0-6) 6 6 6 6 Private bureau coverage (% of adults) 98.1 98.4 98.3 98.4 Public registry coverage (% of adults) 0.7 0.7 0.8 1.0 3. The following graphs illustrate the Getting Credit sub indicators in Germany over the past 4 years: 36 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 (2010) Indicator 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 98.4 1.0 Number of individuals 66,000,000 199,730 Number of firms 3,500,000 501,271 37 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 movable assets, Yes without requiring a specific description of collateral? 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 collateral? 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 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 38 39 1. 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: 40 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 41 2. Historical data: Protecting Investors in Germany Protecting Investors data Doing Business Doing Business Doing Business Doing Business 2008 2009 2010 2011 Rank .. .. 92 93 Strength of investor protection index (0-10) 5.0 5.0 5.0 5.0 3. 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. 42 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 (2010) Indicator Extent of disclosure index (0-10) 5 2 What corporate body provides legally sufficient approval for the transaction? 1 Whether immediate disclosure of the transaction to the public and/or shareholders is required? 1 Whether disclosure of the transaction in published periodic filings (annual reports) is required? 1 Whether disclosure of the conflict of interest by Mr. James to the board of directors is required? 0 Whether an external body must review the terms of the transaction before it takes place? Extent of director liability index (0-10) 5 1 Whether shareholders can hold Mr. James liable for the damage that the Buyer-Seller transaction causes to the company? 1 Whether shareholders can hold the approving body (the CEO or board of directors) liable for the damage that the Buyer-Seller transaction causes to the company? 0 Whether a court can void the transaction upon a successful claim by a shareholder plaintiff? 1 Whether Mr. James pays damages for the harm caused to the company upon a successful claim by the shareholder plaintiff? 43 0 Whether Mr. James repays profits made from the transaction upon a successful claim by the shareholder plaintiff? 1 Whether fines and imprisonment can be applied against Mr. James? 1 Whether shareholders can sue directly or derivatively for the damage that the Buyer-Seller transaction causes to the company? Ease of shareholder suits index (0-10) 5 4 Whether the plaintiff can obtain any documents from the defendant and witnesses during trial? 0 Whether the plaintiff can directly question the defendant and witnesses during trial? 0 Whether the plaintiff can request categories of documents from the defendant without identifying specific ones? 1 Whether shareholders owning 10% or less of Buyer's shares can request an inspector to investigate the transaction? 0 Whether the level of proof required for civil suits is lower than that of criminal cases? 0 Whether shareholders owning 10% or less of Buyer's shares can inspect transaction documents before filing suit? Strength of investor protection index (0-10) 5.0 44 45 1. Benchmarking Paying Taxes Regulations: Germany is ranked 88 overall for Paying Taxes. Ranking of Germany in Paying Taxes - Compared to good practice and selected economies: 46 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* 3 0 Timor-Leste 0.2 Selected Economy Germany 16 215 48.2 Comparator Economies Denmark 9 135 29.2 Finland 8 243 44.6 France 7 132 65.8 Iceland 31 140 26.8 Norway 4 87 41.6 * The following economies are also good practice economies for : Payments (number per year): Qatar 47 2. Historical data: Paying Taxes in Germany Paying Taxes data Doing Business Doing Business Doing Business Doing Business 2008 2009 2010 2011 Rank .. .. 70 88 Total tax rate (% profit) 50.1 50.5 44.9 48.2 Payments (number per year) 15 16 16 16 Time (hours per year) 196 196 196 215 3. The following graphs illustrate the Paying Taxes sub indicators in Germany over the past 4 years: 48 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 19.0% value added filing Property tax 5 less than property 0.10 0.1% value vehicle tax 1 EUR 5-30 per 100 cubic 0.10 meter Tax on insurance 1 17.8% insurance 0.20 contracts premium Tax on interest 0 withheld 25.0% interest 0.60 income Solidarity surcharge 0 paid 5.5% corporate 0.60 together income tax with CIT Long term care insurance 1 online 1.0% gross salaries 1.10 filing Fuel tax 1 included in 1.50 fuel price Road tax (only for 1 0.183 Euros 1.50 trucks) per kilometer 49 Unemployment 1 online 1.4% gross salaries 1.60 contributions filing Health insurance 1 online 7.2% gross salaries 8.10 contributions filing Trade tax 1 online 11-17% taxable 10.90 filing profits Social security 1 online 142 10.0% gross salaries 11.20 contributions filing Corporate income tax 1 online 30 15.0% taxable profit 11.40 filing Totals 16 215 48.2 50 51 1. 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: 52 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 4 439 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 53 2. Historical data: Trading Across Borders in Germany Trading Across Borders data Doing Business Doing Business Doing Business Doing Business 2008 2009 2010 2011 Rank .. .. 14 14 Cost to export (US$ per container) 740 822 872 872 Cost to import (US$ per container) 765 887 937 937 Documents to export (number) 4 4 4 4 Documents to import (number) 5 5 5 5 Time to export (days) 7 7 7 7 Time to import (days) 7 7 7 7 3. The following graphs illustrate the Trading Across Borders sub indicators in Germany over the past 4 years: 54 55 Trading Across Borders in Germany These tables list the procedures necessary to import and export a standardized cargo of goods in Germany. The documents required to export and import the goods are also shown. Nature of Export Procedures (2010) 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 (2010) 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 56 Documents for Export and Import Export Bill of lading Commercial invoice Customs export declaration Packing list Import Bill of lading Certificate of origin Commercial invoice Customs import declaration Packing list 57 58 1. Benchmarking Enforcing Contracts Regulations: Germany is ranked 6 overall for Enforcing Contracts. Ranking of Germany in Enforcing Contracts - Compared to good practice and selected economies: 59 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 35 410 23.3 Finland 32 375 13.3 France 29 331 17.4 Iceland 27 417 8.2 Norway 33 280 9.9 60 2. Historical data: Enforcing Contracts in Germany Enforcing Contracts data Doing Business Doing Business Doing Business Doing Business 2008 2009 2010 2011 Rank .. .. 7 6 Procedures (number) 30 30 30 30 Time (days) 394 394 394 394 Cost (% of claim) 14.4 14.4 14.4 14.4 3. The following graphs illustrate the Enforcing Contracts sub indicators in Germany over the past 4 years: 61 Enforcing Contracts in Germany This topic looks at the efficiency of contract enforcement in Germany. Nature of Procedure (2010) 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) 6.6 Court cost (% of claim) 5.4 Enforcement Cost (% of claim) 2.4 62 Court information: Berlin Regional Court ("Landgericht Berlin") * Claim assumed to be equivalent to 200% of income per capita. 63 64 1. 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: 65 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 92.7 Singapore* 1 Selected Economy Germany 53.1 1.2 8 Comparator Economies Denmark 89.4 1.1 4 Finland 89.4 0.9 4 France 45.2 1.9 9 Iceland 78.5 1.0 4 Norway 90.9 0.9 1 * The following economies are also good practice economies for : Cost (% of estate): Colombia, Kuwait, Norway 66 2. Historical data: Closing Business in Germany Closing a Business data Doing Business Doing Business Doing Business Doing Business 2008 2009 2010 2011 Rank .. .. 35 35 Time (years) 1.2 1.2 1.2 1.2 Cost (% of estate) 8 8 8 8 Recovery rate (cents on the dollar) 53.1 52.2 52.2 53.1 3. The following graphs illustrate the Closing Business sub indicators in Germany over the past 4 years: 67 Since 2004 Doing Business has been tracking reforms aimed at simplifying business regulations, strengthening property rights, opening access to credit and enforcing contracts by measuring their impact on 10 indicator sets . * Nearly 1,000 reforms have had an impact on these indicators. Doing Business 2011, covering June 2009 to June 2010, reports that 117 economies implemented 216 reforms to make it easier to start a business. 64% of economies measured by Doing Business have reformed this year, focusing on easing business start-up, lightening the tax burden, simplifying import and export regulations and improving credit information systems. The top 10 most-improved in Doing Business 2011 Dealing with Construction Trading Across Borders Positive Change Registering Property Enforcing Contracts Protecting Investors Starting a Business Closing a Business Negative Change Getting Credit Paying Taxes Permits Economy Kazakhstan Rwanda Peru Vietnam Cape Verde Tajikistan Zambia Hungary Grenada Brunei Darussalam * For Doing Business 2011 the Employing Workers indicator is not included in the aggregate ease of doing business ranking. 68 Summary of changes to business regulation in top 10 most improved economies in Doing Business 2011 and selected comparator economies. Brunei Darussalam Brunei Darussalam made starting a business easier by improving efficiency at the company registrar and implementing an electronic system for name searches. Brunei Darussalam reduced the corporate income tax rate from 23.5% to 22% while also introducing a lower tax rate for small businesses, ranging from 5.5% to 11%. The introduction of an electronic customs system in Brunei Darussalam made trading easier. Cape Verde Cape Verde made start-up easier by eliminating the need for a municipal inspection before a business begins operations and computerizing the system for delivering the municipal license. Cape Verde eased property registration by switching from fees based on a percentage of the property value to lower fixed rates. Cape Verde abolished the stamp duties on sales and checks. Denmark Denmark eased business start-up by reducing the minimum capital requirement for limited liability companies from 125,000 Danish kroner ($22,850) to 80,000 Danish kroner ($14,620). Computerization of Denmark's land registry cut the number of procedures required to register property by half. Germany Germany eased business start-up by increasing the efficiency of communications between the notary and the commercial registry and eliminating the need to publish an announcement in a newspaper. Grenada Grenada eased business start-up by transferring responsibility for the commercial registry from the courts to the civil administration. The appointment of a registrar focusing only on property cut the time needed to transfer property in Grenada by almost half. Grenada's customs administration made trading faster by simplifying procedures, reducing inspections, improving staff training and enhancing communication with users. Hungary Hungary implemented a time limit for the issuance of building permits. Hungary reduced the property registration fee by 6% of the property value. Hungary simplified taxes and tax bases. Amendments to Hungary's bankruptcy law encourage insolvent companies to consider reaching agreements with creditors out of court so as to avoid bankruptcy. Iceland Iceland made dealing with construction permits more costly by increasing the fees to obtain the design approval and receive inspections. Iceland increased the corporate income tax rate from 15% to 18% and raised social security and pension contribution rates. Kazakhstan Kazakhstan eased business start-up by reducing the minimum capital requirement to 100 tenge ($0.70) and eliminating the need to have the memorandum of association and company charter notarized. Kazakhstan made dealing with construction permits easier by implementing a one-stop shop related to technical conditions for utilities. Kazakhstan strengthened investor protections by requiring greater corporate disclosure in company annual reports. Kazakhstan speeded up trade through efforts to modernize customs, including implementation of a risk management system and improvements in customs automation. Peru Peru eased business start-up by simplifying the requirements for operating licenses and creating an online one-stop shop for business registration. Peru streamlined construction permitting by implementing administrative reforms. Peru introduced fast-track procedures at the land registry, cutting by half the time needed to register property. Peru made trading easier by implementing a new web-based electronic data interchange system, risk-based inspections and payment deferrals. Rwanda Rwanda made dealing with construction permits easier by passing new building regulations at the end of April 2010 and implementing new time limits for the issuance of various permits. Rwanda enhanced access to credit by allowing borrowers the right to inspect their own credit report and mandating that loans of all sizes be reported to the central bank's public credit registry. Rwanda reduced the number of trade documents required and enhanced its joint border management procedures with Uganda and other neighbors, leading to an improvement in the trade logistics environment. Tajikistan Tajikistan made starting a business easier by creating a one-stop shop that consolidates registration with the state and the tax authority. Tajikistan strengthened investor protections by requiring greater corporate disclosure in the annual report and greater access to corporate information for minority investors. Tajikistan lowered its corporate income tax rate. 69 Vietnam Vietnam eased company start-up by creating a one-stop shop that combines the processes for obtaining a business license and tax license and by eliminating the need for a seal for company licensing. Vietnam made dealing with construction permits easier by reducing the cost to register newly completed buildings by 50% and transferring the authority to register buildings from local authorities to the Department of National Resources and Environment. Vietnam improved its credit information system by allowing borrowers to examine their own credit report and correct errors. Zambia Zambia eased business start-up by eliminating the minimum capital requirement. Zambia eased trade by implementing a one-stop border post with Zimbabwe, launching web-based submission of customs declarations and introducing scanning machines at border posts. Zambia improved contract enforcement by introducing an electronic case management system in the courts that provides electronic referencing of cases, a database of laws, real-time court reporting and public access to court records. 70 71