Accounting and Auditing

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An Overview of Accounting and Auditing in Germany

Germany is one of the leading economies in the world. Doing business in Germany is a favorable option. The main advantages of doing business in Germany are stability, a well-developed legal and judicial system, and a high level of financial services. Germany is one of the most defining nations of Europe and is a logistics huge of Europe. However, with the business-friendly and innovative environment, there come strict accounting disclosure norms and mandatory audits. All registered companies must prepare financial statements annually and submit them to the authorities timely.

Financial Statements and Accounting Records

All German Companies are required to maintain accounting records and prepare financial statements in a manner and to an extent it is possible to judge the company’s activity and that it reflects the true and fair view of the company’s financial position. A company’s obligation to file accounts depends upon its legal form and size: whether it is a micro, small, medium, or large size company. Classification of a company into micro, small, medium and large companies can be done in the following manner:

Type of Company

Balance Currency


Average number of employees

Micro Companies

Up to 350,000 EUR

Up to 700,000 EUR

Up to 10

Small Companies

From 350,000 to 6000,000 EUR

From 700,000 to 12,000,000 EUR

From 10 to 50

Medium-sized companies

From 6,000,000 to 20,000,000 EUR

From 12,000,000 to 40,000,000 EUR

From 50 to 250

Large companies

Above 20,000,000 EUR

Above 40,000,000 EUR

Above 250

Financial Statements required to be prepared by Different Types of Companies are as follows:

Type of Company

Balance Sheet

Profit and Loss Statement

Balance Sheet Explanation

Management Report

Micro Company

Significantly condensed




Small Company





Medium Sized Company





Large Companies





Every company must store the financial statements and relevant source Documents for at least 10 years after the end of the financial year to which it relates. The annual financial statements prepared must comply with the accounting standards i.e., German Commercial GAAP or International Financial Reporting Standard (IFRS). The German Commercial Code is strict when it comes to rules for the disclosure of annual financial statements of companies. All national public companies and the listing of foreign companies is required to be done as per IFRS. The main legislations followed for accounting in Germany are:

  1. Stock Corporation Act of 1965 (AktG)
  2. Commercial Code of Germany (Handelsgesetzbuch-HGB)

Who must file financial statements?

  1. Limited Liability Company (GmBH)
  2. Stock Corporation (AG)
  3. Open trading company (OHG)
  4. Limited Partnership (KG)

Limited Liability entities other than small companies must publish annual returns and get them audited by external auditors. However, unlimited liability entities are neither required to publish the returns or get them audited.

Audit of Accounts

Annual Financial Statements must be audited by independent external auditors. It is compulsory for large and medium-sized companies to get their financial statements audited. The auditor must apply international auditing standards for drawing its opinion. The international auditing standards must be applied in a manner as prescribed under paragraph 3 of article 26 of Directive 2006/43/EC of the international auditing standard adopted by the European Commission. If the auditor has certain objections, then the auditor will issue an objective written report else, the auditor will issue an auditor’s opinion.

Time Period for preparation and submission of financial statements

The financial year should be determined as per the resolution of the meeting of shareholders. The financial year should not be more than 12 months except the first financial year, which can be shorter. The deadline for submission of accounts of micro and small companies is six months, and for medium and large-sized companies, it is three months. The accounts must be maintained in German language, and the amount should be in euros. The accounts should be signed by the company’s representatives at a general meeting. The accounts should be published in an electronic form in the federal gazette within 12 months from the end of the financial year. Listed companies and companies that have issued debt securities can publish their accounts within four months from the end of the financial year. For late filing of accounts, the Federal Office of Justice imposes administrative penalties not exceeding 25,000 EUR.

Time Period for preparation and submission of tax statements

Corporate Tax – For the preparation of corporate tax, the tax period is the calendar year. But the tax returns are filed as per the company’s financial year, which should not be more than 12 months from the end of the corresponding calendar year. The standard date of filing a tax return is 31st July of the year succeeding the reporting year.

Value-Added Tax(VAT)–Companies with taxable turnover of 17,500 EUR or less in the previous calendar year and which is not estimated to exceed 50,000 EUR in the current calendar year may choose a special scheme for small businesses with no VAT. A preliminary VAT return is filed monthly if the tax amount for the previous calendar year is above 7500 EUR or quarterly by the 10th day of the month following the reporting month. VAT must be paid by the same date. An annual VAT return must also be filed by every taxpayer. Further, if the company purchases or sells goods and services with companies incorporated in other EU countries, then it must register itself in the INTRASTAT and VIES systems and file information with the tax authority in the prescribed form.

Consolidated Financial Statements

The consolidated financial statements and a management report of a group of companies must be mandatorily audited else they cannot be approved.

Exemption to the parent company from the preparation of consolidated financial statements is provided if:

  1. On the closing date of the annual financial statement and on the previous closing date, at least two of the three following characteristics apply:
  2. Total assets of the parent company and subsidiaries included in the consolidated financial statements are not more than 24,000,000 EUR.
  3. Sales of the parent company and subsidiaries included in the consolidated financial statement are not more than 48,000,000 EUR for 12 months preceding the reporting date.
  4. Parent company and subsidiaries included in the consolidated financial statement, on average, did not have more than 250 employees for 12 months preceding the reporting date.
  5. At least 2 of the three following criteria must apply on the closing date of the consolidated financial statements:
  6. Total balance amount is not more than 20,000,000 EUR.
  7. Sales for 12 months preceding the reporting date do not exceed 40,000,000 EUR.

The parent company and subsidiaries included in consolidated financial statements, on average, did not have more than 250 employees for 1 one year preceding the reporting date.

Frequently Asked Questions

Germany follows the German Commercial GAAP or the IFRS. IFRS are required for listing of foreign companies and all national public companies. Some companies also use the German Tax Code for tax purposes.

In Germany, accountants are regulated by the Chambers of Public Accountants and the Chambers of Tax Advisors.

Filing of accounts is different for different types of companies as it varies depending upon the size and legal form of the company. Larger companies have more extensive reporting as compared to smaller companies.

The relevant authority for filing accounts in Germany is the Federal Gazette. It is the official register for company information.

Yes, audit is mandatory for certain types of companies in Germany.


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