Concept and legal classification of foreign associations
Ein foreign association is, under German law, an independent legal entity formed by natural or legal persons, which was established under the laws of another state and has its registered office outside of Germany. In German legal transactions, foreign associations are treated in particular with regard to their recognition, legal capacity, as well as their activities and representation in Germany. The legal framework governing the status and treatment of foreign associations is derived from various provisions of international private law, German association law, as well as international treaties.
Conceptual distinction
The concept of a foreign association is to be distinguished from associations established under German law. While the German Civil Code (BGB) chiefly applies to domestic associations, in the case of foreign associations, the law of the state under whose legal system the association was founded and where it has its statutory seat is primarily decisive.
Recognition and legal capacity of foreign associations in Germany
Reference to the foreign statute
According to Articles 21, 24 of the Introductory Act to the German Civil Code (EGBGB), the law of the state in which the association has its seat is decisive for the formation, existence, legal capacity, and representation of a foreign association (seat theory). This means that an entity constituted and recognized as an “association” under foreign law is, in principle, also regarded as an association under German law, unless there are compelling reasons of public policy (ordre public) to the contrary.
Proof of legal capacity
Foreign associations are legally capable in Germany if they are legally capable under the law of their country of domicile. Proof is regularly provided by official documents, such as a register excerpt or a confirmation from the competent authority of the country of domicile. These documents must be submitted with a certified translation.
Registration and entry
While domestic associations acquire legal capacity by being entered in the association register at the relevant local court (§ 21 BGB), German law does not provide for a separate registration requirement for foreign associations. However, foreign associations can be entered in the commercial register if their activities are aimed at a commercial business operation in Germany (e.g., as a branch office). For purely idealistic associations, this obligation does not exist.
Participation rights of foreign associations in legal transactions
Capacity to act and representation
The authority of representation of a foreign association is determined by the law of the country of origin. In business transactions in Germany, the foreign association must be represented by its authorized representatives. The authority to represent must be proven by suitable documents.
Acquisition of rights and assumption of obligations
Foreign associations may, insofar as they are legally capable, acquire rights in Germany (e.g., real estate ownership, contract conclusion) and assume obligations. This also includes participation in legal proceedings as a party, standing to sue, and liability to be sued.
Activities of foreign associations in Germany
General activity and restrictions
Foreign associations may operate in Germany unless there are special legal prohibitions or restrictions. Activities are, however, subject to the relevant general laws, such as tax law, trade regulation, registration law, or, in the case of charitable purposes, the law on non-profit organizations.
Establishment of a branch office
For the establishment of a branch office of a foreign association, the provisions of § 13 of the Commercial Code (HGB) apply accordingly, provided the association intends to engage in permanent activities in Germany with an independent organization. Registration in the commercial register is required, and the association is partially subject to German law after establishing a seat.
Recognition of non-profit status
Foreign associations can be recognized as non-profit in Germany if they meet the requirements of §§ 51 et seq. of the German Fiscal Code (AO) and their statutory purposes are consistent with German requirements. Non-profit status is a prerequisite for tax advantages.
Association bans and security considerations
Freedom of association
The activities of foreign associations in Germany are in principle protected by the constitutional freedom of association (Art. 9 para. 1 GG). Restrictions apply only to associations whose purposes or activities are aimed against criminal laws, the constitutional order, or the principles of international understanding (Art. 9 para. 2 GG).
Association ban by German authorities
According to the Associations Act (VereinsG), the activity of a foreign association in Germany can be prohibited or restricted if it pursues unconstitutional objectives or disturbs public security and order. The competent prohibition authority decides on the prohibition of activities and can also confiscate assets.
Tax treatment of foreign associations
The taxation of foreign associations is governed by the general German tax laws. If foreign associations generate taxable income in Germany, for example from business activities, they are subject to German corporate income tax, trade tax, or value added tax, unless different provisions of double taxation agreements apply. In the case of charitable purposes and recognition as a non-profit entity, a tax exemption can be granted.
International legal and administrative assistance
Legal transactions and cross-border cooperation with foreign associations are subject to international treaties and the respective conflict of laws. Documents or register excerpts from abroad often require an apostille or legalization in order to be recognized in Germany. Cooperation with authorities in the area of law enforcement may also result in the application of special provisions.
Summary
Foreign associations are associations established under foreign law with their registered office outside Germany. Their recognition, legal capacity, and activities in Germany are determined by international, national, and special statutory provisions. They may acquire rights, assume obligations, and establish branches in Germany. In their activities, they are subject to German law, particularly regarding association law, tax obligations, and compliance with public security and order. Recognition as a non-profit corporation is possible under certain conditions. Cooperation with German authorities follows international agreements and special evidentiary requirements.
Frequently Asked Questions
Do foreign associations have to register in Germany to operate?
Foreign associations that wish to operate permanently or conduct business activities in Germany are subject to special legal requirements. According to § 50 BGB, if they establish a domestic business division, they must in particular register with the competent association register. The registry court will check whether the foreign association is a legally capable association in terms of its home country law and whether its statutes and objectives are also in line with German legal principles (especially public policy). If such an entry is missing or if no registration is made, there is often a legal risk that the association will be regarded as non-legal, and thus cannot sue or be a party in proceedings. For purely occasional or private activities of a foreign association in Germany, these registration obligations generally do not apply.
Can a foreign association acquire real estate in Germany?
A foreign association may, in principle, acquire real estate in Germany, provided its statutes and home country law do not prohibit it. However, in many cases, recognition as a legal entity under German association law is required for this. This is ensured by registration in the German association register. Without this registration, acquisition and entry in the land register can be problematic, especially if the specific authority of representation cannot be clearly proven. In addition, in certain cases relevant to security (e.g. with properties near sensitive border areas), there may be notification or approval requirements arising from the Foreign Trade and Payments Act (AWG) and relevant special legislation.
Is a foreign association board legally capable of acting in Germany?
The capacity of the board of a foreign association is initially governed by the respective national law of the country of origin. However, if the association conducts business in Germany, it must be demonstrated that the board is authorized to represent the association under foreign law. This is usually evidenced by certified and apostilled register excerpts or other official documents. German law also requires that the board is registered for tax purposes in commercial or tax matters. If there is no proper authorization or registration, business conducted in the name of the association can, under German law, be considered invalid.
How is a foreign association registered for tax purposes in Germany?
A foreign association that permanently conducts economic or taxable activities in Germany (e.g. solicits donations, sells goods, organizes events) is required to register with the competent tax office for tax purposes. This applies regardless of registration in the association register. It will be examined whether the association can act for tax-advantaged purposes according to §§ 51 et seq. AO (charitable purposes) or will be treated as a corporation subject to corporate tax. Tax registration is essential, especially for obtaining a tax number and issuing donation receipts. Value added tax liability may also arise, taking into account double taxation treaties with the respective country of origin.
Under what circumstances can a foreign association be banned in Germany?
A foreign association may be banned in Germany by the Federal Ministry of the Interior pursuant to § 14 VereinsG if its activities violate criminal law, constitutional order, or the principles of international understanding. The ban applies both to activities within the country and to promotion of the association. This applies regardless of whether the association is permitted and recognized in its country of origin. After the ban, any activity, property, and symbols of the association are also prohibited, as are all activities of its members in Germany. Violations are prosecuted under criminal law.
How does the lack of registration of a foreign association in the association register affect the liability of its members?
If a foreign association is not entered in the association register in Germany, this can result in it being treated as a non-legal association. In this case, under German law, the acting members are generally personally and jointly liable for obligations entered into in the name of the association (§ 54 BGB analogously). Registration thus not only protects the legal capacity of the association itself, but also serves to limit members’ liability to the association’s assets.
What specific notification obligations exist for foreign associations with regard to anti-money laundering?
Foreign associations that operate economically in Germany are subject to special notification and identification requirements under the Anti-Money Laundering Act (GwG), particularly if they act as beneficial owners within the meaning of transparency registers. They are required to report information on their beneficial owners to the German Transparency Register, unless exceptions under § 20 GwG apply. Failure to do so can result in fines and other regulatory actions. Special diligence is required, especially in connection with donations and sponsorships, as associations are often a focus of anti-money laundering efforts.
