The 16 Länder and their capitals
Germany is a federal republic. Power is shared between the central government (Bund) and the 16 states. Each Land has its own parliament and powers over education, police and part of local taxation, which explains why procedures and costs vary from one state to another.
Key points
- Baden-Württemberg: Stuttgart
- Bavaria (Bayern): Munich
- Berlin: Berlin
- Brandenburg: Potsdam
- Bremen: Bremen
- Hamburg: Hamburg
- Hesse: Wiesbaden
- Mecklenburg-Western Pomerania: Schwerin
- Lower Saxony (Niedersachsen): Hanover
- North Rhine-Westphalia (Nordrhein-Westfalen): Düsseldorf
- Rhineland-Palatinate (Rheinland-Pfalz): Mainz
- Saarland: Saarbrücken
- Saxony (Sachsen): Dresden
- Saxony-Anhalt: Magdeburg
- Schleswig-Holstein: Kiel
- Thuringia (Thüringen): Erfurt
City-states versus territorial states
Three of the sixteen are city-states: Berlin, Hamburg and Bremen. They are both municipality and Land at the same time, which simplifies some procedures because local and regional administration coincide.
The rest are large territorial states, where the administrative capital is not always the economically strongest city. Hessen is the classic case: the capital is Wiesbaden, but the financial centre is Frankfurt.
The states that matter for a company
If your goal is to sell to companies, North Rhine-Westphalia has the highest industrial density in the country, with Düsseldorf and Cologne as hubs. Bavaria is the engine of the south, with Munich as the base for multinationals and tech startups.
Hessen, with Frankfurt, is the banking and financial centre and home to the European Central Bank. Berlin concentrates startups and young talent, with costs still lower than Munich. Hamburg dominates foreign trade and logistics thanks to its port, the largest in Germany.
The choice of state has a direct tax consequence: the Gewerbesteuer, the municipal tax on business activity, varies by municipality. In practice, the total corporate tax burden is around 30-33% and can move a few points up or down depending on where you establish your registered office.
Local taxation: why the municipality decides
Corporate tax (Körperschaftsteuer) is federal and the same throughout the country: 15% plus the solidarity surcharge. What changes is the Gewerbesteuer, whose base rate is federal but to which each municipality applies its own multiplier (Hebesatz).
That means two GmbH with the same profit pay different amounts depending on whether they are in Munich, Berlin or a small town. It is one of the first variables to look at when choosing a registered office, along with office costs and access to talent.
What to look at before deciding on a city
Beyond the map, the practical decision comes down to four things: your target customer, the cost per square metre, the availability of talent and the municipal Hebesatz of the Gewerbesteuer.
For most Spanish SMEs making the leap, the conversation usually ends up between Munich, Frankfurt, Berlin and Düsseldorf. Each one wins in something different, and none is the right answer for every sector.
