What is the upside of opening a company there if you can incorporate in a EU country with much much lower taxation say Cyprus or, you have a EU citizenship and the company is in IT field, Malta, and pay just 5% tax (and 0% tax on dividends from it if you move there and become a tax resident)? It effectively means increasing your income 2x-2.4x depending on how high the revenue is, vs paying 30% profit tax and then on dividends, 45% personal income tax in Germany. While still enjoying all the same access to funding and open EU market as in Germany.
Another much closer and cheaper to run option is Hungary where company profit tax is 9% and personal income tax is 15%, still providing up to 2x higher net personal income on same revenue vs Germany.
Because you usually have to move to the other EU country, or at least live there for half the year and many people still like to live in Germany. Optimizing taxes might not be the main goal in life.
Well, substance is a way to domicile your company in a certain jurisdiction in a way that passes checks according to the rules of tax authorities of necessary countries. I saw people doing it in Madeira, in fact with German clients, and had German cops/tax officers fly to them to Madeira, check compliance, and agreeing that they conform - you need to do a certain minimum set of things like keep an office, papers, minimum number of employees etc. - there, and that will be enough.
As for your own tax residence, some countries offer shortened terms of annual stay to qualify, Cyprus offers 60-days scheme for example (that again comes with a certain set of rules to obey).
Simply put, there's a massive demand for the "i want to pay as little tax as legally possible on my IT business" thing, and many countries lined up to do it as conveniently as possible for people from all kind of places. Only country for which it doesn't work is good ol' USA, because of world-unique system of citizenship-based taxation.
Another much closer and cheaper to run option is Hungary where company profit tax is 9% and personal income tax is 15%, still providing up to 2x higher net personal income on same revenue vs Germany.