Germany: Investing

FDI in Figures

Germany is considered an attractive country for foreign direct investment, but in recent years the influx of FDI has been hampered by the global recession and subsequent Eurozone crisis. According to the 2022 World Investment Report by UNCTAD, FDI inflows into Germany more than halved in 2021, totaling USD 31.26 billion against USD 64.59 billion one year earlier. The stock of FDI increased slightly in 2021 to over USD 1.1 trillion. The country has traditionally been a key investor: after declining sharply in 2020, Germany's outward investment reached USD 151.6 billion in 2021, marking a 150.2% increase year-on-year. According to data from the national Trade and Investment Agency (GTAI), Germany’s federal states registered 1,806 FDI projects (excluding M&A) in 2021 - a 7% rise compared to the previous year. In the same year, the number of projects (1,851) rebounded almost fully compared to pre-COVID levels, with 1,806 international companies setting up shop in Germany in the form of greenfield investments.
FDIs in Germany are mostly owned by Luxembourg, the Netherlands, the U.S., Switzerland and the UK, which represent more than 60% of the total stock. France, Ireland, Italy, Austria, and Japan are also investing in the country. FDIs are mainly oriented towards finance and insurance, manufacturing and trade, information and communication, management and consultancy activities, and real estate. The latest data from OECD shows that in the fist half of 2022 FDI inflows to Germany reached a total of USD 17.7 billion, more than eight times higher compared to the second half of the previous year. In 2022, Intel and Northvolt announced massive expansion projects, which were worth at least EUR 17 billion and EUR 4 billion respectively.

Among the country’s strengths are a highly powerful and diversified industrial network, a highly skilled workforce with a good command of English, reliable infrastructure, a favourable social climate, a stable legal framework and a location at the heart of Europe. Its main weaknesses are a high tax rate (for both individuals and businesses), rather inflexible labour laws, and the high dependence on the automotive and mechanical industries. The Economist Business Environment ranking puts Germany in the 13th place out of 82 countries in terms of business environment. However, The Economist notes that the country is more exposed than most other large high-income economies to the near-term fallout and energy risks from the Russia-Ukraine conflict. Constraints on the ranking include a high tax burden on labour income and on firms, combined with high administrative costs. Germany ranks 8th among the 132 economies on the Global Innovation Index 2022 and 14th out of 177 countries on the 2023 Index of Economic Freedom.

What to consider if you invest in Germany

Protection of Foreign Investment

Procedures Relative to Foreign Investment

Freedom of Establishment

Foreign investors are generally subject to the same conditions as German investors and there are no administrative controls specifically for foreign investments in Germany, and no specific key laws or regulatory authorities that govern foreign investment. Regulated industries (such as pharmaceuticals, military products, radioactive substances and so on) are subject to special controls.

Acquisition of Holdings

Foreign investors may have a majority holding in the capital of a local company.

Under the Foreign Trade and Payments Ordinance, the Federal Ministry of Economics can prohibit or restrict the direct or indirect acquisition of at least 10% of the voting rights in a German company. There are two areas of review:

• Sector-specific review, e.g. defense sector
• Cross-sectoral review, pursuant public order or public security in sensitive sector such as critical infrastructure and software for energy, IT and health sector

Obligation to Declare

Germany Trade & Invest (the agency responsible for the promotion of foreign investment) provides information about necessary authorisations or declarations.
The most recent changes to the German Foreign Investment Act (the GFI Act) were adopted by the German parliament on 17 June 2020 and came into force on 16 July 2020, when the GFI Act was published in the Federal Law Gazette.

Competent Organisation For the Declaration

Federal Ministry for Economic Affairs and Energy (BMWi)

Requests For Specific Authorisations

Investments must be governed by the policies and the procedures specific to the sector.

Private share sales are usually subject to the following closing conditions/conditions precedent:

• Merger control clearance by the Federal Cartel Office or the European Commission.
• Foreign investment control clearance by the Ministry of Economics and Technology.

Under the Foreign Trade and Payments Ordinance, the Federal Ministry of Economics can prohibit or restrict the direct or indirect acquisition of at least 10% of the voting rights in a German company. There are two areas of review:
-    Sector-specific review, e.g. defense sector.
-    Cross-sectoral review, pursuant public order or public security in sensitive sector such as critical infrastructure and software for energy, IT and health sector.

Office Real Estate and Land Ownership

Possible Temporary Solutions

Temporary office solutions

The Possibility of Buying Land and Industrial and Commercial Buildings

There are no restrictions on the ownership or occupation of real estate by foreigners in Germany.

Risk of Expropriation

According to German law, for public purposes only and in a non-discriminatory manner, private property can be expropriated. The process must be transparent, and victims must receive prompt, adequate and effective compensation.

Investment Aid

Forms of Aid

Germany offers numerous incentives to all investors, regardless of nationality or origin.
Incentive packages may be structured as:

•     Tax incentives.
•     Cash incentives (subsidies paid out in connection to proven investments).
•     Loans with preferred conditions or guarantees.
•     Capital/shareholding investments by state authorities, in exceptional cases.

For more information, please visit the website of Germany Trade and Invest

Privileged Domains

State aid is granted throughout Germany for creating (long-term) employment, for developing research, development and innovation (R&D), for environmental protection, for public guarantee and public loan programmes.

For more information, refer to the Germany Trade & Invest (GTAI) is the economic development agency of the Federal Republic of Germany.

Privileged Geographical Zones

Regions with the highest incentives rates offer grants of up to 30 percent of eligible expenditures for small enterprises. Small enterprises situated in the border regions to Poland may receive up to 40 percent funding. These higher incentive rate regions are mainly situated in Eastern Germany. (Macklenburg- Vorpommern, Brandenburg, Saxony, Saxony-Anhalt, Thuringia).

Free-trade zones

The eastern part of Germany. There are five free trade zones established under EU law: Bremerhaven, Cuxhaven, Deggendorf, Duisburg and Hamburg.

Public aid and funding organisations

Germany Trade & Invest (GTAI)

Investment Opportunities

The Key Sectors of the National Economy

Consumer goods, since the number of inhabitants is the highest in Europe. Subcontracted goods, as Germany is the the leading producer of machine tools. This sector may see a new boom thanks to the development of numerical industrial processes. The other key sectors are: advanced materials, aerospace industry, agriculture, automobile industry, pharmaceutical and chemical industry, wholesale, retail, online trade.

High Potential Sectors

Services to consumers, high-tech, multimedia, electronic, health and biotechnologies, renewable energies (ambitious plan of development in solar, wind and renewable energy storage)

Privatization Programmes

There is no privatisation program ongoing. As a matter of principle, Germany treats foreigners equally in privatisations.

Tenders, Projects and Public Procurement

Tenders Info, Tenders in Germany
Ted - Tenders Electronic Daily, Business opportunities in EU
DgMarket, Tenders Worldwide

Sectors Where Investment Opportunities Are Fewer

Monopolistic Sectors

Education. State-owned enterprises are limited to basic services (water, energy and national rail transportation).

Finding Assistance For Further Information

Investment Aid Agency

Germany Trade & Invest (GTAI) 

Other Useful Resources

Investment Guide to Germany (GTAI)

Doing Business Guides

Doing Buisness and investing in Germany (PwC)

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