In this page: FDI in Figures | What to consider if you invest in Germany | Protection of Foreign Investment | Procedures Relative to Foreign Investment | Office Real Estate and Land Ownership | Investment Aid | Investment Opportunities | Sectors Where Investment Opportunities Are Fewer | Finding Assistance For Further Information
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.
Foreign Direct Investment | 2020 | 2021 | 2022 |
---|---|---|---|
FDI Inward Flow (million USD) | 56,204 | 46,468 | 11,053 |
FDI Stock (million USD) | 1,153,099 | 1,057,990 | 1,007,533 |
Number of Greenfield Investments* | 1,105 | 1,395 | 984 |
Value of Greenfield Investments (million USD) | 26,504 | 47,231 | 34,398 |
Source: UNCTAD, Latest data available.
Note: * Greenfield Investments are a form of Foreign Direct Investment where a parent company starts a new venture in a foreign country by constructing new operational facilities from the ground up.
Main Investing Countries | 2019, in % |
---|---|
Luxembourg | 18.5 |
The Netherlands | 17.5 |
USA | 11.6 |
Switzerland | 8.3 |
United Kingdom | 7.2 |
France | 5.7 |
Ireland | 5.0 |
Italy | 3.5 |
Austria | 3.3 |
Japan | 3.2 |
Main Invested Sectors | 2019, in % |
---|---|
Financial and insurance activities | 33.9 |
Manufacturing | 24.2 |
Wholesale and retail trade, maintenance | 11.3 |
Information and Communication | 6.5 |
Management consultancy activities | 5.7 |
Real estate | 5.5 |
Source: OECD Statistics, Latest data available.
Germany's strengths for FDI are:
Germany's weaknesses for FDI are:
For more information, visit the website of Germany Trade & Invest (GTAI).
Country Comparison For the Protection of Investors | Germany | OECD | United States |
---|---|---|---|
Index of Transaction Transparency* | 5.0 | 6.5 | 7.0 |
Index of Manager’s Responsibility** | 5.0 | 5.3 | 9.0 |
Index of Shareholders’ Power*** | 5.0 | 7.3 | 9.0 |
Source: The World Bank - Doing Business, Latest data available.
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:
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.
For more information, please visit the website of Germany Trade and Invest
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Latest Update: November 2023