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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

 

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 2021 World Investment Report by UNCTAD, FDI inflows into Germany declined by almost 34% in 2020, reaching USD 36 billion, compared to USD 54 billion in the previous year, despite an increase in cross-border M&A transactions, mainly due to the outbreak of the COVID-19 pandemic. The stock of FDI increased slightly in 2020 to over USD 1 trillion. The country has traditionally been a key investor, but this trend has been slowed by the pandemic: Germany's outward investment fell from USD 139 billion in 2019 to USD 35 billion in 2020.
FDIs in Germany are mostly owned by Luxembourg, the Netherlands, the US, 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. According to the latest data by the OECD, in the first half of 2021 FDI inflows reached a total of USD 21.38 billion, up by 18.1% compared to the second half of the previous year.

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 table 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 World Bank ranked Germany 22nd out of 190 countries in its latest edition of the Doing Business report (gaining two positions compared to the previous publication).

 
Foreign Direct Investment 201920202021
FDI Inward Flow (million USD) 52,66564,58931,267
FDI Stock (million USD) 963,5671,107,8391,139,106
Number of Greenfield Investments* 8601,0771,118
Value of Greenfield Investments (million USD) 21,32425,91740,527

Source: UNCTAD, Latest available data.

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.

 

FDI STOCKS BY COUNTRY AND INDUSTRY

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 available data.

 
Form of Company Preferred By Foreign Investors
GmbH
Form of Establishment Preferred By Foreign Investors
Distributors, commercial agents.
Main Foreign Companies
Ford, General Motors, Exxon Mobil, Sony, Toshiba (German), Total.
Sources of Statistics
Federal Statistical Office
Germany Trade and Invest

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What to consider if you invest in Germany

Strong Points

Germany's strengths for FDI are:

  • Strategic location in the centre of Europe
  • Political stability and a good anchor in international relations
  • The largest population of the European Union
  • Infrastructure among the most developed in the European Union
  • Strong manufacturing base (almost a third of the GDP)
  • Strong exports (high range products and diversified clients)
  • Advanced technology and expertise
  • Highly qualified work force
  • Consolidated public finances
  • Competitive taxation.
Weak Points

Germany's weaknesses for FDI are:

  • Eastern part of the Germany (former DDR) is struggling to catch up with the western part in many areas
  • Ageing population weighs heavily on growth
  • German economy is highly dependant on exports, especially to China
  • Ageing infrastructure
  • Unproductive service sector
  • Insufficient infrastructure for development of start-ups
  • A low investment/GDP ratio
  • Lack of engineers
Government Measures to Motivate or Restrict FDI
Germany distinguishes itself with a business climate compliant with international standards and with transparency of its judicial system. The German Government is implementing measures aimed at encouraging investments including:

  • Grants for investments (Cash Incentives Program: GRW)
  • Grants for R&D for different research categories (fundamental research, industrial research, experimental development)
  • Grants for hiring personnel (programs focusing on recruitment support, training support, wage subsidies and on-the-job training)
  • Public loans
  • Public guarantees

For more information, visit the website of Germany Trade & Invest (GTAI).

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Protection of Foreign Investment

Bilateral Investment Conventions Signed By Germany
Germany has signed bilateral investment treaties (BITs) with numerous countries. To see a list of participating countries, consult UNCTAD website.
International Controversies Registered By UNCTAD
The ISDS Navigator contains information about known international arbitration cases initiated by investors against States pursuant to international investment agreements. Germany is involved in 69 cases as Home State of claimant and in 4 cases as Respondent State.
Organizations Offering Their Assistance in Case of Disagreement
ICCWBO , International court of arbitration, International chamber of commerce
ICSID , International Center for settlement of Investment Disputes
Member of the Multilateral Investment Guarantee Agency
Germany is a signatory to the Convention of the MIGA.
 
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: Doing Business - Latest available data.

Note: *The Greater the Index, the More Transparent the Conditions of Transactions. **The Greater the Index, the More the Manager is Personally Responsible. *** The Greater the Index, the Easier it Will Be For Shareholders to Take Legal Action.

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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.

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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.

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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)
 
 

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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

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Sectors Where Investment Opportunities Are Fewer

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

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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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Latest Update: November 2022