Germany’s ‘most desirable passport’ is magnet for foreign investors

By Uglobal Staff

Germany is the world’s fourth largest economy and one of the world’s leading exporters. With 469 billion euros in foreign direct investment (FDI), Germany is one of the top regions for foreign investors.

“Germany has a steadily-growing economy, a stable political environment, and transparent regulations. And we clearly benefit from being established within the world’s largest single market economy,” said Benno Bunse, CEO of Germany’s federal economic development agency, Germany Trade & Invest.

Germany has been named the most desirable passport in the world due to its visa-free entry to 176 countries.

“Germany does not have a specific visa program for investors, such as the EB5 of the U.S. or the British Tier-1 Visa. However, since 2012, the Article 21 of the German Residence Law allows foreign investors to apply for a three-year national residence permit,” said Richard Hoffmann, a partner at ECOVIS Beijing China.

Hoffmann said investors have to either establish their own company or invest a significant amount in a German company. He said the visa application process takes about a month, but that the company and investment procedure, including the approval by local authorities, may take longer.

Germany offers an entrepreneur visa to encourage investment in industry with no minimum requirement. However, applicants are required to invest sufficient funds to create a business and jobs.

Detlef von Hellfeld, owner of Berlin-based Trust7 Consulting e.K., said for investors, the rules are not so clear, and anything is possible if the benefit to Germany is large enough.

“For example, if a company creates many jobs for normal workers or if the business plan is very special. This depends a lot on the individual situation,” von Hellfeld said.

Hoffman said the law requires that the business must contribute to the local economy. He said applicants must get an approval letter from the respective Chamber of Industry and Commerce and the local Alien Affairs Office.

“Visa holders can obtain a three-year residence permit. After that, they will have to resubmit their application and prove that their business is doing fine and that they can pay for their own and their family members’ living cost. If this is the case, the residence permit will be changed into a permanent residence permit,” Hoffmann said.

Hoffmann said a residence permit can be extended to spouses and underage children or other dependent family members. He said holders of residence permits benefit from similar rights as Germans, but they have to apply for private health and social insurance.

“Only after receiving a permanent residence permit can they obtain the same social benefits as Germans do,” Hoffmann said.

For residents to become citizens, they are required to be legal residents of Germany for at least eight years. The time may be reduced under certain exceptions such as good language skills or the completion of an integration course.

“It is possible to get this earlier in case there is a very high benefit for the society – scientists, very, very good engineers, for example,” said von Hellfeld.

Hoffmann said there is a difference between FDI in general and investors moving to Germany for the purpose of immigration. He said FDI clearly focuses on high tech companies and real estate. He said real estate is also a big factor for Article 21 Investors, because German property alone does not entitle them to a residence permit.

“Some investment projects also include real estate development projects, which include foreign investors, thus granting them the right to apply for an Article 21 visa. Besides this, most of the investors usually run small businesses in trading, hospitality, or the cultural sector,” Hoffmann said.

Dorothea Metasch, head of marketing at Berlin-based Ziegert Bank and Real Estate Consulting, said 25 percent of her firm’s buyers the past year were foreign investors. She said the largest percentage of those investors came from the European Union, followed by Switzerland, China, and the United Arab Emirates, as well as the United States, United Kingdom, and Russia.

“They all prefer small tickets sizes, 400-750,000 euros, and buy studios or one-bedroom apartments near the water, River Spree, and central areas,” Metasch said.

Germany Trade & Invest notes that Germany provides incentives to all investors, ranging from cash incentives for the reimbursement of direct investment costs to incentives for labor and research and development.

Hoffmann said, “There are no specific tax benefits for foreign investors. Tax rules apply to all legal entities in the same way regardless of the ownership. However, there might be differences in IIT (individual income tax) liabilities, since some countries, such as China or the U.S., levy taxes on world income.”

Within the last two years, von Hellfeld said he has seen big changes in the immigration business, which he attributes to the election of Donald Trump as U.S. president and Brexit.

“I have some clients from the U.S. who want to live in Germany because of the freedom we have in Germany, especially with children, and I have some business clients from the UK who do not know what Brexit will do for their business and they want to be prepared for a worst case scenario and set up a branch or a new company in Germany,” von Hellfeld said.