The German Economy: High Net Worth Individuals, Investment & Residency

Spotlight
09 September 2014
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TL: Why should international investors and high-net-worth individuals consider investing in Germany?

Claus: There are 11 reasons why international investors and high-net-worth individuals should consider investing in Germany:
 
I. Economy is leading in Europe
Germany could be seen as Europe's economic engine. Investors profit from the economic performance of the world's fourth largest economy. Germany also offers a large domestic market and easy access to growing markets in the enlarged European Union.
 
 
II. Secure Investment Framework
Highly developed economic and political frameworks provide the necessary security for foreign business investments. Germany’s judiciary and civil service institutions are professionally regulated to ensure consistently excellent service. Contractual agreements are secure and intellectual property is strictly protected.
 
III. First Class Infrastructure
Located at the heart of Europe, Germany is Europe's number one logistics market. A sophisticated energy and communications infrastructure and first-class transportation networks ensure on-time delivery and short roads to success.
 
IV. Inviting Incentives
Germany provides attractive incentives to all investors. A comprehensive range of programs support the broad spectrum of business activities at all stages of the investment process. Support ranges from cash incentives for the reimbursement of direct investment costs to incentives for labor and R&D
 
V. Competitive Tax System and Conditions
Germany has significantly reduced its corporate tax levels. A far-reaching reform of company taxation is helping companies invest, and secure new business. The Federal Government’s raft of reforms to improve the general tax framework and keep indirect labor costs down are opening doors of opportunity to ever more investors.
 
VI. High Productivity
One of the highest productivity rates in the world, German quality, and steadily decreasing unit labor costs are the decisive factors for Germany’s competitiveness. A series of social and market reforms have further contributed to Germany's continued economic growth to make it one of Europe’s most cost-effective production locations.
 
VII. Social Consensus
In Germany a broad and stabile consensus has emerged since the trauma of World War Two and the subsequent foundation of the Federal Republic of Germany. Apart from other countries there are no large-scale unrest or social flashpoints which could harm the internal stability of a country and economy. The social consensus becomes apparent that all partner of the economic and social system have a great ability to find compromises.
 
VIII. Excellent Workforce
Germany’s world class education system ensures the highest standards. 81 percent of the German population have been trained to university entrance level or possess a recognized vocational qualification – above the OECD average of 67 percent. An investor friendly social-market economy promotes stable labor relations.
 
IX. Innovative Power
Germany is Europe's № 1 location for research. German R&D is backed by billions of euros in annual federal funds, helping to make Germany the world's leader in innovation. It's this commitment which also makes Germany Europe's leading patent applicant and the leading global force in high-tech solutions.
 
X. Global Player
Germany is the world’s number three exporter, neck and neck with China and the US after six years at the top spot. And with EUR 469 billion FDI, Germany also proved to be an investment magnet and one of the top regions for foreign investors.
 
XI. Quality of Life
Germany is a modern, tolerant, and cosmopolitan society with an excellent standard of living. Superior health and education provision, endless opportunities for sports and recreation in Germany’s beautiful landscape, and a vibrant cultural scene are just some of the reasons why more than seven million foreigners have made their homes in Germany.

TL: What is the most efficient and recommended procedure that needs to take place needed in order to open a new business in Germany? Also, what are the necessary requirements that need to be met?

Claus: The most common way to start a business in Germany is to found a close corporation (GmbH). A branch office respectively a permanent establishment is a second option. A third option is a German partnership. Even though a close corporation is the most used investment and business vehicle, a limited partnership with corporation as a general partner (so call GmbH & Co. KG) is in many circumstances a better vehicle in respect of an easy to achieve withholding tax optimization. For the foundation of a GmbH a notary public is needed. The investor must apply for an entry in the commercial register (by a notary pubic) and must register at the Trade Office. Only for a very few business sectors’ activities one needs an approval before one starts carrying out the business. 

TL: Where are the majority of international investors coming into Germany arriving from and why do you believe this to be the case?

Claus: Many investors come from the US, European Union countries and the Arabic world. In the last years also many investors from Russia invest in Germany, not only business groups but also high-net-worth individuals. Each investor has other reasons why and in what he invests in Germany. For many businesses from abroad the strong German economy combined with the largest domestic market is a core reason. Many investors also start their first European activities from Germany because of its location in the centre of Europe. 

TL: Should an investor want to obtain German citizenship, what are the requirements that they need to meet and how long will it take for them to obtain citizenship?

Claus: In general a foreign investor should first obtain a residence and work permit if he plans to stay longer than just for business trips. This residence and work permit is easy to obtain if the investor has a management function in a (his) German business. As a second step, an investor could try to obtain German citizenship. There are various requirements depending on the country the investor comes from. In general German citizenship can be applied for after eight years of residing lawfully in Germany.