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German Legislation for Foreign Investment

German Legislation for Foreign Investment

Updated on Monday 14th September 2015

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There are no restrictions when it comes to doing business in Germany and the law makes no difference between German nationals and foreigners. Intellectual property is protected by patent laws. Investors also benefit from laws that enforce them to plan and implement their investment effectively.

The Foreign Trade and Payments Act

Germany encourages and supports foreign direct investment (FDI). The German legislation for FDI encourages the principle of freedom of foreign trade and payment transactions as shown in The Foreign Trade and Payments Act (Außenwirtschaftsgesetz).

This Act permits restrictions on FDI due to foreign policy, foreign exchange, or national security. But such restrictions are rarely imposed. There is no broad authority to review foreign direct investment (except for the defense and cryptology sectors).

Imports in Germany do not require a special permit or control declaration. This is applicable to both German companies or partnerships and residents also, with a registered office in Germany. However, there are goods submitted to import duties even if their number has decreased over the years.

Only agricultural products, food, pharmaceuticals, chemicals, and goods of strategic relevance have certain import restrictions. In such cases import licenses and surveillance documents may need to be obtained before importing to Germany.

Incentive Programs in Germany

Germany runs a variety of programs of incentives for foreign investors. The system helps different economic activities through all stages of the German investment process and also offers support from cash incentives to labor- related and research and development incentives.

Research and Development Incentives in Germany

In Germany R&D projects benefit from many forms of financial support. These programs offer R&D grants, low-interest loans and special partnership programs. A company will find financing with the European Union, the German government, and the individual German states. The research categories that benefit from R&D incentives are: fundamental research, industrial research and experimental development.

Labor-Related Incentives in Germany

Germany’s Federal Employment Agency (Bundesagentur für Arbeit) and the German states offer a range of labor-related incentives programs created to fit different company needs when building workforce. 

These incentives can be classified into programs focusing: on recruitment support, training support, wage subsidies and on-the-job training.

Public Loans in Germany

German investors have access to publicly financed loan programs in Germany. These programs usually offer loans at below current market value interest rates in combination with attractive grace periods. These loans are provided by development banks publicly owned and organized. Small and medium-sized enterprises in particular can profit from these kinds of loans.

Public Guarantees in Germany

A public guarantee in Germany is a financial instrument that encourages commercial banks and public banks to offer loans to new companies. German guarantee programs are specially designed to help companies obtain bank financing by dealing with the collateral restraint.

The guarantee functions as a promise by the guarantor to the lender that, in case the borrower would fail in paying, the guarantor will repay the lender a specified proportion of the precedent amount.

Germany offers a competitive system of company taxation. The average tax rate on companies is lower than 30 %. Due to locally variable rates of trade tax, the corporate tax is lower than 23 %.

 

To learn more about foreign investment in Germany you can always contact our German law firm

 

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