The Investment Incentives in Germany
The German system of promotion of foreign trade and investment is characterized by a division of responsibilities between the state and the private sector. Various institutions, such as the German chambers of commerce abroad, foreign missions, and Germany Trade and Invest (GTAI), work closely together to deliver the best possible backing for German firms.
Incentives for foreign investors
Germany offers numerous incentives for foreign investors. There are a variety of programs available, designed to fit the needs of economic activities at different stages of the investment process. Support ranges from cash incentives to labor-related and R&D incentives. These incentive programs are available through public funding instruments and for different funding purposes.
The following sections outline the most common as well as the most attractive incentives programs and their application fields in Germany:
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Investor production facility costs can be significantly reduced by cash incentives provided in the form of grants. There is one major program directing the allocation of these cash grants, the “Joint Task for Improving Regional Economic Structures” (GRW), throughout Germany. The program is issued by the Federal Ministry for Economic Affairs and Energy. It determines the maximum possible incentive rates for all regions eligible for funding throughout Germany which are published for each funding period in the form of the Ministry’s so-called “incentives map.“
As it is visible from the incentives map, the government tries to encourage investments in the northwestern part of the country except for Berlin. In particular, there are 3 main incentives regions; Border area to Poland, C region, and D region. The grants are mainly for small and medium-sized enterprises.
Public Loan Programs on National Level
The institute KfW (Kreditanstalt für Wiederaufbau) is the nationally operating development bank of Germany. It offers a number of different financing tools such as promotional loan programs, mezzanine financing, and private equity. The KfW offers a number of loan programs for investment projects. The Entrepreneur Loan is the most important one. In order to ease the KfW loan application process, investors should open an account from a German bank or a subsidiary of their domestic bank in Germany.
State Development Bank Loan Programs
In addition, each German state has its own development bank financing projects within the respective state. They offer their own loan programs, especially targeted at start-ups and growing companies. State development bank loans are generally tailored to meet the requirements of small and medium-sized enterprises.
The following information can be seen only as an overview of some major options to be supported. It is recommendable to ask for professional advice to find the right financial option. For more information, see the Federal Ministry for Economic Affairs and Energy and GTAI.
