Though a self-evidently attractive destination for HNWI from around the world, we rarely hear about the investment-based immigration possibilities Germany offers. Though they may not take the form of a program, as such, residence-by-investment solutions do exist in the country. This article will offer an overview of the various routes available to those hoping to gain residency, and eventually citizenship, through an investment in Germany.
Investment-based visas in Germany
Foreign nationals (non-EU citizens) wishing to invest and obtain residency in Germany must comply with the immigration laws related to self-employment, by taking up economic activity in a local municipality (of which Germany has more than 11,000). Section 21 of the Residence Act (Aufenthaltsgesetz) makes it possible for foreign entrepreneurs to start a business in Germany to get a residence permit. It is a long-term visa for staying in Germany for purposes of self-employment, even though the country does not have an investor visa category in the strictest sense of the term.
The relevant authorities can be the Senate Administration for Economic Affairs in Berlin or the Ministry of Economic Affairs or Chamber of Commerce in the federal state in which the applicant intends to invest.
According to German regulations, to establish a limited liability company (GmbH) for these purposes, the minimum founding capital is EUR25,000, of which at least EUR12,500 must actually be paid-in if there are several partners. Following a regulation change in 2012, the mandated minimum of EUR250,000 for investment and the need to create at least five jobs were removed from the Residence Act as a condition for a residence permit for independence. Nevertheless, express intentions of investing such an amount, though not an explicit requirement, significantly improve the odds of approval. Though there is no net asset requirement for the applicant, the authorities will take into account the background and management experience of the applicant.
The decisive prerequisite for the approval is whether the applicant’s business idea is of economic interest to the region; authorities should be able to reasonably assume that the investment will engender positive effects on the local economy. The applicant needs to demonstrate that he has secured the financing to establish a business in Germany. He must also state that the activity requires his/her permanent personal presence in Germany. An approval from the authorities leads the immigration department to issue the residence visa. The whole process takes about six months.
The three-year national resident permit will enable the applicant and his/her dependents, namely spouse and children under the age of 18, to take up any employment and go to school in Germany and visit all the other Schengen countries for up to 90 days per visit in each six-month period. They must visit Germany at least once in every six months.
During the three years, the principal investor-entrepreneur needs to demonstrate he has been conducting the specified economic activity and generated positive economic impacts, the measurement of which differs by region. In some big cities, the business needs to generate EUR1 million of revenue in the second or third year and create jobs locally. In some smaller and less populated cities, the business is considered as operating soundly if it generates total revenue of EUR600,000, gross profit of EUR 80,000, and pays tax EUR24,000 at least in three years.
The three-year temporary residence permit can be converted into a permanent residence (or so-called a settlement permit) after three years for the principal investor and five years for his/her immediate family members. After eight years, applicants can apply for German citizenship and obtain a German passport. They should be above 18 years old and have no criminal record, and pass the German language test of B1 level.
The passive investments route
Individuals who would like to obtain residency in Germany through passive investments and not physically spend much time in the country can choose to participate in an ongoing regional development project, of which the core activity is to build up commercial and residential properties in certain regions.
Investors can participate in such programs through some immigration firms, which mostly requires a minimum investment of EUR350,000 for five years (or three, depending on whether the applicant has dependents or not), among which EUR250,000 will be invested in off-plan commercial real estate assets and the remaining EUR100,000 in a so-called development project fund to cover application and services fees and other expenses.
The EUR250,000 invested in the commercial real estate assets is the principal of the investment, which the applicant can expect to generate a return. Once the development is complete, the applicant can use this property as the residential address for the remaining period of temporary residence.
Although there is no need for the applicants to spend a significant amount of time in Germany, they will be required to maintain a residential address in the local municipality at least until the property development is completed.
The passive route resembles the golden visa offered by some southern European countries; however, it legally falls under Section 21 of the Residence Act mentioned above. Essentially, the applicant is a business investor and his economic activities are property development, which happens to be needed by the region in which he intends to reside.
It has to be stressed that the viability of such a passive investment route depends on the regional requirements and priorities. Each municipality has its own slightly different criteria and the examination of the application takes into account the specificities of the individual case. It is important to work with service providers with a good understanding of the local economic needs and trustworthy partnership networks. Some cities need property development while other regions prefer entrepreneurs who can establish high-tech companies. That might be why German investment immigration hasn’t unfolded on a large scale and remains relatively unknown.
Comparison with golden visas
To put it into comparison, the relatively long period of residency to acquire Germany’s citizenship is quite demanding relative to other countries, and the required language test of intermediate-level German can be energy-absorbing.
The costs involved, however, are relatively low, both as they relate to starting a business in Germany and the EUR350,000 for the passive investment route. Both are reasonable in comparison to programs in English-speaking countries, such as the EB-5 visa for the US and 188 categories for Australia, and lower than most Golden-visa countries in Europe, though the nature of immigration is – in principle – different.