Question

In Germany-explain the laws that govern foreign direct investment (for example, are there provisions to attract foreign direct investment, such as tax incentives, most-favored-nation treatment, dispute resolution fora; or provisions that restrict foreign direct investors such as high local content requirements or currency exchange restrictions).

Answer 1

As per World Bank Statistics, FDI inflows to Germany formed 1.3265% of GDP in 2019. Germany is a technologically advanced economy with a highly developed infrastructure. Germany is part of the EU and all statistics and information relating to its economy are tracked by various agencies engaged in monitoring the content.

The following points describe the investment climate prevailing in Germany :

- The FDI Policy of Germany can be regarded as liberal as it doesn't discriminate between local and foreign investors, all the benefits granted to local investors are extended to foreign investors.

- Germany's taxation policy is very liberal. It has an attractive tax subsidy policy for SMEs (Small and Medium Enterprises) interested in investing in Germany; tax subsidy is around 25-27% for SMEs.

- Innovation is the key driver of modern economy. Germany has a low interest loan scheme for foreign investors engaging in Research and Development. The government offers coverage of about 50% of R & D to foreign investors.

- The German government has a special statutory provision for foreign investors that allows them to invest in any sector of the economy and enjoy full ownership of their businesses. Investment in sectors under public domain is also allowed.

From the above points, it can be inferred that Germany's investment policy is investor-friendly and liberal, granting foreign investors fair and equitable access to business opportunities in the the country.