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Germany: Market Profile

Picture: Germany factsheet
Picture: Germany factsheet

1. Overview

Germany's economic growth will decelerate in the coming years, affected by rising global trade protectionism (and particularly the prospect of auto import tariffs in the United States), softer global growth momentum and Brexit-related uncertainties weighing particularly on the crucial export sector, as well as rising Euroscepticism fuelling instability that may result in a significant crisis in a weaker member state, such as Italy. As the largest market in Europe, Germany is a major destination for foreign direct investment (FDI); consequently, a vast FDI stock has accumulated over time. The solid labour market should continue to be a main driver of the German economy although a declining population poses a challenge for policymakers. Business sentiment surveys offer growing evidence that economic growth has slowed, with activity in the manufacturing sector at its slowest in more than five years. In the medium term, structural challenges may also dampen output. Germany's economy will continue its slow rebalance away from exports and towards domestic demand, with rising wages and ageing households boosting consumption.

Source: Fitch Solutions

2. Major Economic/Political Events and Upcoming Elections

December 2017
The Alternative for Germany party surged into third place in the parliamentary elections, behind the much-weakened Christian Democrats and Social Democrats.

March 2018
Chancellor Angela Merkel renewed the "Grand Coalition" with the Social Democrats.

October 2018
Chancellor Merkel announced that she would not seek re-election in the 2021 federal election and would be stepping down as the Christian Democrats' chair.

December 2018
Annegret Kramp-Karrenbauer was elected as the new leader of the Christian Democrats.

January 2019
President Emmanuel Macron of France and Chancellor Merkel signed the Aachen treaty, a renewed and extended version of the Paris treaty signed in 1963, to enhance Franco-German cooperation in a number of policy areas at European and international levels.

April 2019
Daimler announced plans to cut costs to save at least USD8.7 billion by 2021 at the Mercedes-Benz passenger car and van division and Daimler Trucks division. The company seeked to raise funds for investing into the electrification of its fleet. The automaker's vehicle sales in Mainland China declined in 2018 for the first time in two decades.

May 2019
The Social Democratic Party, which controls the finance ministry as the junior coalition partner, rejected United States President Donald Trump's demand that Germany at least match its North Atlantic Treaty Organization-sponsored target of spending 2% of GDP on the military.

May 2019
Germany and France asked the European Union (EU) to approve state subsidies for a battery cell consortium, trying to curb the market dominance of Asian companies.

July 2019
Deutsche Bank, Germany’s largest lender, announced restructuring plans.

Sources: BBC Country Profile – Timeline, Federal Ministry for Economic Affairs and Energy, Bloomberg, Deutsche Welle, Al Jazeera, Reuters, Fitch Solutions

3. Major Economic Indicators

Graph: Germany real GDP and inflation
Graph: Germany real GDP and inflation
Graph: Germany GDP by sector (2018)
Graph: Germany GDP by sector (2018)
Graph: Germany unemployment rate
Graph: Germany unemployment rate
Graph: Germany current account balance
Graph: Germany current account balance

e = estimate, f = forecast
Sources: IMF, World Bank, Fitch Solutions
Date last reviewed: August 20, 2019

4. External Trade

4.1 Merchandise Trade

Graph: Germany merchandise trade
Graph: Germany merchandise trade

Source: WTO
Date last reviewed: August 20, 2019

Graph: Germany major export commodities (2018)
Graph: Germany major export commodities (2018)
Graph: Germany major export markets (2018)
Graph: Germany major export markets (2018)
Graph: Germany major import commodities (2018)
Graph: Germany major import commodities (2018)
Graph: Germany major import markets (2018)
Graph: Germany major import markets (2018)

Sources: Trade Map, Fitch Solutions
Date last reviewed: August 20, 2019

4.2 Trade in Services

Graph: Germany trade in services
Graph: Germany trade in services

e = estimate
Source: WTO
Date last reviewed: August 20, 2019

5. Trade Policies

  • Germany has been a World Trade Organization (WTO) member since January 1, 1995 and a member of the General Agreement on Tariffs and Trade since October 1, 1951. It is also a member state of the EU. Germany incorporates EU regulatory norms. As a eurozone member, it has adopted the euro as its legal tender.

  • As an EU member, a common tariff applies to the import of goods across the external borders of the EU. The EU has an overall simple tariff of 5.1%. Once goods are cleared by customs authorities upon entry into any EU member state, these imported goods can move freely among EU member states without any additional customs procedures. The EU updated its trade policy (and, by extension, its import tariffs, customs, duties and procedures) in 2017 and 2018.

  • The EU is party to some 50 free trade agreements (FTAs) and access to other markets is mediated through those agreements. The EU’s scheme on generalised system of preferences (GSP) entered into effect on January 1, 2014. Under the scheme, tariff preferences have been removed for imports into the EU from countries where per-capita income has exceeded USD4,000 for four years in a row. As a result, the number of countries that enjoy preferential access to EU markets was reduced from 176 to less than 80. While Mainland China remains a beneficiary, many of its exports, such as toys, electrical equipment, footwear, textiles, wooden articles, and watches and clocks have already been “graduated” from the preferential treatment. Hong Kong has been fully excluded from the EU's GSP since May 1, 1998.

  • Trade bureaucracy and customs delays are a significant hindrance to foreign investors, particularly those outside the EU. Although there are increasing efforts to reduce trade bureaucracy, paper-based procedures remain cumbersome, and cost and connectivity issues add to market barriers. The German Länder (federal states) have a say in European affairs through the Bundesrat (upper chamber of parliament). It is incumbent on the federal government to instruct the Bundesrat at an early stage on all plans at EU level that are relevant for the Länder. The federal government notifies draft technical regulations to the WTO Committee on Technical Barriers to Trade through a national notification office within the federal ministry for economic affairs and energy, where in April 2019 Federal Minister for Economic Affairs Peter Altmaier called for the reduction of red tape within the EU.

  • In 2018 the EU modernised its trade defence instruments in response to EU states wanting to shield EU producers from damage caused by unfair competition and ensure a level playing field that was fair for businesses. Anti-dumping and anti-subsidy regulations have been amended to better respond to unfair trade practices and to furnish Europe's trade defence instruments with more transparency, quicker procedures and more effective enforcement. In exceptional cases, such as in the presence of distortions in the cost of raw materials, the EU will be able to impose higher duties through the limited suspension of the lesser duty rule.

  • The European Commission (EC) has introduced an import licensing regime for certain iron, steel and aluminium products exceeding 2.5 tonnes. The regulation will be active until May 15, 2020.

  • The EU has imposed various anti-dumping measures on a wide range of products, predominantly in the areas of textiles, machine parts, steel, iron and machinery, and certain goods coming from Mainland China and a few other Asian nations in order to protect domestic industries. Currently, a number of products originating from Mainland China are subject to the EU's anti-dumping duties, including bicycles, bicycle parts, ceramic tiles, ceramic tableware and kitchenware, fasteners, ironing boards, and solar glass, which are of interest to Hong Kong and regional exporters. In November 2016, the EC imposed a provisional anti-dumping duty on imports of some primary and semi-processed metals from Mainland China. The rate of duty is between 43.5 and 81.1% of the net free-at-union-frontier price before duty, depending on the company. As of July 2019, the EU is not applying any anti-dumping measures on imports from Hong Kong.

Sources: WTO – Trade Policy Review, European Commission, Federal Ministry of Economic Affairs and Energy, Fitch Solutions

6. Trade Agreement

6.1 Trade Updates

As a member of the EU, Germany is part of the same trade agreements as its 27 peer states. The region negotiates and enters into trade agreements as a collective owing to the single market nature of the union. In total, the EU has approximately 70 preferential trade agreements in place.

6.2 Multinational Trade Agreements


  1. The EU Common Market: The transfer of capital, goods, services, or labour between member nations enjoy 'free movement'; the common market extends to the 28 member states of the EU, namely: Austria, Belgium, Bulgaria, Croatia, Cyprus, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, the Netherlands, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden, and the United Kingdom. As Germany's main trade partners are in the EU, the absence of customs charges with member countries greatly enhances its trade volumes.

  2. European Economic Area (EEA)-European Free Trade Association (EFTA): This economic integration agreement entered into force on January 1, 1994. The EEA unites the EU member states and the EFTA states (Iceland, Liechtenstein, Norway and Switzerland) into an internal market governed by the same basic rules. These rules aim to enable goods, services, capital and persons to move freely about the EEA in an open and competitive environment, a concept referred to as the four freedoms. While it enhances trade flows between these countries and Germany, only Switzerland is a fairly major trading partner.

  3. EU-Japan Economic Partnership Agreement (EPA): In July 2018, the EU and Japan signed a trade deal that promises to eliminate 99% of tariffs that cost businesses in the EU and Japan nearly EUR1 billion annually. According to the EC, the EU-Japan EPA will create a trade zone covering 600 million people and nearly a third of global GDP. The result of four years of negotiation, the EPA was finalised in late 2017 and came into force on February 1, 2019 after the EU Parliament ratified the agreement in December 2018. The total trade volume of goods and services between the EU and Japan is an estimated EUR86 billion. The key parts of the agreement will cut duties on a wide range of agricultural products and it seeks to open up services markets, particularly financial services, e-commerce, telecommunications and transport. Japan is the EU's second biggest trading partner in Asia after Mainland China. EU exports to Japan are dominated by motor vehicles, machinery, pharmaceuticals, optical and medical instruments, and electrical machinery.

  4. EU-Turkey Customs Union: The EU and Turkey are linked by a customs union agreement, which came into force on January 1, 1996. Turkey has been a candidate country to join the EU since 1999, and is a member of the Euro-Mediterranean partnership. The customs union with the EU provides tariff-free access to the European market for Turkey, benefitting both exporters and importers. Turkey is the EU's fourth largest export market and its fifth largest provider of imports. The EU is by far Turkey's number one import and export partner. Turkey's exports to the EU are mostly machinery and transport equipment, followed by manufactured goods. At present, the customs union agreement covers all industrial goods, but does not address agriculture (except processed agricultural products), services or public procurement. Bilateral trade concessions apply to agricultural, coal and steel products. In December 2016, the EC proposed the modernisation of the customs union and to further extend the bilateral trade relations to areas, such as services, public procurement and sustainable development.

  5. EU-Canada Comprehensive Economic and Trade Agreement (CETA): CETA is expected to strengthen trade ties between the two regions, having been signed in October 2016 and provisionally cominge into effect on September 21, 2017. Some 98% of trade between Canada and the EU is duty free under CETA. The agreement is expected to boost trade between partners by more than 20%. CETA also opens up government procurement. Canadian companies will be able to bid on opportunities at all levels of the EU government procurement market and vice versa. CETA means that Canadian provinces, territories and municipalities are opening their procurement to foreign entities for the first time, albeit with some limitations regarding energy utilities and public transport.

  6. EU- Southern African Development Community (SADC) EPA (Botswana, Lesotho, Mozambique, Namibia, South Africa and eSwatini): An agreement between the EU and the SADC delegations was reached in June 2016 and entered into force in October 2016 for five SADC members, joined by a sixth in February 2018 following the ratification of the agreement by Mozambique. The remaining six members of the SADC not included in the deal (the Democratic Republic of the Congo, Madagascar, Malawi, Mauritius, Zambia and Zimbabwe) are seeking EPAs with the EU as part of other trading blocs – such as East or Central African communities. Germany’s largest exports to the SADC (South Africa in particular) are motor vehicles and machinery.

Provisionally Active

CETA: This is an agreement between the EU and Canada. CETA was signed in October 2016 and ratified by the Canadian House of Commons and EU Parliament in February 2017. However, the agreement has not been ratified by every European state and has only provisionally entered into force.

Ratification Pending

  1. EU-Central America Association Agreement (Guatemala, El Salvador, Honduras, Nicaragua, Costa Rica, Panama, Belize and the Dominican Republic): An agreement between the parties was reached in June 2012 and is awaiting ratification (29 of the 34 parties have ratified the agreement as of October 2018). The agreement has been provisionally applied since August 2013.

  2. EU-Mercosur: The EU and Mercosur (Argentina, Brazil, Paraguay and Uruguay) signed a trade deal on June 28, 2019 after twenty years of negotiations. The trade agreement for goods and services will cover nearly 25% of global GDP and almost 800 million people. The deal is expected to cut duties on EU exports to Mercosur by EUR4.0 billion annually and eliminate tariffs on 93% of Mercosur’s exports to the EU and 91% of EU exports to Mercosur states. The deal will also include access to public procurement contracts. Mercosur states will greatly benefit from increased access to the EU for agricultural goods, which has resulted in opposition to the deal by European farmers. European firms, especially those in the manufacturing and industrial sector, will have an advantage over other competitors after the removal of high tariffs.

Under Negotiation

  1. EU-Australia: The EU, Australia's second largest trade partner, has launched negotiations for a comprehensive trade agreement with Australia. Bilateral trade in goods between the two partners has risen steadily in recent years, reaching almost EUR48 billion in 2017, while bilateral trade in services added an additional EUR27 billion. The negotiations aim to remove trade barriers, streamline standards and put European companies exporting to or doing business in Australia on an equal footing with those from countries that have signed up to the Trans-Pacific Partnership or other trade agreements with Australia. The Council of the EU authorised opening negotiations for a trade agreement between the EU and Australia on May 22, 2018.

  2. EU-United States Transatlantic Trade and Investment Partnership (TTIP): This agreement was expected to increase trade in goods and services, but talks were suspended at the end of 2016. In January 2019, the EC published its draft negotiating directives, which include a trade agreement focused on the removal of tariffs on industrial goods, excluding agriculture. On April 15, 2019, the EU member states gave the EC their approval to start formal negotiations. The negotiating directives for the TTIP are no longer relevant.

  3. EU-Vietnam FTA: In July 2018, the EU and Vietnam agreed on final texts for the EU-Vietnam FTA and the EU-Vietnam Investment Protection Agreement. The EU describes the agreement as the most ambitious it has ever concluded with a developing country, expecting it to increase EU exports to Vietnam by around 29% and Vietnam's exports to the EU by around 18%. As of January 2019, the final text of the agreement has been finalised and is awaiting signature and conclusion.

Sources: WTO Regional Trade Agreements database, European Commission, Fitch Solutions

7. Investment Policy

7.1 Foreign Direct Investment

Graph: Germany FDI stock
Graph: Germany FDI stock
Graph: Germany FDI flow
Graph: Germany FDI flow

Source: UNCTAD
Date last reviewed: August 20, 2019

7.2 Foreign Direct Investment Policy

  1. Germany Trade and Invest (GTAI), established in 2009, is the national economic development agency, with more than 50 offices in Germany and abroad. The GTAI promotes Germany as a business location and acts as a facilitator for foreign companies looking to invest in Germany. A number of federal states also have regional investment promotion agencies.

  2. Germany has an open and welcoming attitude towards FDI. In the last 10 years, FDI stocks in Germany doubled. While this FDI mainly originated from other European countries, the United States and Japan, FDI from emerging economies – particularly Mainland China – has grown substantially in the past decade and a half, albeit from a low level. To promote the development of competitive industries, such as smart solutions, the digital economy, electronics and micro-technology, energy efficiency and green buildings, energy storage, life sciences, logistics, machinery and equipment, corporate services environment and resources, aerospace, and automobiles, Germany has put in place various incentive programmes for both local and foreign investors, offering different measures to reimburse investment costs (from cash incentives to public loan and public guarantee programmes) and subsidy costs (from labour-related measures to research and development incentives) for location-based investments.

  3. The EU states are generally open to FDI but in February 2017, Germany, France and Italy requested the EC to review the possibility of EU member states being given the ability to block foreign investment on the grounds of reciprocity.

  4. The German legal, regulatory and accounting systems can be complex, but are transparent and consistent with international norms. Businesses enjoy considerable freedom within a well regulated environment. Foreign and domestic investors are treated equally when it comes to investment incentives, and the establishment and protection of real and intellectual property. Foreign investors can fully rely on the legal system, which is efficient and sophisticated. At the same time, this system requires investors to pay attention to their legal obligations. First-time investors will need to ensure that they have the necessary legal expertise to meet all requirements.

  5. Despite the fact that Germany has 127 investment protection agreements in force, the negotiations for the TIPP, which were initiated in 2013, triggered political tensions, including investor state dispute settlement mechanisms.

  6. The Federal Ministry for Economic Affairs and Energy (BMWi) may review acquisitions of domestic companies by foreign buyers in individual cases to assess whether these transactions pose a risk to the public order or national security of the Federal Republic of Germany. The Foreign Trade and Payments Act and the Foreign Trade and Payments Ordinance provide the legal basis. However, in practice, restrictions of FDI are very rare. German law provides that private property can be expropriated for public purposes only in a non-discriminatory manner and in accordance with established principles of constitutional and international law. There is due process and transparency of purpose, and investors and lenders to expropriated entities receive prompt, adequate and effective compensation.

  7. Cross-sector investment review procedures apply to any acquisitions of a company by a foreign investor located outside the territory of the EU or the EFTA region whereby investors acquire ownership of at least 25% of the voting rights of a company resident in Germany. There is no requirement for investors to obtain approval for or notify any acquisition, but the BMWi may conduct a review within three months from the day of the conclusion of the acquisition agreement. An investor may also request a binding certificate of non-objection from the BMWi in advance of the planned acquisition to obtain legal certainty at an early stage. If the BMWi does not open an in-depth review within one month of the receipt of the request, the certificate shall be deemed as granted.

  8. Special rules apply for the acquisition of companies that operate in sensitive security areas, including defence and IT security. In contrast with the cross-sectoral rules, the sensitive acquisitions must be notified in written form, including basic information of the planned acquisition, the buyer, the domestic company that is the subject of the acquisition and the respective fields of business. The BMWi may open a formal review procedure within one month after receiving notification, or the acquisition shall be deemed as approved. If a review procedure is opened, the buyer is required to submit further documents. The acquisition may be restricted or prohibited only within one month after the full set of documents has been submitted. Any decisions resulting from review procedures are subject to judicial review by an administrative court.

  9. Germany is a member of both the International Centre for the Settlement of Investment Disputes (ICSID) and the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards, meaning local courts must enforce international arbitration awards under certain conditions.

  10. Before engaging in commercial activities, companies and business operators have to register in public directories, the two most significant of which are the commercial register (Handelsregister) and the trade office register (Gewerberegister). GTAI can assist in the registration processes.

  11. Germany has bilateral investment treaties (BITs) in force with 127 countries, and four more have been signed but are not yet in force.

  12. While Germany's Foreign Economic Law contains a provision permitting restrictions on private direct investment flows in either direction for reasons of foreign policy, foreign exchange, or national security, in practice, restrictions have mainly been imposed in the sectors of air transport, maritime transport, inland waterways, and rail transport only. In 2016, the German government withdrew its approval and announced a re-examination of the acquisition of German semi-conductor producer Aixtron by China’s Fujian Grand Chip Investment Fund based on national security concerns. Before the German government could reissue a decision, Fujian Grand Chip withdrew its offer as the result of a concomitant negative CFIUS ruling. Additionally, Germany limits the foreign provision of employee placement services, such as providing temporary office support, domestic help, or executive search services.

  13. Germany has treaties with investment provisions with 77 individual countries and economic blocs worldwide.

Sources: WTO – Trade Policy Review, ITA, Germany Trade and Invest, UNCTAD, Fitch Solutions

7.3 Free Trade Zones and Investment Incentives

Free Trade Zone/Incentive ProgrammeMain Incentives Available
1. Freeport of Bremerhaven (Freihafen Bremerhaven)

2. Freeport of Cuxhaven (Freihafen Cuxhaven), since 1896

In recent years, falling tariffs and the progressive enlargement of the EU have gradually eroded much of the utility and attractiveness of duty-free zones. Kiel and Emden lost free-trade zone status in 2010. Hamburg lost free-trade zone status in 2013, and Deggendorf lost free port status in 2016.
Free trade zones in Germany are specific geographic areas where economic incentives are provided to companies operating in the region. Foreign and domestic merchandise can be brought in and sold without being subject to taxation. Germany's free trade zones are also called foreign free zones, free ports or bonded warehouses.

Given their tax regime, free trade zones attract investments in the German economy. The EU Community Customs Code regulates the activity within the free trade zones of Germany.

Both German and foreign companies can do business in these free trade zones. Germany's free trade zones have a fixed perimeter with entry and exit points that are subject to customs supervision. The way in which Community and non-Community goods and merchandise are dealt with on import and export is the main criteria of free trade zones classification.
Other incentivesInvestment or operational incentives in Germany are generally provided in the form of direct subsidies as non-repayable cash grants, reduced-interest loans, public guarantees or silent participations.

Incentives mainly focus on the promotion of business expansion and new investments, energy transition (to renewable solar and wind energy), energy efficiency, the development of electric mobility and environmental protection, social housing, health care, infrastructure and agriculture, research and development (R&D), and recruitment – particularly of the long-term unemployed.

Investor production facility set-up costs can be significantly reduced by cash incentives provided in the form of grants. There is one major programme directing the allocation of these cash grants, the Joint Federal/Länder Task for the Improvement of Regional Economic Structures (Gemeinschaftsaufgabe – GRW), throughout Germany. The programme is issued by the Federal Ministry for Economic Affairs and Energy. It defines maximum possible incentives rates for all regions eligible for funding throughout Germany, which are published for each funding period as the ministry's map of assisted areas. The federation and the Länder finance the incentives 50:50, including investment grants, and labour-related and R&D incentives.

Public loans and public guarantees are available to domestic and foreign investors alike. Different incentives can be combined. In general, foreign and German investors have to meet the same criteria for eligibility. Small- and medium-sized companies are eligible to receive higher rates of funding than large corporations.

The Federal Ministry for Economic Affairs and Energy offers investment grants intended to improve business conditions in certain regions in Germany. The funding rules incorporate EU rules on national regional aid into (German) national law. The development banks of the individual federal states offer attractive interest rates, especially for small- and medium-sized enterprises. R&D incentives are provided by the EU, the German government and the German state governments in the form of R&D grants, public loans and special partnership programmes. The next review of the GRW will be published before the end of the current funding period, no later than mid-2020.

Sources: European Commission, Germany Trade and Invest, Federal Ministry for Economic Affairs and Energy, Fitch Solutions

8. Taxation – 2019

  • Value Added Tax: 19%
  • Corporate Income Tax: 15.8%

Source: Federal Ministry of Finance

8.1 Important Updates to Taxation Information

  • As part of its implementation of the Organisation for Economic Co-Operation and Development (OECD) recommendations developed in the Base Erosion and Profit Shifting Project in June 2017, Germany introduced a restriction on the deductibility of certain royalty payments to related parties to counter so-called harmful preferential tax regimes. The OECD allowed for a grandfather of existing preferential tax regimes until June 2021, but in Germany the restriction on the deductibility of such payments to related parties applies from January 1, 2018, onwards.

  • In addition to the OECD proposals, Germany will also have to consider various standards set by the EU. The Anti-Tax Avoidance Directive (EU-ATAD) must be implemented into local law in the main by no later than December 31, 2018 and is to be generally applied from January 1, 2019 onwards. In May 2017, the Council of the EU further adopted a directive amending the EU-ATAD (ATAD II). The member states must transpose ATAD II into local law by December 31, 2019 and apply it generally from January 1, 2020 onwards.

  • At the EU level, an extension of the EU Mutual Assistance Directive with reference to the exchange of information on cross-border tax planning schemes (‘arrangements’), including the imposition of disclosure requirements on intermediaries and taxpayers, was adopted in May 2018. The new rules must be implemented into domestic law by December 31, 2019 and will become applicable from July 1, 2020.

8.2 Business Taxes

Type of TaxTax Rate and Base
Corporate Income Tax (CIT)15.8%
Trade Tax14-17% (the tax consists of a base rate of 3.5% plus a municipal tax rate that varies according to the location of the business)
Branch Tax15%
Withholding Tax
- 25% on dividend income
- 0% on royalties and
- 25% on interest for residents; for non-residents a refund can be claimed for anything above the CIT rate)
VATStandard rate of 19%, but a lower rate of 7% applies to some goods and services, such as food and books, and certain transactions are zero rated
Social security contributionEmployers must deduct four types of insurance, with the contributions shared equally between employer and employee: 18.6% pension, 3% unemployment, 14.6% health and 3% invalidity
Real Property Tax0.35% of tax value of property (rate varies by municipality)
Real Estate Transfer Tax3.5–6.5%, levied on conveyancing of German property (rate varies by municipality)

Source: Federal Ministry of Finance
Date last reviewed: August 20, 2019

9. Foreign Worker Requirements

9.1 Working Permit

EU member citizens do not require a work permit, but their employer must inform the job office about their employment. Foreign nationals other than those from the EU or EEA and Swiss nationals may reside in Germany to take up gainful employment if they have a residence permit that explicitly authorises them to do so. Australian, Israeli, Japanese, Canadian, South Korean, New Zealand and United States citizens may obtain such a residence permit from the relevant foreigner authority once they have arrived in Germany, but they may not commence their intended employment until they have the permit. All other foreign nationals must apply for a work visa from their local German mission before coming to Germany.

No work permit is needed by foreigners from outside the EU if they have a permanent residence or family reunion permit, have been granted asylum, study in the country or have blue or green cards.

9.2 Obtaining Foreign Worker Permits

Foreigners' access to the labour market is limited by the Ordinance on the Admission of Foreigners for the Purpose of Taking Up Employment. In principle, access is limited to certain occupational groups and normally requires the approval of the employment authorities. However, there are numerous exceptions to this general principle, and in recent years various legislative measures have further liberalised access to the German labour market.

Access to the labour market remains limited for unskilled and low-skilled workers, but the legal barriers to working in Germany have been further reduced for highly qualified foreign nationals, such as university graduates.

9.3 Blue Card

Since August 2012 foreign nationals have had easier access to the labour market in Germany under the EU Blue Card system for highly qualified employees. A foreigner holding a Blue Card may reside in the country and work in the job for which it was issued or change that job under the conditions defined. High qualification means a duly completed university education or higher professional education that has lasted for at least three years. The Blue Card is issued with the term of validity three months longer than the term for which the employment contract has been concluded, but for a maximum period of two years. The Blue Card can be extended. One of the conditions for issuing the card is a wage criterion – the employment offer must be for a position providing gross earnings of at least EUR53,600 (2019). The approval of the Federal Employment Agency is not required. In the case of highly qualified foreign nationals with a background in mathematics, IT, the natural sciences or technology, as well as medical doctors, EU Blue Card conditions still apply, provided that these people are offered the same salaries as comparable German employees and that their annual gross earnings are at least EUR41,808 (2019). The approval of the Federal Employment Agency is required.

Sources: Federal Foreign Office, European Commission, Fitch Solutions

10. Risks

10.1 Sovereign Credit Ratings

Rating (Outlook)Rating Date
Aaa (Stable)
S&P GlobalAAA (Stable)
Fitch Ratings
AAA (Stable)19/07/2019

Sources: Moody's, Standard & Poor's, Fitch Ratings

10.2 Competitiveness and Efficiency Indicators

World Ranking
Ease of Doing Business Index
Ease of Paying Taxes Index
Logistics Performance Index
Corruption Perception Index
IMD World Competitiveness13/6315/6317/63

Sources: World Bank, IMD, Transparency International

10.3 Fitch Solutions Risk Indices

World Ranking
Economic Risk Index RankN/A5/2025/202
Short-Term Economic Risk Score
Long-Term Economic Risk Score78.878.8
Political Risk Index RankN/A18/20216/202
Short-Term Political Risk Score
Long-Term Political Risk Score87.287.287.2
Operational Risk Index RankN/A17/20117/201
Operational Risk Score72.473.972.3

Source: Fitch Solutions
Date last reviewed: August 20, 2019

10.4 Fitch Solutions Risk Summary

Germany remains among the top five largest global economies, but is set to slip over the long term. The main economic issues Germany faces stem from the need to reduce regulations and costs, restructuring the domestic banking sector, managing the costs of an ambitious energy policy and playing a leading role in the future of the eurozone.

Although it is one of the most stable countries in the world with a strong logistics profile and highly skilled labour, Germany will face issues such as redefining its role in Europe and reducing risks stemming from an ageing population and lower productivity growth, while balancing its immigration policies.

Source: Fitch Solutions
Data last reviewed: August 21, 2019

10.5 Fitch Solutions Political and Economic Risk Indices

Graph: Germany short term political risk index
Graph: Germany short term political risk index
Graph: Germany long term political risk index
Graph: Germany long term political risk index
Graph: Germany short term economic risk index
Graph: Germany short term economic risk index
Graph: Germany long term economic risk index
Graph: Germany long term economic risk index

100 = Lowest risk; 0 = Highest risk
Source: Fitch Solutions Economic and Political Risk Indices
Date last reviewed: August 20, 2019

10.6 Fitch Solutions Operational Risk Index

Operational RiskLabour Market RiskTrade and Investment RiskLogistics RiskCrime and Security Risk
Germany Score72.365.5
Developed States Average72.464.671.376.377.4
Developed States Position (out of 27)141418820
Global Average49.650.349.849.049.2
Global Position (out of 201)17

100 = Lowest risk; 0 = Highest risk
Source: Fitch Solutions Operational Risk Index

Graph: Germany vs global and regional averages
Graph: Germany vs global and regional averages
Operational Risk Index
Labour Market Risk Index
Trade and Investment Risk IndexLogistics Risk IndexCrime and Security Risk Index
New Zealand77.473.775.772.188.3
United States77.281.3
United Kingdom76.871.479.078.578.2
Isle of Man65.869.162.449.382.4
Developed Markets Averages72.464.671.376.377.4
Emerging Markets Averages46.948.645.447.4
Global Markets Averages49.650.349.849.049.2

100 = Lowest risk; 0 = Highest risk
Source: Fitch Solutions Operational Risk Index
Date last reviewed: August 20, 2019

11. Hong Kong Connection

11.1 Hong Kong’s Trade with Germany

Graph: Major export commodities to Germany (2018)
Graph: Major export commodities to Germany (2018)
Graph: Major import commodities from Germany (2018)
Graph: Major import commodities from Germany (2018)

Note: Graph shows the main Hong Kong exports to/imports from Germany (by consignment)
Date last reviewed: August 20, 2019

Graph: Merchandise exports to Germany
Graph: Merchandise exports to Germany
Graph: Merchandise imports from Germany
Graph: Merchandise imports from Germany

Note: Graph shows Hong Kong exports to/imports from Germany (by consignment)
Exchange Rate HK$/US$, average
7.75 (2014)
7.75 (2015)
7.76 (2016)
7.79 (2017)
7.83 (2018)
Sources: Hong Kong Census and Statistics Department, Fitch Solutions
Date last reviewed: August 20, 2019

Growth rate (%)
Number of German residents visiting Hong Kong226,819
 2017Growth rate (%)
Number of Germans residing in Hong Kong2,0031.5

Sources: Hong Kong Tourism Board, United Nations Department of Economic and Social Affairs – Population Division

Growth rate (%)
Number of European residents visiting Hong Kong1,929,824
 2017Growth rate (%)
Number of developed state citizens residing in Hong Kong65,6801.6

Sources: Hong Kong Tourism Board, United Nations Department of Economic and Social Affairs – Population Division, Fitch Solutions
Date last reviewed: August 20, 2019

11.2 Commercial Presence in Hong Kong

Growth rate (%)
Number of Geman Companies in Hong Kong396
- Regional headquarters98
- Regional offices139-0.7
- Local offices1592.6

Sources: Business Expectation Statistics Section of the Hong Kong Census and Statistics Department, Fitch Solutions

11.3 Treaties and agreements Between Hong Kong/Mainland China and Germany

  • Germany does not have a bilateral treaty on the avoidance of double taxation with Hong Kong but has an agreement for the avoidance of double taxation on shipping income that came into force on January 17, 2005.
  • Germany and Hong Kong have an investment promotion and protection agreement that entered into force on February 19, 1998.
  • Germany has a BIT with Hong Kong that entered into force on February 2, 1998, and a BIT with Mainland China that entered into force on November 11, 2005.
  • Germany has a tax treaty with Mainland China that has been applicable since January 1, 2017.

Sources: Department of Justice, Fitch Solutions, Trade and Industry Department, UNCTAD, State Administration of Taxation of The People's Republic of China

11.4 Chamber of Commerce or Related Organisations

German Chamber of Commerce, Hong Kong
The German Chamber of Commerce is one of the largest European chambers of commerce in Hong Kong. It provides a wide range of services to its members and serves as a forum for networking, business development and opportunities in Hong Kong, Asia Pacific and Germany.

Address: 19/F, COFCO Tower, 262 Gloucester Road, Causeway Bay, Hong Kong
Email: info@hongkong.ahk.de
Tel: (852) 2526 5481

Source: German Chamber of Commerce, Hong Kong

German Hong Kong Association
Email: michael.katzmarck@hktdc.org / karin.gessner@hktdc.org
Tel: (49) 69 9577 2311
Website: www.hongkong-gesellschaft.de
Please click to view more information.

Source: Federation of Hong Kong Business Associations Worldwide

Consulate General of the Federal Republic of Germany
Address: 21/F, United Centre, 95 Queensway, Admiralty, Hong Kong
Tel: (852) 2105 8788
Fax: (852) 2865 2033

Source: Consulate General of the Federal Republic of Germany

11.5 Visa Requirements for Hong Kong Residents

  • Hong Kong residents are entitled to a visa-free entry to Schengen countries lasting no more than 90 days in any six-month period from the date of first entry in the territory of the member states.

  • The Hong Kong Document of Identity (HKDI) are recognised by all Schengen countries. The holders of such documents, however, need to apply for a Schengen visa.

  • For a long-term stay of more than 90 days, an application will need to be submitted and the process may take several months. There are 12 different types of visa.

Source: Consulate General of the Federal Republic of Germany
Date last reviewed: August 20, 2019

Content provided by Picture: Fitch Solutions – BMI Research
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