Why Invest in Germany? Berlin and Leipzig!

Why Invest in Germany? Berlin and Leipzig!

Why Invest in Germany? Berlin and Leipzig!

Why Invest in Germany? To make money of course!
 
Last week I attended a Germany Trade & Invest GmbH (GTAI) event at the Victory & Services Club near Marble Arch. GTAI, the foreign trade and inward investment agency of the Federal Republic of Germany, is I confess not a body that I’ve had that much familiarity with prior to meeting their representatives in London. What unfolded was nevertheless interesting and should interest British investors considering ploughing capital into Germany - especially the tech sector in Eastern Germany.
 
Business experts and executives from the UK and Germany were on hand on Wednesday 25 June to present their in­dustry knowledge. It’s a fact that British entrepreneurs have successfully invested in Germany. After all the new federal states in Eastern Germany present one of the most dynamic regions in Europe’s strongest economy. Germany itself accounts for 16% of the population of the European Union (EU) but 21% of the EU’s gross domestic product.
 
Eastern Germany was touted as he “ideal business location” for British investment success and there are some good reasons for these boasts. The region has a strategically favorable position in the heart of Europe and pro­vides an exceptional advantage to serve the European market from a single site. Furthermore, Eastern Germany’s proven commitment to leading edge R&D is helping create excellent investment opportunities for technology-based companies.
 
Opening the proceedings, Dr Andreas Prothmann, Head of the Economic Affairs Department at the German Embassy in London commenting said: “While Germany is well known for its car manufacturing it might come as a surprise to some that the German IT and telecoms sector is actually a bigger sector and a greater driver of growth.”
 
While Germany certainly does have some big hitters in the tech space such as SAP AG, Dr Prothmann stressed that the innovators in the country are coming from SME (Small-to-Medium Enterprises) - known as the German ‘Mittelstand’. In fact, recent figures show that around 3.6 million SME’s are registered in the country.
 
Add to that it is worth noting that Germany has one of the highest rates of productivity globally. According to Peter Alltschekow, Managing Director Eastern Germany, GTAI, since German re-unification “East Germany has more than doubled its rate of productivity” thanks to a high level of technological investment.
 
More Than Just A Berlin Story...
Start-up companies in Germany have been blazing a successful path in Berlin in recent years, but Dr Prothmann stressed that the story is beyond just Berlin. Interestingly IT clusters have been gaining traction of late in other cities in eastern Germany - namely Magdeburg and Halle (both in the state of Saxony-Anhalt), and Potsdam (in the state of Brandenburg).
 
Leipzig is also viewed as the next potential “hot spot” for IT investment according to Julia Oentich, Manager Digital Economy, GTAI, who gave an informative presentation on specific opportunities for British firms considering a move into Germany. And, one should not forget Dresden as a dark horse for potential investment opportunities.
 
There are some very good reasons for investing in Germany - and particularly the New States in the east of the country.  In particular Eastern Germany offers interesting investment opportunities spanning cloud computing, digital marketing and media, security services as well as payment systems.
 
The figures would seem to speak for themselves with some 9,000 foreign companies to date having invested in Eastern Germany. Besides the good environment, landscape, great beer and a premier location for technology companies, the German government is also offering some very enticing investment and tax incentives for foreign investors.
 
For example, there are different incentive programmes for foreign investors to take advantage of depending on the particular state in question - ranging up to a maximum 35%-40% of the eligible investment costs - according to Christina Schön, Senior Manager, Tax & Legal Services, GTAI, who also gave a presentation on how to establish companies, investment incentives and the tax situation. The corporate taxation rate can also vary municipality by municipality and on whether a business is located in the city or country - from a German average of 29.8% down to 23%. This differential is accounted for by varying levels of the so-called local trade tax.
 
There are a number of options for foreign companies wishing to set up in Germany. These are for instance: (1) Establishing a subsidiary in the form of a GmbH that requires €25,000 of capital, of which half this amount needs to be deposited in a bank account; (2) Establishing a subsidiary in the form of UG / Mini GmbH with a requirement of just €1 (but 25% of annual profits must be retained and cannot be drawn on until €25,000 is generated).
 
There are no restrictions on nationality for directors setting up a company presence in Germany. A notary (a special lawyer) is required to arrange the documentation and the timeframe for setting up a GmbH entity is around 1-2 weeks, with fees for setting up a company currently typically around €800 (c.£675). The GmbH procedure is described by Berlin-based Schön as “straightforward” using a notary.
 
Case studies and ICT testimonials from two British companies who have established successful presences in Berlin and Stuttgart were presented to the attendees. These were delivered by Bryony Cooper, CEO, TDispatch Ltd Berlin, which provides booking and dispatch systems for fleet management and has raised all its financing from German investors to date; and, Bryan Tookey, COO of social media monitoring firm Brandwatch (www.brandwatch.com), which tracks company reputations.
 
For more information on GTAI, which offers extensive knowledge of Germany's key industries and its investment and IT landscape see: www.gtai.com
 
by Roger Aitken