Facts Figures Incentives Germany April2010 GTAI

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Incentives in Germany – Supporting Your Investment Project Facts & Figures Incentives at a Glance Germany offers numerous incentives to all investors – regardless of whether they are from Germany or not. Funds are provided by the German government, the individual federal states, and the European Union (EU). Incentives in Germany have a lasting effect on new business as they support companies at all stages of the investment process. Supporting New Investments Many incentives target new investme
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      F   a   c   t   s    &     F    i   g   u   r   e   s Incentives in Germany –Supporting Your Investment Project  Facts & Figures 2010 www.gtai.com Incentives at a Glance Germany offers numerous incen-tives to all investors – regardlessof whether they are from Germanyor not. Funds are provided by theGerman government, the individualfederal states, and the EuropeanUnion (EU). Incentives in Germanyhave a lasting effect on new busi-ness as they support companies atall stages of the investment process . Supporting New Investments Many incentives target new invest-ments especially focused on foste-ring economic growth. Germany hasEUR 26.3 billion funding providedby the EU (co-financed using meansobtained from German national andregional budgets) at its disposaluntil 2013. In addition, Germany andits individual states make their ownincentives funds available. When itcomes to investor production facility Germany’s Different Incentives Packages and Respective Programs 1) only in Eastern Germany  Investment Incentives PackageOperational Incentives Package Interest-Reduced LoansR&D IncentivesLabor-RelatedIncentivesKfW Loans(National Level)State Develop-ment Bank LoansGrants   RecruitmentLoansTrainingSupportSilent/DirectPartnershipWage SubsidiesCashIncentivesInvestmentGrantsInvestmentAllowance 1 PublicGuaranteesStateCombined State/Federal + set-up costs investors can counton a number of different measuresfrom Germany’s extensive invest-ment incentives package. The maininstrument are cash incentives pro-vided in the form of non-repayablegrants. Fostering Innovation A major focus of Germany’s financialsupport is put on assisting research& development (R&D) activities inGermany as this is considered to beamong the most important areasfor the development of the Germaneconomy. Thus industry and the pu-blic sector have made a commitmentto spend around three percent ofnational GDP per year on R&D activi-ties. This amounts to approximatelyEUR 70 billion R&D spending eachyear. In addition, an unprecedentedcampaign to foster the advancementof new technologies has been laun-ched by the German government.This campaign – known as the“High-Tech Strategy” – is combiningthe resources of all governmentministries committing EUR 15 billionto the development of cutting-edgetechnologies through 2009. Incentives Programs There are a number of incentivesprograms available which can begrouped into two overall packages:the investment incentives packagewhich includes different measuresto reimburse investment costs; andthe operational incentives packageto subsidize costs once the location-based investment has been realized.Investment incentives can be madeup of cash incentives, interest-re-duced loans, and public guarantees.Operational incentives package com-ponents include labor-related incen-tives and R&D incentives.  Facts & Figures 2010 www.gtai.com Incentives in GermanyIncentives Meetingthe Capital Needs ofInvestment Projects Investment incentives and operatio-nal incentives can be combined.This means that support does notstop at one point, but is availableat all of the different investmentprocess stages and beyond – suitingthe financial needs at each step ofthe project.During the investment phase (whencapital needs are high), cash incen-tives programs reimburse directinvestment costs by providing non-repayable cash grants. Public loanprograms and guarantees round offinvestment project financing.Once operations have started, labor-related incentives programs sup-port companies during all stages ofbuilding up a workforce. Particularemphasis is placed on R&D projectswhich receive financial assistancefrom a number of different programs. How to Determine InvestmentProject Incentives Levels Each incentives program definesindustries as well as forms of in-vestments (e.g. greenfield projectsor expansions) eligible for funding.Foreign investors are subject to ex-actly the same conditions availableto German investors.Each program has a set of criteria(such as company size or plannedinvestment project location) whichdetermine individual investmentproject incentives levels.Company size is determinedaccording to a European Union-wide classification system inwhich enterprises are categorizedas being small, medium-sized orlarge according to their staff head-count, annual turnover or annualbalance sheet total.Most incentives programs offer thehighest incentives rates to small andmedium-sized enterprises (SMEs).Some programs may even specifi-cally target SMEs (this is very oftenthe case with R&D programs).Other criteria determining projecteligibility may be defined subject toindividual incentives programs andfederal state regulations. Criteria Determining Company Size CompanyCategoryStaffHeadcountAnnualTurnoverAnnualBalanceSheet TotalSmall Enterprise < 50  EUR 10 million  EUR 10 million Medium-Sized Enterprise < 250  EUR 50 million  EUR 43 million Large Enterprise  250> EUR 50 million> EUR 43 million The criterion concerning the headcount is compulsory.In addition, either of the annual turnover or the balance sheet criteria must also apply.  Source: European Commission orororor The instruments depicted below are the instruments most frequently usedin Germany over the different phases of an investment project. German incentives meet immediate capital needs of investors     I   n   v   e   s   t   m   e   n   t    &    I   n   c   e   n   t   i   v   e   s    V   o    l   u   m   e   s 12345 Source: Adapted from IFO (2007) and KPMG (2007) Frequent German InstrumentsInvestor Capital NeedsYears InvestmentIncentive PackageEmploymentand TrainingIncentivesR&D Incentives  Facts & Figures 2010 www.gtai.com Incentives in GermanyThe EU IncentivesFramework The legal and financial frameworkof public funding throughout Europeis provided by the European Union(EU) – meaning that public fundinghas to follow certain criteria appli-cable to all EU member states.The objectives of public fundingare the overall long-term advance-ment and maintenance of economicgrowth and development in alldifferent economic regions withinthe EU. This is to be achieved bystrengthening competitiveness andemployment, improving trainingand education, and boosting re-search and development activitiesto reduce inequalities betweenregions with different economicdevelopment levels.To realize this, the EU has definedtwo types of regions which receivediverse levels of support: “Convergence Regions” that requirecomprehensive support in order tobridge the gap with well-developedregions in Europe. “Regional Competitiveness and Em-ployment Regions” that receive as-sistance to maintain and expand theireconomic competitiveness levels.Germany comprises both regions.Western Germany has largely beendefined as a “Regional Competitive-ness and Employment Region”, whe-reas Eastern Germany is classifiedas a “Convergence Region.” Bothareas are eligible for a broad varietyof public financial support programs. Overview of Different Incentives Regions in Germany
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