German Investors: US Investment Guide
No capital controls, comprehensive tax treaty, and E-2 visa eligibility for German nationals
Germany Investment Overview
Tax Treaty
Dividend Rate
Visa Eligible
Capital Controls
Germany maintains a comprehensive tax treaty with the United States and imposes no capital controls on outbound investment. German investors benefit from reduced withholding rates, E-2 visa eligibility, and straightforward banking relationships. As an EU member, Germany follows EU capital movement freedoms, making cross-border investment seamless.
Germany-US Tax Treaty
Withholding Rate Reductions
The Germany-US Income Tax Treaty provides significant withholding reductions:
| Income Type | Standard Rate | Treaty Rate | Notes |
|---|---|---|---|
| Dividends (portfolio) | 30% | 15% | Less than 10% ownership |
| Dividends (substantial) | 30% | 5% | 10%+ corporate ownership |
| Interest | 30% | 0% | Complete exemption |
| Royalties | 30% | 0% | Complete exemption |
Estate Tax Provisions
The Germany-US Estate Tax Treaty provides important protections:
Treaty Benefits
- Pro-rata unified credit
- Marital deduction available
- Credit for German inheritance tax
- Avoids double taxation
Planning Considerations
- German Erbschaftsteuer applies
- Coordinate both tax systems
- Corporate structure may help
- Life insurance for liquidity
Avoiding Double Taxation
Germany uses the credit method for US taxes:
| Income Type | US Tax | German Treatment |
|---|---|---|
| US rental income | Federal + state tax | Credit for US tax paid |
| US dividends | 15% withholding | Credit against German tax |
| US capital gains (real estate) | FIRPTA withholding | Credit for US tax paid |
| US business income | If PE exists | Credit method applies |
Capital Controls
EU Free Movement of Capital
As an EU member, Germany guarantees free movement of capital:
No Restrictions
- Unlimited foreign investment
- No government approval needed
- No foreign currency limits
- Free repatriation of profits
Reporting Only
- AWV report for transfers over EUR 12,500
- Statistical reporting to Bundesbank
- No approval, just notification
- Bank handles reporting automatically
Entity Formation
Recommended Structures
German investors should consider these US entity options:
US LLC (Disregarded)
- Pass-through taxation
- Good for real estate
- German Finanzamt treats as transparent
- Report on German Anlage AUS
US C-Corporation
- 21% US corporate rate
- 5-15% dividend withholding
- Best for active business
- E-2 visa compatible
German GmbH + US Sub
- German holding structure
- 5% dividend rate (participation)
- German participation exemption possible
- Good for larger investments
LLC with Corp Election
- Check-the-box for corporate treatment
- Access treaty benefits
- Complex German implications
- Requires specialist advice
US Real Estate Investment
Tax Treatment
| Tax Type | US Treatment | German Treatment |
|---|---|---|
| Rental income | Up to 37% (elect ECI) | Anlage AUS, credit for US tax |
| Capital gains | FIRPTA: 15% withholding | Credit for US tax paid |
| Estate tax | Treaty relief applies | Credit against Erbschaftsteuer |
| Depreciation | 27.5 years residential | May differ for German purposes |
Popular Markets for German Buyers
Florida
- No state income tax
- Large German community
- Direct Lufthansa flights
- Vacation + investment
California
- Tech and business hub
- Strong appreciation
- High state tax (13.3%)
- Silicon Valley opportunities
Texas
- No state income tax
- Growing tech sector
- German business presence
- Lower property prices
New York
- Premier investment market
- High entry prices
- Strong rental market
- High combined taxes
E-2 Treaty Investor Visa
E-2 for German Nationals
German citizens are eligible for E-2 treaty investor visas:
Requirements
- Substantial investment ($100K+ typical)
- Active business operation
- Majority ownership (50%+)
- Direct and develop the business
- Not marginal enterprise
Benefits
- 2-year initial term
- Unlimited renewals possible
- Spouse work authorization
- Children can attend school
- Process at Frankfurt Consulate
German Tax Considerations
Reporting US Investments
German tax residents must report worldwide income:
Annual Reporting
- Anlage AUS for foreign income
- Rental income from US property
- US dividends and interest
- Capital gains on US assets
Special Rules
- CFC rules for passive holdcos
- LLC transparency issues
- Kapitalertragsteuer considerations
- Progressionsvorbehalt may apply
Frequently Asked Questions
How is a US LLC taxed in Germany?
Germany generally treats US LLCs as transparent (like a GbR). This means income flows through to the German owner and is taxed on their personal return. For real estate, this often works well as US tax paid receives a credit. For complex situations, the LLC can elect corporate treatment in the US.
Do I need a US bank account?
Yes, for managing US investments, a US bank account is highly recommended. Many German banks can assist with introductions to US correspondent banks. Alternatively, I can recommend US banks that work with German clients remotely.
What about Wegzugsbesteuerung if I move to the US?
Exit taxation (Wegzugsbesteuerung) applies to unrealized gains in company shares when leaving Germany. If you hold significant shares in a German GmbH and relocate to the US, taxes may be triggered. The US-Germany treaty has provisions, but careful planning with German and US tax advisers is essential before relocating.
Can I get a US mortgage from Germany?
Yes, several US banks offer mortgages to German nationals. Typical requirements include 30-40% down payment, documentation of German income, and possibly establishing a US credit profile. Some German banks also offer loans secured against US property.