The requirements for applying for a residence permit for self-employed individuals (companies and freelancers) are manageable. The necessary documents are listed on the relevant subpages. Business plan, financial overview, letters of support from clients or business partners, health insurance – it all sounds straightforward.
Unlike an application for, say, a Blue Card, there are no precise criteria such as salary level and qualifications that determine whether an application will be approved. Applications under Sections 21.1 and 21.5 of the German Residence Act (AufenthG) are subject to discretionary, not mandatory, provisions. The law defines the criteria for a decision. It states that a residence permit can be granted if, among other things, “an economic interest or a regional need exists” and “the activity is expected to have a positive impact on the economy.”
This raises the first question: what exactly constitutes an “economic interest or a regional need”? In earlier versions, the legislator had sometimes explicitly defined this, for example, if the investment made through the establishment or relocation of a company amounts to at least €250,000 and creates five qualified jobs. This was aimed primarily at medium-sized manufacturing companies.
Many startups have been unable to overcome this hurdle. However, immigration authorities and cities were naturally still interested in attracting an exciting AI startup – even if the initial investment consisted only of two computers and the rent for a co-working space.
Today, these fixed parameters have disappeared from the Residence Act. Instead, “the relevant bodies, the competent trade authorities, the public-law professional associations, and the authorities responsible for professional licensing must be involved in the review process.”
This doesn’t make the process any easier, and certainly not any faster. Many of these institutions define the requirements in a very regional and specific way. Furthermore, many applicants have to submit their applications to a German embassy or consulate and fail there because the business idea is deemed unviable from the outset, or the regional need is disregarded. It’s as if they’re operating under the motto: we don’t need another Turkish barber in Bottrop or another kebab shop in Berlin.
But what can we even use as a guide anymore?
- Regional scope
In principle, each region or city defines specific economic sectors that are relevant to it. This information can usually be found on the economic development agency’s website. Often, these are regional clusters, which applicants can use to check whether their own business activities are a good fit. - Regional added value
The economic benefit in this context must be more than just a contribution to trade tax. As a rule, this involves actual investments, such as the purchase of machinery or the rental of a warehouse. And above all, it involves the creation of jobs. Here, it is particularly important what qualification level the positions require and whether they are filled by regional applicants. It can also be sufficient if jobs are saved. - Regional value creation
Pure import or export projects have a significantly higher risk of being rejected than projects that demonstrate added value in terms of vertical integration. Simply importing goods from other countries and refining them here is often insufficient. Authorities then suspect that this will displace the local economy or fail to generate added value and therefore reject the applications. - Economic stability
A common misconception is that you need to submit bank-ready business plans to immigration authorities. However, the goal isn’t to secure a loan from a bank in Germany, but rather to demonstrate why you want to establish a business in a particular region and what the region will gain from your investment. Of course, it never hurts to submit a business plan with solid financial data, perhaps even reviewed by a tax advisor. But the numbers alone are no guarantee of approval.
Of course, every application is unique. But the most common reasons for rejection are:
- Poorly prepared application documents
- Business plans without answers to the points listed above
- Lack of credible proof of the relocation of the center of life for entrepreneurs who do not completely abandon their business in their country of origin.
Our tip: German authorities make decisions based on written documents. There is no “renegotiation.” AI-generated documents often fail to convince the regional experts who review the applications. You have to analyze the regional circumstances very carefully and incorporate them into the application. So, it’s often not a legal problem in the strictest sense. Rather, you have to convincingly demonstrate to the region where you want to do business why you would be a welcome addition to the local economy.
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