Austria

Executive Summary

Austria has a well-developed market economy that welcomes foreign direct investment, particularly in technology and R&D. The country benefits from a skilled labor force, and a high standard of living, with its capital, Vienna, consistently placing at the top of global quality-of-life rankings.

With more than 50 percent of its GDP derived from exports, Austria’s economy is closely tied to other EU economies, especially that of Germany, its largest trading partner. The United States is one of Austria’s top two-way trading partners, ranking fifth in overall trade according to provisional data from 2021. The economy features a large service sector and an advanced industrial sector specialized in high-quality component parts, especially for vehicles. The agricultural sector is small but highly developed.

The COVID-19 crisis deeply affected Austria’s economy, contributing to a GDP decrease of 6.7% in 2020 with the unemployment rate increasing to a peak of 5.4% at the end of 2020. Austria’s economy rebounded with 4.5% GDP growth in 2021 and unemployment lower than before the onset of the pandemic, but forecasters recently lowered expectations to 3.8% growth for 2022 due to instability stemming from Russia’s invasion of Ukraine. At the same time, Austria is experiencing a record number of vacancies, largely stemming from a shortage of skilled labor.

The country’s location between Western European industrialized nations and growth markets in Central, Eastern, and Southeastern Europe (CESEE) has led to a high degree of economic, social, and political integration with fellow European Union (EU) member states and the CESEE.

Some 220 U.S. companies have investments in Austria, represented by around 300 subsidiaries, and many have expanded their original investment over time. U.S. Foreign Direct Investment into Austria totaled approximately EUR 11.6 billion (USD 13.7 billion) in 2020, according to the Austrian National Bank, and U.S. companies support over 16,500 jobs in Austria. Austria offers a stable and attractive climate for foreign investors.

The most positive aspects of Austria’s investment climate include:

  • Relatively high political stability;
  • Harmonious labor-management relations and low incidence of labor unrest;
  • Highly skilled workforce;
  • High levels of productivity and international competitiveness;
  • Excellent quality of life for employees and high-quality health, telecommunications, and energy infrastructure.

Negative aspects of Austria’s investment climate include:

  • A high overall tax burden;
  • A large public sector and a complex regulatory system with extensive bureaucracy;
  • Low-to-moderate innovation dynamics;
  • Low levels of digitalization;
  • Low levels of private venture capital.

Key sectors that have historically attracted significant investment in Austria:

  • Automotive;
  • Pharmaceuticals;
  • ICT and Electronics;
  • Financial.

Key issues to watch:

  • Due to a strong reliance on Russian natural gas and the third-highest banking exposure to Russia among EU Member States, Austria could be one of the hardest countries hit by sanctions against Russia. Russia’s invasion of Ukraine and sanctions are expected to cause a 0.4-0.5% decrease in Austria’s GDP. However, the impact is likely to be greater if natural gas supplies are disrupted. Austria relies on Russian imports for approximately 80% of its natural gas demand.
  • At the same time, Austria’s export-oriented economy makes it particularly sensitive to events affecting trade, which could include potential setbacks in the pandemic, particularly during the winter months. The tourism sector, which, together with hotels and restaurants, accounts for 15 percent of the country’s GDP is still struggling, currently operating at two-thirds of its pre-crisis output levels. Many companies are also struggling to find skilled labor, which is hindering the economy from reaching its full output potential.
Table 1: Key Metrics and Rankings
Measure Year Index/Rank Website Address
TI Corruption Perceptions Index 2021 13 of 175 http://www.transparency.org/research/cpi/overview
Global Innovation Index 2021 18 of 132 https://www.globalinnovationindex.org/analysis-indicator
U.S. FDI in partner country ($M USD, historical stock positions) 2020 USD 4.95 https://apps.bea.gov/international/factsheet/
World Bank GNI per capita 2020 USD 48,350 https://data.worldbank.org/indicator/NY.GNP.PCAP.CD

1. Openness To, and Restrictions Upon, Foreign Investment

The Austrian government welcomes foreign direct investment, particularly when such investments have the potential to create new jobs, support advanced technology fields, promote capital-intensive industries, and enhance links to research and development.

There are limited restrictions on foreign investment. American investors have not complained of discriminatory laws against foreign investors. Austria’s investment screening law, which requires government approval of transactions leading to 10 percent or more foreign ownership in sensitive sectors, has resulted in an increase in the number of investments screened, from less than three per year, to 50 completed screenings from July 2020 to July 2021, the first full year law has been in effect. The majority of these screenings (31 in total) were for U.S.-based investments. Please see the “Laws and Regulations on Foreign Investment” section below for further details on the law and its applications.

The corporate tax rate, a 25 percent flat tax, is above the EU average. The government is planning to reduce it to 24 percent in 2023 and 23 percent in 2024. U.S. citizens and investors have occasionally reported that it is difficult to establish and maintain banking services since the U.S.-Austria Foreign Account Tax Compliance Act (FATCA) Agreement went into force in 2014, as some Austrian banks have been reluctant to take on this reporting burden.

Potential investors should also be aware of Austria’s lengthy environmental impact assessments in their investment decision-making. Some sectors also suffer from heavy regulation that may affect certain investments. For example, the requirement that over 50 percent of energy providers must be publicly owned places a potential cap on investments in the energy sector. Strict liability and co-existence regulations in the agriculture sector restrict research and virtually outlaw the cultivation, marketing, or distribution of biotechnology crops. The mining and transportation sectors are also heavily regulated.

Austria’s national investment promotion organization, the Austrian Business Agency (ABA), is a useful first point of contact for foreign companies interested in establishing operations in Austria. It provides comprehensive information about Austria as a business location, identifies suitable sites for greenfield investments, and consults in setting up a company. ABA provides its services free of charge.

The Austrian Economic Chamber (WKO) and the American Chamber of Commerce in Austria (Amcham) are also good resources for foreign investors. Both conduct annual polls of their members to measure their satisfaction with the business climate, thus providing early warning to the government of problems identified by investors.

There is no principal limitation on establishing and owning a business in Austria. A local managing director must be appointed to any newly established enterprise. For non-EU citizens to establish and own a business, the Austrian Foreigner’s Law mandates a residence permit that includes the right to run a business. Many Austrian trades are regulated, and the right to run a business in regulated trade sectors is only granted when certain preconditions are met, such as certificates of competence, and recognition of foreign education.

There are limited restrictions on foreign ownership of private businesses. Austria’s investment screening law, requires an investment screening process to review potential foreign acquisitions of 25 percent or more of a company essential to the country’s infrastructure, lowering the threshold to 10 percent for sensitive sectors (see the “Laws and Regulations on Foreign Investment” section below for further details). In April 2019, the EU Regulation on establishing a framework for the screening of foreign direct investments into the Union entered into force. It creates a cooperation mechanism through which EU countries and the European Commission will exchange information and raise concerns related to specific investments which could potentially threaten the security of EU countries.

The American Chamber of Commerce (AmCham) commented on Austria’s strengthened investment screening law following implementation in 2020, that the two-month screening process takes too long and places an undue administrative burden on companies. The AmCham advocated for expedited screenings for proposed investments with no clear threat to national security. Business interest groups, such as the Austrian Economic Chamber and the Federation of Austrian Industries also commented during the legislation’s draft and review process that the strengthened screening measures would impose an undue administrative burden on businesses, the definition of sectors requiring screening was too wide, and the updated legislation would reduce the attractiveness of Austria as an investment location.

Austria generally ranked in the top 30 countries in the world in the past World Bank “Ease of Doing Business” reports, but starting a business takes time. The average time to set up a company is 21 days, while the average time in OECD high income countries is 9.2 days.

To register a new company or open a subsidiary in Austria, a company must first be listed on the Austrian Companies Register at a local court. The next step is to seek confirmation of registration from the Austrian Economic Chamber (WKO) establishing that the company is really a new business. The investor must then notarize the “declaration of establishment,” deposit a minimum capital requirement with an Austrian bank, register with the tax office, register with the district trade authority, register employees for social security, and register with the municipality where the business will be located. Finally, membership in the WKO is mandatory for all businesses in Austria.

For sole proprietorships, it is possible under certain conditions to use an online registration process via government websites in German to either found or register a company: https://www.usp.gv.at/Portal.Node/usp/public/content/gruendung/egruendung/269403.html, or www.gisa.gv.at/online-gewerbeanmeldung. It is advisable to seek information from ABA or the WKO before applying to register a firm.

The website of the ABA contains further details and contact information and is intended to serve as a first point of contact for foreign investors in Austria: https://investinaustria.at/en/starting-business/.

The Austrian government encourages outward investment. Advantage Austria, the “Austrian Foreign Trade Service,” is a special section of the WKO that promotes Austrian exports and also supports Austrian companies establishing an overseas presence. Advantage Austria operates five offices in the United States (Washington D.C., New York, Atlanta, Los Angeles, and San Francisco). Overall, it has about 100 trade offices in 70 countries across the world, reflecting Austria’s strong export focus and the important role the WKO plays. (https://www.wko.at/service/aussenwirtschaft/aussenwirtschaftscenter.html#heading_aussenwirtschaftscenter) The Ministry for Digital and Economic Affairs and the WKO run a joint program called “Go International,” providing services to Austrian companies that are considering investing for the first time in foreign countries. The program provides grants for market access costs and provides “soft subsidies,” such as counseling, legal advice, and marketing support.

Belgium

Executive Summary

According to its most recent report, the Belgian central bank expects gross domestic product (GDP) to grow 2.6% in 2022 despite economic headwinds linked to global supply chain bottlenecks, spiking energy costs, and uncertainty related to COVID-19 and the Russian invasion of Ukraine. Experts project that Belgium’s growth rate will slow but remain above potential, dipping slightly to 2.4% in 2023 and further to 1.6% in 2024. The labor market remains strong as overall job numbers continue to increase, and analysts anticipate that the unemployment rate will decline steadily to 5.7% by 2024. The inflation rate will likely continue to increase, largely driven by rising energy prices. The Belgian central bank expects the rate to peak in 2022 at 4.9% and then decline as energy markets stabilize. Belgium’s budget deficit is projected to reach 6.3% of GDP for 2021 – down from a high of 9.1% in 2020 – and will likely remain above 4% of GDP through 2024. The level of government debt will hold steady, with most experts projecting 108.9% of GDP in 2021, 106.3% in 2022 and 107.5% in 2023.

Belgium is a major logistical hub and gateway to Europe, a position that helps drives its economic growth.  Since June 2015, the Belgian government has undertaken a series of measures to reduce the tax burden on labor and to increase Belgium’s economic competitiveness and attractiveness to foreign investment.  A July 2017 decision to lower the corporate tax rate from 35% to 25% further improved the investment climate. The current coalition government has not signaled any intention to revise this tax rate.

Belgium boasts an open market well connected to the major economies of the world. As a logistical gateway to Europe, host to major EU institutions, and a central location closely tied to the major European economies, Belgium is an attractive market and location for U.S. investors. Belgium is a highly developed, long-time economic partner of the United States that benefits from an extremely well-educated workforce, world-renowned research centers, and the infrastructure to support a broad range of economic activities

Belgium has a dynamic economy and attracts significant levels of investment in chemicals, petrochemicals, plastics and composites; environmental technologies; food processing and packaging; health technologies; information and communication; and textiles, apparel and sporting goods, among other sectors.  In 2021, Belgian exports to the U.S. market totaled $27.7 billion, registering the United States as Belgium’s fourth largest export destination.  Key exports included chemicals (37.6%), machinery and equipment (10.9%), and precious metals and stones (5.9%).  In terms of imports, the United States ranked as Belgium’s fourth largest supplier of imports, with the value of imported goods totaling $27.6 billion in 2021.  Key imports from the United States included chemicals (38.8%), machinery and equipment (11%), and plastics (10.7%).

Table 1: Key Metrics and Rankings
Measure Year Index/Rank Website Address
TI Corruption Perceptions Index 2021 18 of 180 http://www.transparency.org/
research/cpi/overview
Global Innovation Index 2021 22 of 132 https://www.globalinnovationindex.org/
analysis-indicator
U.S. FDI in partner country ($M USD, historical stock positions) N/A USD Amount https://apps.bea.gov/
international/factsheet/
World Bank GNI per capita 2020 45,750USD https://data.worldbank.org/
indicator/NY.GNP.PCAP.CD

1. Openness To, and Restrictions Upon, Foreign Investment

Belgium maintains an open economy, and its prosperity is highly dependent on international trade.  Since WWII, making Belgium attractive to foreign investors has been the cornerstone of successive Belgian governments’ foreign and commercial policy.  Competence over policies that weigh on the attractiveness of Belgium as a destination for foreign direct investment (FDI) lie predominantly with the federal government, which is responsible for developing domestic competition policy, wage setting policies, labor law, and most of the energy and fiscal policies.  Attracting FDI, however, is the responsibility of Belgium’s three regional governments in Flanders, Wallonia, and the Brussels-Capital Region.  Flanders Investment and Trade (FIT), Wallonia Foreign Trade and Investment Agency (AWEX) and Brussels Invest and Export (BIE) are the three investment promotion agencies responsible for attracting FDI to Belgium.  One of their most visible activities is organizing the Royal Trade Missions, which are led by Princess Astrid (the king’s sister), as well as the economic part of the state visits by King Philippe.  In June 2022, Princess Astrid plans to lead a Royal Trade Mission to Atlanta, New York City, and Boston with more than 500 participants. Neither the federal nor the regional governments currently maintain a formal dialogue with investors.

There are no laws in place that discriminate against foreign investors.  [While U.S. companies continue to play key and long-standing roles in the development of the Belgian economy, a major U.S.-based multinational firm operating in the chemical cluster near the Port of Antwerp has raised concerns that Flemish government officials have unfairly regulated the company and subjected it to strict limitations not applied to other companies operating in the same sector and space.  The firm and the Flemish government remain in regular contact to seek a fair and equitable solution; however, the perceived lack of regulatory certainty could lead to a reduction of industry investment and operations in Belgium if unresolved.

There are currently no limits on foreign ownership or control in Belgium, and there are no distinctions between Belgian and foreign companies when establishing or owning a business or setting up a remunerative activity.

Belgian authorities are, however, developing a national security-based investment screening law that will likely establish certain restrictions based on national security concerns.  The draft law is not expected to be finalized and delivered to Parliament for vote before the end of 2022.

In July 2019 the OECD published an in-depth productivity review of Belgium: https://www.oecd.org/belgium/in-depth-productivity-review-of-belgium-88aefcd5-en.htm .  Belgium was included in the WTO Trade Policy Review of the European Union which took place February 18-20, 2020: https://www.wto.org/english/tratop_e/tpr_e/tp495_e.htm . In June 2021, Belgium was subject of an IMF Article IV mission: https://www.imf.org/en/News/Articles/2021/06/29/mcs062921-belgium-staff-concluding-statement-of-the-2021-article-iv-mission 

To set up a business in Belgium, one must:

1. Deposit at least 20% of the initial capital with a Belgian credit institution and obtain a standard certification confirming that the amount is held in a blocked capital account;

2. Deposit a financial plan with a notary, and sign the deed of incorporation and the by-laws in the presence of a notary, who authenticates the documents and registers the deed of incorporation. The authentication act must be drawn up in French, Dutch, or German (Belgium’s three official languages); and

3. Register with one of the Registers of legal entities, VAT and social security at a centralized company docket and obtain a company number.

In most cases, the business registration process can be completed within one week. https://www.business.belgium.be/en/setting_up_your_business 

Based on the number of employees, the projected annual turnover, and the shareholder class, a company will qualify as a small or medium-sized enterprise (SME) according to the terms of the Promotion of Independent Enterprise Act of February 10, 1998. For a small or medium-sized enterprise, registration is possible once a certificate of competence has been obtained. The person in charge of the daily management of the company must prove his or her knowledge of business management with diplomas and/or practical experience.

A company is expected to allow trade union delegations when employing 20 or more full-time equivalents (FTEs).

The three Belgian regions each have their own investment promotion agency, whose services are available to all foreign investors.

Belgium does not actively promote outward investment.  There are no restrictions for domestic investors to invest in certain countries, other than those that fall under UN or EU sanction regimes.  In June 2022, the Belgian government plans to lead a Royal Trade Mission to Atlanta, New York City, and Boston with more than 500 participants. The mission will promote both Belgian investment into the United States and encourage foreign direct investment into Belgium.

France and Monaco

Executive Summary

France welcomes foreign investment and has a stable business climate that attracts investors from around the world. The French government devotes significant resources to attracting foreign investment through policy incentives, marketing, overseas trade promotion offices, and investor support mechanisms. France has an educated population, first-rate universities, and a talented workforce. It has a modern business culture, sophisticated financial markets, a strong intellectual property rights regime, and innovative business leaders. The country is known for its world-class infrastructure, including high-speed passenger rail, maritime ports, extensive roadway networks, a dense network of public transportation, and efficient intermodal connections. High-speed (3G/4G) telephony is nearly ubiquitous, and France has begun its 5G roll-out in key metropolitan cities.

In 2021, the United States was the leading foreign investor in France in terms of new jobs created (10,118) and second in terms of new projects invested (247). The total stock of U.S. foreign direct investment in France reached $91 billion. More than 4,500 U.S. firms operate in France, supporting over 500,000 jobs, making the United States the top foreign investor overall in terms of job creation.

Following the election of French President Emmanuel Macron in May 2017, the French government implemented significant labor market and tax reforms. By relaxing the rules on companies to hire and fire employees, the government cut production taxes by 15 percent in 2021, and corporate tax will fall to 25 percent in 2022. Surveys of U.S. investors in 2021 showed the greatest optimism about the business operating environment in France since 2008. Macron’s reform agenda for pensions was derailed in 2018, however, when France’s Yellow Vest protests—a populist, grassroots movement for economic justice—rekindled class warfare and highlighted wealth and, to a lesser extent, income inequality.

The onset of the pandemic in 2020 shifted Macron’s focus to mitigating France’s most severe economic crisis in the post-war era. The economy shrank 8.3 percent in 2020 compared to the year prior, but with the help of unprecedented government support for businesses and households, economic growth reached seven percent in 2021. The government’s centerpiece fiscal package was the €100 billion ($110 billion) France Relance plan, of which over half was dedicated to supporting businesses. Most of the support was accessible to U.S. firms operating in France as well. The government launched a follow-on investment package in late 2021 called “France 2030” to bolster competitiveness, increase productivity, and accelerate the ecological transition.

Also in 2020, France increased its protection against foreign direct investment that poses a threat to national security. In the wake of the health crisis, France’s investment screening body expanded the scope of sensitive sectors to include biotechnology companies and lowered the threshold to review an acquisition from a 25 percent ownership stake by the acquiring firm to 10 percent, a temporary provision set to expire at the end of 2022. In 2020, the government blocked at least one transaction, which included the attempted acquisition of a French firm by a U.S. company in the defense sector. In early 2021, the French government threated to block the acquisition of French supermarket chain Carrefour by Canada’s Alimentation Couche-Tard, which eventually scuttled the deal.

Key issues to watch in 2022 are: 1) the impact of the war in Ukraine and measures by the EU and French government to mitigate the fallout; 2) the degree to which COVID-19 and resulting supply chain disruptions continue to agitate the macroeconomic environment in France and across Europe, and the extent of the government’s continued support for the economic recovery; and 3) the creation of winners and losers resulting from the green transition, the degree to which will be largely determined by firms’ operating models and exposure to fossil fuels.

Table 1: Key Metrics and Rankings
Measure Year Index/Rank Website Address
TI Corruption Perceptions Index 2021 22 of 180 http://www.transparency.org/research/cpi/overview 
Global Innovation Index 2021 11 of 132 https://www.globalinnovationindex.org/analysis-indicator 
U.S. FDI in partner country ($M USD, historical stock positions) 2020 USD 91.153 https://apps.bea.gov/international/factsheet/ 
World Bank GNI per capita 2020 USD 39.480 http://data.worldbank.org/indicator/NY.GNP.PCAP.CD 

1. Openness To, and Restrictions Upon, Foreign Investment

France welcomes foreign investment. In the current economic climate, the French government sees foreign investment as a means to create additional jobs and stimulate growth. Investment regulations are simple, and a range of financial incentives are available to foreign investors. Surveys of U.S. investors in 2021 showed the greatest optimism about the business operating environment in France since 2008. U.S. companies find France’s good infrastructure, advanced technology, and central location in Europe attractive. France’s membership in the European Union (EU) and the Eurozone facilitates the efficient movement of people, services, capital, and goods. However, notwithstanding recent French efforts at structural reform, including a reduction in corporate and production tax, and advocacy for a global minimum tax within the European Union, perceived disincentives to investing in France include the persistently high tax environment, ongoing labor law rigidity, and a shortage of skilled labor.

France is among the least restrictive countries for foreign investment. With a few exceptions in certain specified sectors, there are no statutory limits on foreign ownership of companies. Foreign entities have the right to establish and own business enterprises and engage in all forms of remunerative activity.

France maintains a national security review mechanism to screen high-risk investments. French law stipulates that control by acquisition of a domiciled company or subsidiary operating in certain sectors deemed crucial to France’s national interests relating to public order, public security and national defense are subject to prior notification, review, and approval by the Economy and Finance Minister. Other sectors requiring approval include energy infrastructure; transportation networks; public water supplies; electronic communication networks; public health protection; and installations vital to national security. In 2018, four additional categories – semiconductors, data storage, artificial intelligence and robotics – were added to the list requiring a national security review. For all listed sectors, France can block foreign takeovers of French companies according to the provisions of the 2014 Montebourg Decree.

On December 31, 2019 the government issued a decree to lower the threshold for vetting of foreign investment from outside Europe from 33 to 25 percent and then lowered it again to 10 percent on July 22, 2020, a temporary provision to prevent predatory investment during the COVID-19 crisis. This lower threshold is set to expire at the end of 2022. The decree also enhanced government-imposed conditions and penalties in cases of non-compliance and introduced a mechanism to coordinate the national security review of foreign direct investments with the European Union (EU Regulation 2019/452). The new European rules entered into force on October 11, 2020. The list of strategic sectors was also expanded to include the following activities listed in the EU Regulation 2019/452: agricultural products, when such products contribute to national food supply security; the editing, printing, or distribution of press publications related to politics or general matters; and R&D activities relating to quantum technologies and energy storage technologies. Separately, France expanded the scope of sensitive sectors on April 30, 2020, to include biotechnology companies.

Procedurally, the Minister of Economy, Finance, and Recovery has 30 business days following the receipt of a request for authorization to either: 1) declare that the investor is not required to obtain such authorization; 2) grant its authorization without conditions; or 3) declare that an additional review is required to determine whether a conditional authorization is sufficient to protect national interests. If an additional review is required, the Minister has an additional 45 business days to either clear the transaction (possibly subject to conditions) or prohibit it. The Minister is further allowed to deny clearance based on the investor’s ties with a foreign government or public authority. The absence of a decision within the applicable timeframe is a de facto rejection of the authorization.

The government also expanded the breadth of information required in the approval request. For example, a foreign investor must now disclose any financial relationship with or significant financial support from a State or public entity; a list of French and foreign competitors of the investor and of the target; or a signed statement that the investor has not, over the past five years, been subject to any sanctions for non-compliance with French FDI regulations.

In 2020, the government blocked at least one transaction—the attempted acquisition of a French firm by a U.S. company in the defense sector. In early 2021, the French government blocked the acquisition of French supermarket chain Carrefour by Canada’s Alimentation Couche-Tard on the basis that it was a threat to France’s food security and national sovereignty.

France has not recently been the subject of international organizations’ investment policy reviews. The OECD Economic Survey for France (November 2021) can be found here:  https://www.oecd.org/economy/france-economic-snapshot/ .

Business France is a government agency established with the purpose of promoting new foreign investment, expansion, technology partnerships, and financial investment. Business France provides services to help investors understand regulatory, tax, and employment policies as well as state and local investment incentives and government support programs. Business France also helps companies find project financing and equity capital. The agency unveiled a website in English to help prospective businesses that are considering investments in the French market ( https://www.businessfrance.fr/en/invest-in-France ). The U.S. Embassy in Paris also collaborated with Business France to create a map of U.S. investment in each region of France ( https://investinfrance.fr/wp-content/uploads/2017/08/Entreprises-americaines.pdf ).

In addition, France’s public investment bank, Bpifrance, assists foreign businesses to find local investors when setting up a subsidiary in France. It also supports foreign startups in France through the government’s French Tech Ticket program, which provides them with funding, a resident’s permit, and incubation facilities. Both business facilitation mechanisms provide for equitable treatment of women and minorities.

President Macron prioritized innovation early in his five-year mandate. In 2017, he launched a €10 billion ($11 billion) fund to back disruptive innovation in energy, the digital sector, and the climate transition by privatizing state-owned enterprises and introduced a four-year tech visa for entrepreneurs to come to France. He also introduced tax reforms that would tax capital gains, interest and dividends at a flat 30 percent, instead of the existing top rate of 45 percent.

In June 2020, the French government introduced a new €1.2 billion ($1.3 billion) plan to support French startups, concentrating on the health, quantum, artificial intelligence, and cybersecurity sectors. The plan included the creation of a €500 million ($550 million) investment fund to help startups overcome the COVID-19 crisis and continue to innovate. It also comprised a “French Tech Sovereignty Fund” launched in December 2020 by France’s public investment bank Bpifrance, with an initial commitment of €150 million ($165 million).

In October 2021, President Macron unveiled a €34 billion ($37.4billion) innovation investment strategy between 2022 and 2027, which mirrors the priorities of the European Commission’s investments in digital innovation and decarbonisation. France will invest by 2030 in breakthrough innovation in a wide variety of areas, including small nuclear fission reactors, green hydrogen production facilities, the production of two million electric and hybrid vehicles every year, research on developing France’s first low-carbon airplane, healthy and sustainable foods, and 20 drugs for cancer and chronic diseases as well as the development of new medical devices. Major industrial groups are encouraged to work with startups, which will also benefit from funding under this new plan. This plan comes on top of the €20 billion ($22 billion) from the 2021 Fourth Future Investment Program. A new Secretary General for Investment was appointed in January 2022 to ensure the coordination of these two innovation programs.

France’s sectors that traditionally attracted the most investment include aeronautics, agro-foods, digital, nuclear, rail, auto, chemicals and materials, forestry, eco-industries, shipbuilding, health, luxury, and extractive industries. However, Business France and Bpifrance are particularly interested in attracting foreign investment in the tech sector. The French government has developed the “French Tech” initiative to promote France as a location for start-ups and high-growth digital companies. French Tech offices have been established in 17 French cities and over 100 cities globally, including New York, San Francisco, Los Angeles, Shanghai, Hong Kong, Vietnam, Moscow, and Berlin. French Tech has special programs to provide support to startups at various stages of their development. The latest effort has been the creation of the French Tech 120 Program, which provides financial and administrative support to some 123 most promising tech companies. In 2019, €5 billion ($5.9 billion) in venture funding was raised by French startups, an increase of nearly threefold since 2015. Venture capital investment in French startups has doubled from €5.1 billion ($5.6 billion) in 2020 to over €10 billion ($11 billion) in 2021.

In March 2021, France launched, with the support of the European Commission and other member states, the Scale-Up Europe initiative bringing together over 300 start-up and scale-up founders, investors, researchers, and corporations, with the goal of creating 10 tech giants each valued at more than €100 billion ($110 billion) by 2030. French authorities supported the Scale-up Europe initiative designed to promote businesses across Europe to expand beyond their local and European markets. As part of that initiative, on February 8, 2022, France inaugurated a new European Investment Fund designed to increase European venture capital funds’ capacity to provide late-stage funding to EU-based start-ups and scale-ups. France and Germany have each committed €1 billion ($1.1 billion), along with €500 million ($565 million) from the European Investment Bank.

The website Guichet Enterprises ( https://www.guichet-entreprises.fr/fr/ ) is designed to be a one-stop website for registering a business. The site, managed by the National Institute of Industrial Property (INPI), is available in both French and English although some fact sheets on regulated industries are only available in French on the website.

French firms invest more in the United States than in any other country and support approximately 765,100 American jobs. Total French investment in the United States reached $314.9 billion in 2020. France was still our tenth largest trading partner with approximately $115.7 billion in bilateral trade in 2021. The business promotion agency Business France also assists French firms with outward investment, which it does not restrict.

Germany

Executive Summary

As Europe’s largest economy, Germany is a major destination for foreign direct investment (FDI) and has accumulated a vast stock of FDI over time.  Germany is consistently ranked as one of the most attractive investment destinations based on its stable legal environment, reliable infrastructure, highly skilled workforce, and world-class research and development.

An EU member state with a well-developed financial sector, Germany welcomes foreign portfolio investment and has an effective regulatory system. Capital markets and portfolio investments operate freely with no discrimination between German and foreign firms. Germany has a very open economy, routinely ranking among the top countries in the world for exports and inward and outward foreign direct investment.

Foreign investment in Germany mainly originates from other European countries, the United States, and Japan, although FDI from emerging economies (and China) has grown in recent years. The United States is the leading source of non-European FDI in Germany. In 2020, total U.S. FDI in Germany was $162 billion. The key U.S. FDI sectors include chemicals ($8.7 billion), machinery ($6.5 billion), finance ($13.2 billion), and professional, scientific, and technical services ($10.1 billion). From 2019 to 2020, the industry sector “chemicals” grew significantly from $4.8 billion to $8.7 billion. Historically, machinery, information technology, finance, holding companies (nonbank), and professional, scientific, and technical services have dominated U.S. FDI in Germany.

German legal, regulatory, and accounting systems can be complex but are generally transparent and consistent with developed-market norms.  Businesses operate within a well-regulated, albeit relatively high-cost, environment. Foreign and domestic investors are treated equally when it comes to investment incentives or the establishment and protection of real and intellectual property.  Germany’s well-established enforcement laws and official enforcement services ensure investors can assert their rights.  German courts are fully available to foreign investors in an investment dispute. New investors should ensure they have the necessary legal expertise, either in-house or outside counsel, to meet all national and EU regulations.

The German government continues to strengthen provisions for national security screening of inward investment in reaction to an increasing number of high-risk acquisitions of German companies by foreign investors, particularly from China, in recent years.  German authorities screen acquisitions by foreign entities acquiring more than 10 percent of voting rights of German companies in critical sectors, including health care, artificial intelligence, autonomous vehicles, specialized robots, semiconductors, additive manufacturing, and quantum technology, among others. Foreign investors who seek to acquire at least 10 percent of voting rights of a German company in one of those fields are required to notify the government and potentially become subject to an investment review. Furthermore, acquisitions by foreign government-owned or -funded entities will now trigger a review.

German authorities are committed to fighting money laundering and corruption.  The government promotes responsible business conduct and German SMEs are aware of the need for due diligence.

Table 1: Key Metrics and Rankings
Measure Year Index/Rank Website Address
TI Corruption Perceptions Index 2020 9 of 180 http://www.transparency.org/research/cpi/overview 
Global Innovation Index 2020 9 of 131 https://www.globalinnovationindex.org/analysis-indicator 
U.S. FDI in partner country ($M USD, historical stock positions) 2020 USD 162,387 https://apps.bea.gov/international/factsheet/ 
World Bank GNI per capita 2020 USD 47,470 http://data.worldbank.org/indicator/NY.GNP.PCAP.CD 

1. Openness To, and Restrictions Upon, Foreign Investment

The German government and industry actively encourage foreign investment. U.S. investment continues to account for the largest share of Germany’s FDI. The 1956 U.S.-Federal Republic of Germany Treaty of Friendship, Commerce and Navigation affords U.S. investors national treatment and provides for the free movement of capital between the United States and Germany. As an OECD member, Germany adheres to the OECD National Treatment Instrument and the OECD Codes of Liberalization of Capital Movements and of Invisible Operations.  The Foreign Trade and Payments Act and the Foreign Trade and Payments Ordinance provide the legal basis for the Federal Ministry for Economic Affairs and Climate Action (MEC) to review acquisitions of domestic companies by foreign buyers and to assess whether these transactions pose a risk to the public order or national security (for example, when the investment pertains to critical infrastructure).  For many decades Germany has experienced significant inbound investment, which is widely recognized as a considerable contributor to Germany’s growth and prosperity. The investment-related challenges facing foreign companies are broadly the same as those that face domestic firms, e.g., relatively high tax rates and energy costs, stringent environmental regulations, and labor laws that complicate hiring and dismissals. Germany Trade and Invest (GTAI), the country’s economic development agency, provides extensive information for investors: https://www.gtai.de/gtai-en/invest 

Under German law, a foreign-owned company registered in the Federal Republic of Germany as a GmbH (limited liability company) or an AG (joint stock company) is treated the same as a German-owned company. There are no special nationality requirements for directors or shareholders.

Companies seeking to open a branch office in Germany without establishing a new legal entity, (e.g., for the provision of employee placement services, such as providing temporary office support, domestic help, or executive search services), must register and have at least one representative located in Germany.

While there are no economy-wide limits on foreign ownership or control, Germany maintains an elaborate mechanism to screen foreign investments based on national security grounds. The legislative basis for the mechanism (the Foreign Trade and Payments Act and Foreign Trade and Payments Ordinance) has been amended several times in recent years to tighten parameters of the screening as technological threats evolve, particularly to address growing interest by foreign investors in both Mittelstand (mid-sized) and blue-chip German companies. Germany amended its investment screening mechanism May 1, 2021 and has now fully implemented the EU Screening Directive. With the amendment, firms must notify MEC of foreign investments and MEC can then screen investments in sensitive sectors and technologies if the buyer plans to acquire 10 percent or more of the company’s voting rights and may be required, regardless, for a non-EU company acquiring more than 25 percent of voting rights ( https://www.bmwi.de/Redaktion/EN/Artikel/Foreign-Trade/investment-screening.html ).

In the screening process, MEC considers “stockpile acquisitions” by the same investor in a German company or “atypical control investments” where an investor secures additional influence in company operations via side contractual agreements. MEC can also factor in combined acquisitions by multiple investors if all are controlled by one foreign government. The total time for the screening process, depending on the sensitivities of the investment, may take up 10 to 12 months. BMWK – Investment screening (bmwi.de) 

The World Bank Group’s “Doing Business 2020” Index provides additional information on Germany’s investment climate. [Note: this report is no longer updated]. The American Chamber of Commerce in Germany publishes results of an annual survey of U.S. investors in Germany (“AmCham Germany Transatlantic Business Barometer.” https://www.amcham.de/publications ).

Before engaging in commercial activities, companies and business operators must register in public directories, the two most significant of which are the commercial register (Handelsregister) and the trade office register (Gewerberegister).

Applications for registration at the commercial register ( www.handelsregister.de ) are electronically filed in publicly certified form through a notary.  The commercial register provides information about all relevant relationships between merchants and commercial companies, including names of partners and managing directors, capital stock, liability limitations, and insolvency proceedings.  Registration costs vary depending on the size of the company. According to the World Bank’s Doing Business Report 2020, the median duration to register a business in Germany is eight days, though some firms have experienced longer processing times.

Germany Trade and Invest (GTAI), the country’s economic development agency, can assist in the registration processes ( https://www.gtai.de/gtai-en/invest/investment-guide/establishing-a-company/business-registration-65532 ) and advises investors, including micro-, small-, and medium-sized enterprises (MSMEs), on how to obtain incentives.

In the EU, MSMEs are defined as follows:

  • Micro-enterprises:  fewer than 10 employees and less than €2 million annual turnover or less than €2 million in balance sheet total.
  • Small enterprises:  fewer than 50 employees and less than €10 million annual turnover or less than €10 million in balance sheet total.
  • Medium-sized enterprises:  fewer than 250 employees and less than €50 million annual turnover or less than €43 million in balance sheet total.

U.S.-based exporters seeking to sell in Germany (e.g., via commercial platforms) are required to register with one specific tax authority in Bonn, which can lead to significant delays due to capacity issues.

Germany’s federal government provides guarantees for investments by Germany-based companies in developing and emerging economies and countries in transition in order to insure them against political risks. In order to receive guarantees, the investment must have adequate legal protection in the host country. The Federal Government does not insure against commercial risks. In 2020, the government issued investment guarantees amounting to €900 million for investment projects in 13 countries, with the majority of those in China and India.

Greece

Executive Summary

The Greek economy has proven resilient in recent years as it continues to rebound from the 2007 economic crisis – including the rigid fiscal constraints demanded by creditors — and the global COVID-19 pandemic.  In early 2020, COVID-19 held the potential to permanently scar an economy that still suffered from legacy issues, including high debt and non-performing loans, limited credit growth, near zero capacity for fiscal expansion, and a hollowed-out healthcare system.  While continuing its aggressive reform agenda, the Mitsotakis government rose to meet the pandemic challenge, as European institutions effectively welcomed Greek debt back into the eurosystem, the IMF and EU evaluated the country’s public debt as sustainable, Moody’s upgraded Greek sovereign debt, the country began borrowing at historically low cost, and strategic investors returned, favorably considering Greece’s current and long-term value proposition.  Meanwhile, over the past several years, our bilateral relationship has deepened significantly via our defense and strategic partnerships, and Greece ambitiously seeks now to bring our economic ties to similar, historic heights.  Far from being the problem child of Europe or the international financial system, Greece is increasingly a source of solutions – not just in the fields of energy diplomacy and defense, but in high-tech innovation, healthcare, and green energy, improving prospects for solid economic growth and stability here and in the wider region.

The Mitsotakis government was elected in July 2019 on an aggressive investment and economic reform agenda which has plowed forward despite the pandemic.  During its first nine months in power, Mitostakis’s team pushed market-friendly reforms and Parliament voted through dozens of economic-related bills, including a key investment law in October 2019, designed to cut red tape, help achieve full employment, and adopt best international practices – including by digitizing government services.  GDP growth reached 8.3 percent in 2021, a major leap forward following the detrimental effects of the COVID-19 pandemic.

Greece maintains a liquidity buffer, estimated at €30 billion, but is intent on boosting its coffers as the economic fallout from the COVID-19 pandemic is larger than expected.  So far untouched, the buffer should be sufficient to cover the country’s financing needs until at least the end of 2022, and the country’s leadership maintains its intention to reserve the European Stability Mechanism (ESM) tranche solely for sovereign debt interest payments.  While capital controls were completely lifted in September 2019, Greece remains subject to enhanced supervision by Eurozone creditors.  However, the European Commission’s (EC) latest positive assessment on the Greek economy, will – most likely – pave the way for the end of the country’s enhanced surveillance status in Q3 2022.

Greece’s banking system, despite three recapitalizations as part of the August 2015 European Stability Mechanism (ESM) agreement, remains saddled with the largest ratio of non-performing loans in the EU, which constrains the domestic financial sector’s ability to finance the national economy.  As a result, businesses, particularly small and medium enterprises, still struggle to obtain domestic financing to support operations due to inflated risk premiums in the sector.  To tackle the issue, and as a requirement of the agreement with the ESM, Greece has established a secondary market for its non-performing loans (NPLs).  According to the Bank of Greece, non-performing loans (NPLs) came, on a solo basis, to €58.7 billion at end-September 2020, down by €9.8 billion from December 2019 and by €48.5 billion from their March 2016 peak.  The NPL-to-total loan ratio remained high in September 2020 at 35.8 percent. The high percentage of performing loans benefited from moratoria until December 31, 2020, and contained the inflow of new NPLs. Non-performing private debt remains high, irrespective of the reduction in NPLs on bank balance sheets via transfer to non-bank entities. 2020 saw substantial reforms aimed at resolving the issue of NPLs.  These involved the securitization of NPLs through the activation of the “Hercules” scheme and the enactment of Law No. 4738/2020 which improves several aspects of insolvency law.  Nevertheless, NPLs will remain high, and considering that there will be a new inflow of NPLs due to the pandemic, other solutions complementary to the “Hercules” scheme should be implemented.  In addition to sales of securitized loan packages, banks have exploited other ways to manage bad loans.  For example, nearly all of Greece’s systemic banks employ loan servicing firms to manage non-performing exposure.  Greece’s secondary market for NPL servicers now includes 24 companies including: Sepal (an Alpha Bank-Aktua joint venture), FPS (a Eurobank subsidiary), Pillarstone, Independent Portfolio Management, B2Kapital, UCI Hellas, Resolute Asset Management, Thea Artemis, PQH, Qquant Master Servicer, and DV01 Asset Management.

Greece’s return to economic growth has generated new investor interest in the country.  Pfizer, Cisco, Deloitte, and Microsoft, to name a few, have all announced major investments in the past few years, due in part to improved protection of intellectual property rights and Greece’s delisting from the U.S. Trade Representatives Special 301 Watch List in 2020.  In March 2021, Greece successfully raised €2.5 billion from its first 30-year bond sale in more than a decade, with the issue more than 10 times oversubscribed.  The bond, which has so far received investor demand of more than €26.1 billion, will price at 150 basis points over the mid-swap level, resulting in a yield of 1.93 percent.

In January 2022, Fitch Ratings Agency maintained Greece’s credit rating at BB and noted the country’s outlook as ‘stable’ due to the financial impact of COVID-19.  On April 1, 2021, Moody’s improved its outlook of the Greek banking system from “stable” to “positive.”Standard & Poor’s affirmed its credit rating for Greece at BB-in October 2020 and also kept its outlook to “stable.”  The European Central Bank (ECB) included Greek government bonds in its quantitative easing program, with €12 billion worth of Greek government debt earmarked for purchase under the ECB’s €750 billion Pandemic Emergency Purchase Program in 2020.  In February 2022, Greece has received the Eurogroup’s approval to repay the final tranches of bailout loans from the International Monetary Fund (IMF) early, along with a small part of bilateral loans from its eurozone partners.  Greece plans to repay loans worth €1.9 billion to the IMF by March, two years ahead of schedule.

The Greek government was given strong marks for its initial response in limiting the spread of the pandemic and has implemented several innovative digital reforms to its economy during COVID-19.  The Greek economy contracted by 10 percent in 2020 with a gross domestic product (GDP) of €189 billion but its GDP rose to €211 billion in 2021.  This was largely attributed to the successful 2021tourism season, which brought in €10 billion to the Greek economy.  The unemployment rate was 15.8 percent in 2021, a slight increase from 15.5 percent in 2020.

In response to the pandemic, Greece’s recovery and resilience plan was among the first plans that were formally approved by the European Council, in July 2021.  Greece received €4 billion of the disbursement in August.  The plan will disburse €17.8 billion in grants and €12.7 billion in loans over the course of five years.  Greece has earmarked funding for many climate-relevant investments and digitalization efforts.  Greece was also the first Member State to finalize its Partnership Agreement for the 2021-2027 programming period.  The Partnership Agreement outlines the plan for deploying of more than €21 billion worth of investments to support Greece’s economic, social and territorial cohesion.

The Greek government also took measures to support businesses throughout the pandemic in 2021.  In February 2021, the government approved a €500 million scheme to support small and medium-sized businesses affected by the pandemic.  The state aid Temporary Framework was open to small and medium-sized enterprises active in all sectors except financial, primary agriculture, tobacco, and fisheries sectors.  This public support, in the form of direct grants, sought to provide sufficient working capital for businesses affected by the pandemic.  In May 2021, the European Commission approved a €793 million support measure for micro, small and medium-sized enterprises affected by the coronavirus outbreak in the form of direct grants, which is open to companies active in all sectors except the financial one.  The aid aims to provide liquidity support to qualifying beneficiaries, to safeguard businesses against the risk of default, allowing them to preserve their economic activity and helping them recover after the pandemic.

Rounding out 2021, the Greek government enacted a €665 million scheme in November 2021 to support households affected by the pandemic.  The scheme was adopted to assist households at risk of losing their primary residence by defaulting on their mortgage loans.  On 3 November 2021, the European Commission approved modifications to ensure the extension of the loan period and a reduction of the maximum aid amount per beneficiary.

Table 1: Key Metrics and Rankings
Measure Year Index/Rank Website Address
TI Corruption Perceptions Index 2021 58 of 180 https://www.transparency.org/country/GRC
Global Innovation Index 2021 47 of 131 https://www.globalinnovationindex.org/analysis-indicator
U.S. FDI in partner country ($M USD, historical stock positions) 2020 $74 million https://apps.bea.gov/international/factsheet/factsheet.cfm?Area=310
World Bank GNI per capita 2020 $17,930 http://data.worldbank.org/indicator/NY.GNP.PCAP.CD

1. Openness To, and Restrictions Upon, Foreign Investment

The Greek government continues to take steps to increase foreign investment, implementing economic reforms and taking steps to mitigate the impact of the pandemic.  Greece completed its EU bailout program in 2018, allowing it to borrow once again at market rates, reflected in a rising economic sentiment since 2017.  Heavy bureaucracy and a slow judicial system continue to create challenges for both foreign and domestic investors.

There are no laws or practices known to Post that discriminate against foreign investors.  The country has investment promotion agencies to facilitate foreign investments, with “Enterprise Greece” as the official agency of the Greek state.  Under the supervision of the Ministry of Foreign Affairs, Enterprise Greece is responsible for promoting investment in Greece and exports from Greece, and with making Greece more attractive as an international business partner.  Enterprise Greece provides the full spectrum of services related to international business relationships and domestic business development for the international market, including an Investor Ombudsman program for investment projects exceeding €2 million.  The Ombudsman is available to assist with specific bureaucratic obstacles, delays, disputes, or other difficulties that impede an investment project.  However, Enterprise Greece, even with its ombudsman service, is not very effective at moving investment projects forward.

The General Secretariat for Strategic and Private Investments streamlines the licensing procedure for strategic investments, aiming to make the process easier and more attractive to investors.

Greece has adopted the following EU definitions regarding micro, small, and medium size enterprises:

Micro Enterprises:  Fewer than 10 employees and an annual turnover or balance sheet below €2 million.

Small Enterprises:  Fewer than 50 employees and an annual turnover or balance sheet below €10 million.

Medium-Sized Enterprises:  Fewer than 250 employees and annual turnover below €50 million or balance sheet below €43 million.

Numerous structural reforms, undertaken as part of the country’s 2015-2018 international bailout program as well as a part of the current New Democracy administration’s efforts to lower taxes and reduce bureaucracy, aim to welcome and facilitate foreign investment, and the government has publicly messaged its dedication to attracting foreign investment.The 2019 investment law simplified licensing procedures in order to facilitate investment.  In December 2020, parliament passed a new law allowing non-residents who relocate their jobs to Greece to benefit from half their salary being free of income tax for up to seven years.  The scheme is open to any type of job, any income level and complements other tax incentive schemes put in place, including a non-dom program for wealthy investors and a low flat tax rate for pensioners.  The Trans Adriatic Pipeline (TAP) is another example of the government’s commitment in this area.  In November 2015, the Greek government and TAP investors agreed on measures and began construction on the largest investment project since the start of the financial crisis.  The pipeline began operations in December 2020 and in March 2021, TAP announced that a total of 1 billion cubic meters (bcm) of natural gas from Azerbaijan entered Europe via the Greek interconnection point of Kipoi.  Law 4710/2020 gave a strong push for electro-mobility, with several incentives and subsidies to those interested in acquiring an electric vehicle. The law has paved the way for greater U.S. investment.  For example, Tesla has installed the first pop-up stand along with three electric vehicle (EV) charges at a major Greek shopping mall, while Blink expanded its EV network in Greece.  Additionally, there are directives that have eased the bureaucracy surrounding renewable energy source (RES) projects, including establishing a deadline for the issuance of Environmental Terms Approvals (ETAs) of 120 days and limiting the environmental licensing stages to three stages instead of the previous six or seven stages required for companies to abide by.

In the past decade, the country underwent one of the most significant fiscal consolidations in modern history, with broad and deep cuts to public expenditures and significant increases in labor and social security tax rates, which have offset improved labor market competitiveness achieved through significant wage devaluation.  While there has been notable progress, corruption and burdensome bureaucracy continue to create barriers to market entry for new firms, permitting incumbents to maintain oligopolies in different sectors, and creating scope for arbitrary decisions and rent seeking by public servants.

As a member of the EU and the European Monetary Union (the “Eurozone”), Greece is required to meet EU and eurozone investment regulations.  Foreign and domestic private entities have the legal right to establish and own businesses in Greece; however, the country places restrictions on foreign equity ownership higher than those imposed on average in the other 17 high-income OECD economies, such as equity restrictions on airport operations and limits on foreign ownership in electricity and media.  The government has undertaken EU-mandated reforms in its energy sector, opening much of it to foreign equity ownership.  Restrictions exist on land purchases in border regions and on certain islands because of national security considerations.  Foreign investors can buy or sell shares on the Athens Stock Exchange on the same basis as local investors.  Greece does not maintain an investment screening mechanism.  However, the Greek Government is currently working on the legislation for the development of an FDI screening mechanism. The plan is to finalize the text in mid-2022 and then present it to the European Commission.

The government has not undergone an investment policy review by the Organization for Economic Cooperation and Development (OECD), the World Trade Organization (WTO), or United Nations Committee on Trade and Development (UNCTAD) or worked with any other international institution to produce a public report on the general investment climate in the past three years.  However, in July 2020, the OECD published a periodic economic survey describing the state of the economy and addressing foreign direct investment concerns, especially regarding needed reforms in the public sector and judicial system.In particular, the OECD report lauds the Ministry of Digital Governance’s progress in instituting digital and public administration reforms and recommends continued effort in this area.  To date, the OECD has not published an economic survey for 2021, however, the economic forecast summary for Greece was published in December 2021.

Although Greece has many civil society organizations (CSOs), no CSO has raised concerns related to investment policies introduced by the government of Greece.

In 2020, Greece eased processes for starting a business by reducing the time to register a company and removing the requirement to obtain a tax clearance.  Accessing industrial land in Greece is relatively quick, with only three weeks required to lease land from the government.  Private land can be leased within 15 days.  Arbitrating commercial disputes, however, can take almost a year.  Establishing a limited liability company takes approximately four days with three procedures involved, including registering the business, making a company seal, and registering with the Unified Social Security Institution.  Greece’s Ease of Doing Business score in 2020 is 96, for a rank of 11 for starting a business and rank of 79 overall.  Greece is now one of the 37 countries listed on www.businessfacilitation.org.

Greece’s business registration entity GEMI (General Commercial Register) has the basic responsibility for digitizing and automating the registration and monitoring procedures of commercial enterprises. The online business registration process is relatively clear, and although foreign companies can use it, the registration steps are currently available only in Greek.  In general, a company must register with the business chamber, tax registry, social security, and local municipality.  Business creation without a notary can be done for specific cases (small/personal businesses, etc.).  For the establishment of larger companies, a notary is mandatory.

The Greek government does not have any known outward investment incentive programs.  Capital controls were eliminated in September 2019.

Enterprise Greece supports the international expansion of Greek companies.  While no incentives are offered, Enterprise Greece has been supportive of Greek companies attending the U.S. Government’s Annual SelectUSA Investment Summit, which promotes inbound investment to the United States, and similar industry trade events internationally.

Italy

Executive Summary

Italy’s successful vaccination campaign, an ambitious reform and investment plan funded and approved by the European Union, and Prime Minister Mario Draghi’s leadership which has boosted Italy’s role on the international stage, helped the Italian economy to grow a healthy 6.6 percent in 2021 – one of the fastest rates in Europe. Growth was underpinned by a robust 17 percent increase in investment. However, energy price spikes, supply chain disruptions, and Russia’s full-scale invasion of Ukraine create uncertainty affecting consumer and business confidence. Italy now forecasts its economy, the euro area’s third largest, will grow by 3.1 percent (down from a 4.7 percent projected in September 2021). For 2023, the government projects GDP will grow 2.4 percent (down from the previous target of 2.8 percent). The public debt, proportionally the highest in the eurozone after Greece’s, is targeted at 147 percent of GDP in 2022, down from 2020’s 156 percent, and projected to decline to 145 percent in 2023.

Italy’s National Resilience and Recovery Plan (NRRP) combines over €200 billion in investment to accelerate the digital and green transition coupled with wide-ranging reforms addressing the Italian economy’s longstanding drags on growth — namely its slow legal system, tax administration and bloated bureaucracy — while rebalancing policies to address gender, youth, and regional disparities. This combination of investment and reform, with some easing of fiscal constraints from Brussels, may reposition Italy, the eurozone’s second largest industrial base, as an engine for growth. In April 2022, the European Commission disbursed €21 billion in the first tranche of Next Generation EU funds pandemic aid to Italy after determining the Italian government successfully met the 51 objectives of its NRRP set out for 2021. Italy will have to achieve a further 45 milestones and targets by June 30, 2022, to receive the second tranche of funds worth €24.1 billion. Crucial for improving Italy’s investment climate and spurring growth is reform of Italy’s justice system, one of the slowest in Europe. According to the European Commission, the average Italian civil law case takes more than 500 days to resolve, versus an average of about 200 days in Germany, 300 in Spain and 450 in Greece. For U.S. investors, judicial reform and bureaucratic streamlining would minimize uncertainty and create a more favorable investment climate.

Italy is and will remain an attractive destination for foreign investment, with one of the largest markets in the EU, a diversified economy, and a skilled workforce. Italy’s economy, the eighth largest in the world, is dominated by small and medium-sized firms (SMEs), which comprise 99.9 percent of Italian businesses. Italy’s relatively affluent domestic market, access to the European Common Market, proximity to emerging economies in North Africa and the Middle East, and assorted centers of excellence in scientific and information technology research, remain attractive to many investors. Italy is the eighth largest consumer market in the world, the seventh largest manufacturing producer, and boasts a diversified economy and skilled workforce. The clustering of industry, the infrastructure, and the quality of life are also among the top reasons international investors decide to start or expand a business in Italy. According to Italy’s Institute of Statistics, over 15,000 foreign multinationals employ one out of seven Italian residents.  Foreign companies account for 18 percent of Italian GDP and 14 percent of investments. Exports of pharmaceutical products, furniture, industrial machinery and machine tools, electrical appliances, automobiles and auto parts, food and wine, as well as textiles/fashion are an important source of external revenue. The sectors that have attracted significant foreign investment include telecommunications, transportation, energy, and pharmaceuticals. The government remains open to foreign investment in shares of Italian companies and continues to make information available online to prospective investors.

Table 1: Key Metrics and Rankings
Measure Year Index/Rank Website Address
TI Corruption Perceptions Index 2021 42 of 180 http://www.transparency.org/research/
cpi/overview
Global Innovation Index 2021 29 of 132 https://www.globalinnovationindex.org/
analysis-indicator
U.S. FDI in partner country ($M USD, historical stock positions) 2021 $31,093 https://www.bea.gov/international/
direct-investment-and-multinational-
enterprises-comprehensive-data
World Bank GNI per capita 2020 $32,290 http://data.worldbank.org/indicator/NY.GNP.PCAP.CD

1. Openness To, and Restrictions Upon, Foreign Investment

Italy is an open economy and welcomes foreign direct investment (FDI). As an EU member state, Italy is bound by the EU’s treaties and laws. Under EU treaties with the United States, as well as OECD commitments, Italy is generally obliged to provide national treatment to U.S. investors established in Italy or in another EU member state.

EU and Italian antitrust laws provide Italian authorities with the right to review mergers and acquisitions for market dominance. In addition, the Italian government may block mergers and acquisitions involving foreign firms under its investment screening authority (known as “Golden Power”) if the proposed transactions raise national security concerns. Enacted in 2012 and further implemented through decrees or follow-on legislation in 2015, 2017, 2019, 2020, and 2022, the Golden Power law allows the Government of Italy (GOI) to block foreign acquisition of companies operating in strategic sectors: defense/national security, energy, transportation, telecommunications including 5G and cloud computing, critical infrastructure, sensitive technology, and nuclear and space technology.  Under the April 6, 2020, Liquidity Decree the Prime Minister’s Office issued, the government strengthened Italy’s investment screening authority to cover all sectors outlined in the EU’s March 2019 foreign direct investment screening directive. The decree also extends (and has been renewed until December 31, 2022) Golden Power review to certain transactions by EU-based investors and gives the government new authorities to investigate non-notified transactions. Embedded in a broader government decree issued on March 18, 2022, the latest revision of the Golden Power investment screening authority reflects the government’s effort to adapt to both rapid developments in technology and recent shifts in the geopolitical landscape.  The proposed restructuring of the Golden Power mechanism revolves around three poles: the first enlarges Golden Power’s scope to capture emerging and critical technology, including cloud-based activities of strategic importance to the national defense and security system; the second proposes a requirement that companies submit to the Golden Power committee for approval annual procurement plans; and the third empowers a ten-expert committee to carry out investigations to monitor compliance, and also establishes strict penalties and enforcement mechanisms for non-compliance. The decree is in force for 60 days by which time it will need to be passed by the Italian parliament.

The Italian Trade Agency (ITA) is responsible for foreign investment attraction as well as promoting foreign trade and Italian exports. ITA operates under the coordination of the Italian Ministry of Economic Development and the Ministry of Foreign Affairs. As of April 2022, ITA operates through a network of 79 offices in 65 countries. ITA promotes foreign investment in Italy through Invest in Italy program: http://www.investinitaly.com/en/ . The Foreign Direct Investment Unit is the dedicated unit of ITA for facilitating the establishment and development of foreign companies in Italy. ITA supports foreign investors from location scouting to bureaucratic consulting to aftercare following the establishment of their business (e.g., visas, expansion projects, etc.).

While not directly responsible for investment attraction, SACE, Italy’s export credit agency, has additional responsibility for guaranteeing certain domestic investments. Foreign investors – particularly in energy and infrastructure projects – may see SACE’s project guarantees and insurance as further incentive to invest in Italy.

Additionally, Invitalia is the national agency for inward investment and economic development operating under the Italian Ministry of Economy and Finance. The agency focuses on strategic sectors for development and employment. Invitalia finances projects both large and small, targeting entrepreneurs with concrete development plans, especially in innovative and high-value-added sectors. For more information, see https://www.invitalia.it/eng . The Ministry of Economic Development ( https://www.mise.gov.it/index.php/en/ ) within its Directorate for Incentives to Businesses also has an office with some responsibilities relating to attraction of foreign investment.

Italy’s main business association (Confindustria) also helps companies in Italy: https://www.confindustria.it/en .

Under EU treaties and OECD obligations, Italy is generally obliged to provide national treatment to U.S. investors established in Italy or in another EU member state. EU and Italian antitrust laws provide national authorities with the right to review mergers and acquisitions over a certain financial threshold. The Italian government may block mergers and acquisitions involving foreign firms to protect the national strategic interest or in retaliation if the government of the country where the foreign firm is from applies discriminatory measures against Italian firms. Foreign investors in the defense and aircraft manufacturing sectors are more likely to encounter resistance from the many ministries involved in reviewing foreign acquisitions than are foreign investors in other sectors.

Italy maintains a formal national security screening process for inbound foreign investment in the sectors of defense/national security, transportation, energy, telecommunications, critical infrastructure, sensitive technology, and nuclear and space technology through its “Golden Power” legislation. Italy expanded its Golden Power authority in March 2019 to include the purchase of goods and services related to the planning, realization, maintenance, and management of broadband communications networks using 5G technology. Under the April 6, 2020, Liquidity Decree the Prime Minister’s Office issued, the government strengthened Italy’s investment screening authority to cover all sectors outlined in the EU’s March 2019 foreign direct investment screening directive. The EU regulations cover: (1) critical infrastructure, physical or virtual, including energy, transport, water, health, communications, media, data processing or storage, aerospace, defense, electoral or financial infrastructure, and sensitive facilities, as well as land and real estate; (2) critical technologies and dual use items, including artificial intelligence, robotics, semiconductors, cybersecurity, aerospace, defense, energy storage, quantum and nuclear technologies, and nanotechnologies and biotechnologies; (3) supply of critical inputs, including food security, energy, and raw materials; (4) access to sensitive information; and (5) freedom of the media. The 2020 decree also extended (and has been renewed until December 31, 2022) Golden Power review to certain transactions by EU-based investors and gives the government new authorities to investigate non-notified transactions. Embedded in a broader government decree issued on March 18, 2022, the latest revision of the Golden Power investment screening authority reflects the government’s effort to adapt to both rapid developments in technology and recent shifts in the geopolitical landscape.  The proposed restructuring of the Golden Power mechanism revolves around three poles: the first enlarges Golden Power’s scope to capture emerging and critical technology, including cloud-based activities of strategic importance to the national defense and security system; the second proposes a requirement that companies submit to the Golden Power committee for approval annual procurement plans; and the third empowers a ten-expert committee to carry out investigations to monitor compliance, and also establishes strict penalties and enforcement mechanisms for non-compliance. The decree is in force for 60 days by which time it will need to be passed by the Italian parliament.

Italy has a business registration website, available in Italian and English, administered through the Union of Italian Chambers of Commerce: http://www.registroimprese.it.  The online business registration process is clear and complete, and available to foreign companies. Before registering a company online, applicants must obtain a certified e-mail address and digital signature, a process that may take up to five days. A notary is required to certify the documentation. The precise steps required for the registration process depend on the type of business being registered. The minimum capital requirement also varies by type of business. Generally, companies must obtain a value-added tax account number (partita IVA) from the Italian Revenue Agency; register with the social security agency (Istituto Nazionale della Previdenza Sociale INPS); verify adequate capital and insurance coverage with the Italian workers’ compensation agency (Istituto Nazionale per L’Assicurazione contro gli Infortuni sul Lavoro – INAIL); and notify the regional office of the Ministry of Labor. According to the World Bank Doing Business Index 2020, Italy’s ranking decreased from 67 to 98 out of 190 countries in terms of the ease of starting a business; it takes seven procedures and 11 days to start a business in Italy. Additional licenses may be required, depending on the type of business to be conducted.

Invitalia and the Italian Trade Agency’s Foreign Direct Investment Unit assist those wanting to set up a new business in Italy. Many Italian localities also have one-stop shops to serve as a single point of contact for, and provide advice to, potential investors on applying for necessary licenses and authorizations at both the local and national level. These services are available to all investors.

Italy neither promotes, restricts, nor incentivizes outward investment, nor restricts domestic investors from investing abroad.

Luxembourg

Executive Summary

Luxembourg, the only Grand Duchy in the world, is a landlocked country in northwestern Europe surrounded by Belgium, France, and Germany. Despite its small landmass and small population (634,700), Luxembourg is the second-wealthiest country in the world when measured on a Gross Domestic Product (GDP) per capita basis.

Since 2002, the Luxembourg Government has proactively implemented policies and programs to support economic diversification and to attract foreign direct investment. The Government focused on key innovative industries that showed promise for supporting economic growth: logistics, information, and communications technology (ICT), health technologies including biotechnology and biomedical research; clean energy technologies, and most recently, space technology and financial services technologies. With the COVID-19 pandemic, the health-tech sector has become a priority sector to attract to Luxembourg.

Luxembourg’s economy proved resilient during the COVID-19 pandemic, as 2020 GDP only contracted by 1.3 percent. Luxembourg’s economy rebounded strongly in 2021 with a growth rate of 6.9 percent. Luxembourg fared better than the EU growth rate of 5 percent. This rebound is due to a well-performing financial sector which managed to quickly revert to telework and only suffered limited effects of the pandemic. The Government of Luxembourg also provided a major economic stimulus package of 11 billion euros ($13 billion), equivalent to 18.5 percent of Luxembourg GDP, which helped stabilize the economy. This package includes direct subsidies and compensatory payments to companies, state-guaranteed loans, deferral of taxes, and social security contributions. The Government of Luxembourg borrowed a total of 5 billion euros ($6 billion) at negative interest rates due to the Grand Duchy’s Triple A credit rating.

Unemployment decreased 6.3 to 5.2 percent in 2021 and went back to pre-pandemic levels. This rapid job market recovery was supported by the government’s part-time employment reimbursement scheme, which allows workers to go on extended leave while receiving 80 percent of their salary and keeping their job. This measure cost the State of Luxembourg 1.3 billion euros in 2020 and 216 million euros in 2021.

The Russian invasion of Ukraine represents a major downside risk for the Luxembourg economy, with rising energy prices and a general spike in inflation stifling growth in 2022. The forecast 3.5 percent growth rate for 2022 might be out of reach.

Luxembourg remains a financial powerhouse thanks to the exponential growth of the investment fund sector through the launch and development of cross-border funds (UCITS) in the 1990s. Luxembourg is the world’s second largest investment fund asset domicile, after only the United States, with over $6 trillion of assets in custody in financial institutions.

Luxembourg has committed to the EU target of 55 percent Greenhouse Gas (GHG) Emissions reductions by 2030 and net-zero emission by 2050, and has also set itself a national target of 25 percent renewable energy and 35-40 percent energy efficiency improvement by 2030.

  • Luxembourg is consistently ranked as one of the world’s most open and transparent economies and has no restrictions on foreign ownership. It is also consistently ranked as one of the world’s most competitive and least-corrupt economies.
  • Over the past decade, Luxembourg has adopted major fiscal reforms to counter money-laundering, terrorist-financing, and tax evasion.
  • The Government of Luxembourg actively supports the development of new sectors to diversify the country’s economy, given the dominance of the financial sector. Target sectors include space, logistics, and information technology, including financial technology and biomedicine.
  • Luxembourg launched its SpaceResources.lu initiative in 2016, and, in 2017, announced a fund offering financial support for the space resources industry. More than 50 companies dedicated to space initiatives are now active in Luxembourg. Luxembourg added an additional space fund in early 2020 to further bolster its status as a space startup nation.
  • Luxembourg has positioned itself as “the gateway to Europe” to establish European company headquarters operations by virtue of its central European location and advanced road, railway, and air connectivity. Due to uncertainties related to Brexit, 50 insurers, asset managers and banking institutions have decided to re-locate their EU headquarters to Luxembourg or transfer a significant part of their activity to the country.
  • Luxembourg is actively seeking logistics companies to expand the new logistics hub at Luxembourg Airport, home to Cargolux, Europe’s largest all cargo airline. Inaugurated in 2017, the Luxembourg Intermodal Terminal (LIT) is ideally positioned as an international hub for the consolidation of multimodal transport flows across Europe and beyond.

Luxembourg is also seeking ICT companies to use the existing high-security, state-of-the-art datacenters, affording high-speed internet connectivity to major international data hubs. Luxembourg has set up a high-performance computer which will be part of the EU’s high-performance computer network called EURO HPC

Table 1: Key Metrics and Rankings
Measure Year Index/Rank Website Address
TI Corruption Perceptions Index 2021 9 of 180 http://www.transparency.org/research/cpi/overview 
Global Innovation Index 2021 23 of 132 https://www.globalinnovationindex.org/analysis-indicator 
U.S. FDI in partner country ($M USD, historical stock positions) 2020 759,400 https://apps.bea.gov/international/factsheet/ 
World Bank GNI per capita 2020 80,860 https://data.worldbank.org/indicator/NY.GNP.PCAP.CD 

1. Openness To, and Restrictions Upon, Foreign Investment

Luxembourg offers a public policy framework and political stability, which remain highly attractive for foreign investors, particularly for U.S. investors, given the focus on growth sectors and the historically strong bilateral relationship between the two countries. The government has increased its outreach toward companies looking to expand in Europe. Luxembourg is in the process of implementing the EU standards for the screening of foreign investment but missed the Fall 2020 implementation deadline.

In 2017, Luxembourg’s Deputy Prime Minister and Minister of the Economy and Foreign Trade, Etienne Schneider, unveiled a strategy to promote economic growth focusing on attracting FDI and supporting companies’ moving into other markets. The Luxembourg “Let’s Make It Happen” campaign, developed by the state Trade and Investment Board, focuses on five key objectives:

  • Improving Luxembourg-based companies’ access to international markets
  • Attracting FDI in a “targeted, service-oriented” way
  • Strengthening the country’s international “economic-promotion network”
  • Improving Luxembourg’s image as a “smart location” for high-performance business and industry
  • Ensuring the coherence of economic promotion efforts

There is no overall economic or industrial strategy that has discriminatory effects on foreign investors, either at a market-access or post-establishment phase of investment. Luxembourg strives to attract and retain foreign investors with its unique model of “easy access to decision makers” and its known ability to “act swiftly.”

The Trade and Investment Board has taken the lead in investment promotion and includes representatives from the ministries of Economy, Higher Education and Research, Finance, Foreign and European Affairs, and State. Public-private trade associations such as FEDIL (Business Federation of Luxembourg, the main employers’ trade association), the Luxembourg Chamber of Commerce, and the Chamber of Skilled Trades and Crafts, as well as Luxinnovation, are also represented.

The Board is working in cooperation with Luxembourg embassies and trade and investment offices worldwide, as well as economic and commercial attachés, honorary consuls, and foreign trade advisers, to attract FDI and retain investors. In 2016, the Ministry of the Economy expanded the role of Luxinnovation to incorporate promotion of Luxembourg abroad and to attract FDI into the country. Luxinnovation is a public private partnership agency that carries out business intelligence to target relevant investors and regions and also provides a soft-landing service for investors as they arrive in Luxembourg. The Covid-19 pandemic has led investor outreach efforts to be carried out virtually, and travel restrictions have led investors to prefer virtual meetings before traveling to the country.

There is a right for foreign and domestic private entities to establish and own business enterprises and engage in all forms of remunerative activity. There are no limits on foreign ownership/control or sector-specific restrictions.

General screening of foreign investment exists in line with that of domestic investment. There are no major sectors/matters in Luxembourg in which foreign investors are denied national (domestic) treatment. Luxembourg is in the process of implementing the EU rules for investment screening, to be adopted by Parliament in the Summer of 2022. By implementing these rules, Luxembourg will adopt a formal investment screening process to replace the previous ad-hoc and case by case screening, which lacks transparency.

Luxembourg is included in Trade Policy Reviews (TPRs) of the EU/EC; see the TPR gateway for explanations and background.

In terms of the United Nations Conference on Trade and Development (UNCTAD) Global Action Menu for Investment Facilitation, Luxembourg’s business facilitation efforts are aligned with most of the recommended action points. Over the past decade, Luxembourg has been furthering accessibility and transparency in investment policies and regulations, as well as procedures relevant to investors. Luxembourg ranks 76th in the World Bank’s starting a business ranking, indicating it takes 16.5 days to set up a business in the country.

The Government has improved the efficiency of investment administrative procedures, notably in the context of the overall “Digitization” movement to offer a multitude of government services online or electronically. This has led to the time it takes to start a business being reduced by 2-3 months.

The Government provides a website in multiple languages, including English, that explains the business registration process: http://www.guichet.public.lu/en . A new business must register with the Registry of Commerce (Registre du Commerce: http://www.lbr.lu.) Foreign companies can use the site (after translating from the original French language), but it is best to consult with a local lawyer or fiduciary to complete the overall process. It is necessary to engage a notary to submit the company’s by-laws for registration.

In 2017, the Government reduced the required minimum capitalization of a new company from 12,500 euro to just 1 euro (symbolic), to encourage start-up creation. Between January 2017 and January 2018, over 680 such simplified limited liability companies (Société à responsabilité limitée simplifiée SARL-S) have registered. According to the Luxembourgish Chamber of Commerce, one client out of three has requested information on SARL-S.

After receiving a certificate from the Registry of Commerce, companies are required by law to register with and pay annual dues to the Luxembourg Chamber of Commerce, as well as the Social Security Administration, the Tax Administration (Administration des Contributions Directes) and the Value-Added-Tax Authority (TVA = taxe à la valeur ajoutée). The company will receive an official registration number reflecting the date of inception of the entity, and this number will be used in all business transactions and correspondence with administrative authorities.

The House of Entrepreneurship (HOA), opened in 2016 within the Luxembourg Chamber of Commerce, also provides guidance on the entire registration and creation process of a business. HOA receives over 10,000 enquiries per year by entrepreneurs interested in setting up a business in the country. The organization plays a key role during the COVID-19 pandemic, as it serves as a point of contact and information for businesses looking to apply for Government aid.

The Ministry of Economy continues to support networks and associations acting in favor of female entrepreneurship. The Law of December 15, 2016 incorporated the principle of equal salaries in the Grand Duchy’s legislation, which makes illegal any difference in the salaries paid to men and women carrying out the same task or work of equal value. As a result, Luxembourg had the lowest gender pay gap in the EU in 2021.

In general, the instruments that are most effective are outside the jurisdiction of the Ministry of Economy but are critical. For example, there has been an increase in the number of childcare centers close to business districts which helps dual career families.

The same government services website listed above, http://www.guichet.public.lu/en , includes an “International Trade” tab which provides guidance on outward investment by Luxembourgish companies on various topics, including intra-EU trade and services; import, export, and transit; licensing; and transport. The Luxembourg Government promotes outward investment via the Trade and Investment Board, which functions as a promotion entity for both inward and outward investment.

The “Let’s Make It Happen” initiative, among its many missions, is working to facilitate access to international markets for Luxembourgish companies and to strengthen Luxembourg’s international economic promotion network. Luxembourg does not restrict domestic investors from investing abroad.

Luxembourg also has a public export credit agency, the Office du Ducroire to help companies engage in export and outward investment through funding and export insurance.

In 2020, the Office du Ducroire has insured over 970 million dollars of new transactions and has paid over 1 million dollars of financial support for exports.

Portugal

Executive Summary

The Portuguese economy bounced back from the pandemic, expanding by 4.9 percent in 2021 after an 8.4 percent contraction the prior year, benefitting from EU fiscal and monetary stimulus and a very high vaccination rate. The labor market has shown remarkable resiliency, with unemployment at 6 percent in January 2022, down from 7 percent a year before. GDP is expected to grow again by an estimated 5 percent in 2022, despite the economic shocks from the Russian war against Ukraine

The country will have a chance to boost its economic recovery, deploying more than €16 billion in EU grants and credit expected to fund state coffers between 2021 and 2026. It is expected these funds will be allocated in support of energy and digital transitions.

Increased flows of fossil fuels contributed to a 40 percent jump in trade in goods and services between Portugal and the United States to a record $10 billion in 2021. However, bilateral trade remains lop-sided with a large U.S. trade deficit of around $2.2 billion. Many U.S. companies nvest in business/service delivery centers in Portugal, taking advantage of Portugal’s relatively low-cost, talented, and multilingual labor force.

The country continues to push to improve market attractiveness. Portugal’s export and FDI promotion agency (AICEP) celebrated a record €2.7 billion of contracted FDI in 2021, double that locked-in during the last (2019) high mark. Portugal’s metalworking, auto component, and machinery industries predominate the recent FDI trends, accounting for about 30 percent of the contracted flows, according to the Government .

Portugal’s tech startup scene is thriving, featuring at least six fast-growing firms with ‘Portuguese-U.S. DNA’ that achieved ‘unicorn’ status with valuations above $1 billion– Outsystems, Talkdesk, Feedzai, Remote, SwordHealth and Anchorage. These high-tempo firms are flourishing after tapping into opportunities in the U.S. startup ecosystem that provides not only funding but also knowhow, networks, and customers, ultimately producing jobs on both sides of the Atlantic.

Established in 2012, Portugal’s “Golden Visa” program gives fast-track residence permits to foreign investors who meet certain conditions, such as making substantial capital transfers or certain real estate acquisitions. Between 2012 and February 2022, Portugal issued 10,442 ‘Golden Visas’, representing €6.2 billion of investment, of which more than €5.6 billion went to real estate. Chinese nationals have been the main beneficiaries of the special program for residence permits, accounting for almost 50 percent (5,066) of the 10,442 total, followed by Brazilians with 1,072. Russian citizens were assigned 431 Golden visas since 2012. As of January 2022, Portugal modified the “Golden Visa” program to restrict the purchase of real estate to regions outside urban hotspots such as Lisbon, Porto, and overbuilt areas of the popular Algarve with the aim of boosting rural investment. Loopholes in the program appear to be enabling urban purchases in any event. On March 28, the European Commission urged member states to immediately repeal existing investor citizenship schemes, which the Commission claimed pose inherent risks.

In terms of risks, the independent Portuguese data protection agency (CNPD) has targeted U.S. companies by issuing a succession of judicial opinions warning against the use of U.S. technology firms – including Cloudflare, Respondus, and Amazon Web Services (AWS), arguing that as they are headquartered in the United States and therefore subject to U.S. law, by definition, they have inadequate data privacy standards. CNPD has not found any specific wrongdoing by any U.S. technology firm but bases its rulings on the grounds that a target company is headquartered in the United States. On March 25, President Biden and EU Commission President von der Leyen announced a deal in principle on the Trans-Atlantic Data Privacy Framework, which will supplement the U.S.-EU Privacy Shield Framework (Privacy Shield). However, it remains to be seen how this new Trans-Atlantic Data Privacy Framework will affect EU-U.S. data flows in Portugal.

Portugal ranks second highest in terms of PRC investments in Europe (in relation to GDP). These investments are predominantly in the premier Portuguese companies, which the PRC leverages to reach other markets in Europe, Latin America, and Africa. Portugal’s investment screening regime was established in 2014, but the Government of Portugal has never strictly enforced it.

Despite the security risks, the Government continues to allow investments by and collaboration with untrusted vendors in 5G and Artificial Intelligence (AI). Huawei is using its educational and gender-equity programs to increase influence with high achieving students and access to key technology policymakers in the Government and private sector. The PRC is also attempting to gain a foothold in Portuguese 5G, AI, solar, and related infrastructure industries.

Portugal’s public debt, estimated at 127percent of GDP at the end of 2021, remains an issue, particularly if there is a shift in the benign monetary and sovereign risk sentiment that enabled Lisbon to enjoy issuing debt at record low prices in the last few years. The pace of corporate and household indebtedness has also increased.

Portugal’s primary trading partners are Spain, France, Germany, the United Kingdom, and the United States. Portugal suffers an acute brain drain, with high emigration rates among professionals leaving for higher paying careers in Switzerland, France, the UK, and elsewhere.

Beyond Europe, Portugal maintains significant links with Portuguese-speaking countries including Brazil, Angola, Mozambique, Cape Verde, and Guinea-Bissau. Portugal has one of the lowest fertility rates in Europe and net immigration (from Ukraine, Brazil, and other Portuguese-speaking countries) has prevented a fall in population.

Russia’s invasion of Ukraine will impact the Portuguese growth curve. Except for grain imports from Ukraine, energy intermediate goods, and liquified natural gas (LNG) imports from Russia, the country’s trade and investment relationship with both countries is limited. In LNG specifically, Russia accounted for 15 percent of imports, well below the 45 percent EU average. However, Portugal is a net importer of energy products, fully dependent on outside supply of crude and refined fossil fuels. It also imports natural gas for energy and generation, which acts as a key complement to the fast-growing renewable energy footprint of its solar, wind and hydro power assets. The country’s commercial balance will be negatively impacted by a long period of high global energy prices.

Portugal’s low installed solar capacity of about 7 percent of the energy mix is expected to reach 8 GW of solar capacity, or 27 percent of the mix by 2030. The Government is promoting significant investments in wind and solar energy development to meet its target of 47 percent energy from renewables by 2030. By 2021 the country reduced its external energy dependence by 9 percentage points (from 2005), seeking greater supply security by increasing domestic energy generation and reducing the consumption of primary energy by 17 percent. The Government has also talked about plans to launch a 2-5 GW offshore wind auction this summer (without providing details), in hopes of speeding up the deployment of large-scale offshore wind capacity to reduce energy dependence on Russia.

Portugal’s path to a carbon neutral economy includes incentives for energy efficiency; promoting diversification of energy sources; increasing electrification; reinforcing and modernizing infrastructure; developing more interconnections; market stability for investors; reconfiguring and digitalizing the market; incentives for research and innovation, promoting low-carbon processes, products and services; and improving energy services and information for consumers.

Table 1: Key Metrics and Rankings
Measure Year Index/Rank Website Address
TI Corruption Perceptions Index 2021 32 of 180 http://www.transparency.org/research/cpi/overview
Global Innovation Index 2021 31 of 132 https://www.globalinnovationindex.org/analysis-indicator
U.S. FDI in partner country ($M USD, historical stock positions) 2020 USD 2.54 billion https://apps.bea.gov/international/factsheet/
World Bank GNI per capita 2020 USD 21,790 https://data.worldbank.org/indicator/NY.GNP.PCAP.CD

1. Openness To, and Restrictions Upon, Foreign Investment

The Government of Portugal (GOP) actively pursues and protects foreign investment, seeing it as a driver of economic growth, with a very positive attitude toward foreign direct investment (FDI). Portuguese law is based on non-discrimination principles, meaning foreign and domestic investors are subject to the same rules. Foreign investment is not subject to any special registration or notification to any authority, with exception of a few specific activities.

The Portuguese Agency for Foreign Investment and Commerce (AICEP) is the lead for promotion of trade and investment. AICEP is responsible for attracting FDI, global promotion of Portuguese brands, and export of goods and services. It is the primary point of contact for investors with projects over € 25 million or companies with a consolidated turnover of more than € 75 million. For foreign investments not meeting these thresholds, AICEP will make a preliminary analysis and direct the investor to assistance agencies such as the Institute of Support to Small- and Medium- Sized Enterprises and Innovation (IAPMEI), a public agency within the Ministry of Economy that provides technical support, or to AICEP Capital Global, which offers technology transfer, incubator programs, and venture capital support. AICEP does not favor specific sectors for investment promotion. It does, however, provide a “Prominent Clusters” guide on its website, where it advocates investment in Portuguese companies by sector. Additionally, Portugal has introduced the website Simplex, designed to help navigate starting a business.

The Portuguese government maintains regular contact with investors through the Confederation of Portuguese Business (CIP), the Portuguese Commerce and Services Confederation (CCP), the Portuguese Chamber of Commerce and Industry (CCIP) and other industry associations.

There are no legal restrictions in Portugal on foreign investment. To establish a new business, foreign investors must follow the same rules as domestic investors, including mandatory registration and compliance with regulatory obligations for specific activities. There are no nationality requirements and no limitations on the repatriation of profits or dividends.

Non-resident shareholders must obtain a Portuguese taxpayer number for tax purposes. EU residents may obtain this number directly from the tax administration (in person or by means of an appointed proxy); non-EU residents must appoint a Portuguese resident representative to handle matters with tax authorities.

Portugal enacted a national security investment review framework in 2014 which gave the Council of Ministers authority to block specific foreign investment transactions that would compromise national security. Reviews can be triggered on national security grounds in strategic industries like energy, transportation, and communication. Investment reviews can be conducted in cases where the purchaser acquiring control is an individual or entity not registered in an EU member state. In such instances, the review process is overseen by the relevant Portuguese Ministry based on the assets in question. Portugal has yet to activate its investment screening mechanism.

Portuguese government approval is required in the following sensitive sectors: defense, water management, public telecommunications, railways, maritime transportation, and air transport. Any economic activity that involves the exercise of public authority also requires government approval; private sector companies can operate in these areas only through a concession contract.

Portugal additionally limits foreign investment with respect to the production, transmission, and distribution of electricity, the production of gas, the pipeline transportation of fuels, wholesale services of electricity, retailing services of electricity and non-bottled gas, and services incidental to electricity and natural gas distribution. Concessions in the electricity and gas sectors are assigned only to companies with headquarters and effective management in Portugal.

Investors wishing to establish new credit institutions or finance companies, acquire a controlling interest in such financial firms, and/or establish a subsidiary must have authorization from the Bank of Portugal (for EU firms) or the Ministry of Finance (for non-EU firms). Non-EU insurance companies seeking to establish presence in Portugal must post a special deposit and financial guarantee and must have been authorized for such activity by the Ministry of Finance for at least five years.

In the past five years, the Government has not undergone any third-party investment policy reviews (IPRs) through a multilateral organization such as the OECD, WTO, UNCTAD, or UN Working Group on Business and Human Rights.

To combat the perception of a cumbersome regulatory environment, the government has created ‘cutting red tape’ measures described in the website Simplex  (simplex.gov.pt) that details steps taken since 2005 to reduce bureaucracy, and the Empresa na Hora  (“Business in an Hour”) program that facilitates company incorporations by citizens and non-citizens.

In 2007, the government established AICEP, a promotion agency for investment and foreign trade that also manages industrial parks and provides business location solutions for investors through its subsidiary AICEP Global Parques.

Established in 2012, Portugal’s “Golden Visa” program gives fast-track residence permits to foreign investors who meet certain conditions, such as making substantial capital transfers, creating and certain real estate acquisitions. Between 2012 and February 2022, Portugal issued 10,442 ‘Golden Visas’, representing €6.2 billion of investment, of which more than €5.6 billion went to real estate. Chinese nationals have been the main beneficiaries of the special program for residence permits, accounting for almost 50 percent (5,066) of the 10,442 total, followed by Brazilians with 1,072. Russian citizens were assigned 431 Golden visas since 2012. As of January 2022, Portugal modified the “Golden Visa” program to restrict the purchase of real estate to regions outside urban hotspots such as Lisbon, Porto and overbuilt areas of the popular Algarve with the aim of boosting rural investment. Loopholes in the program appear to be enabling urban purchases in any event. On March 28, the European Commission urged member states to immediately repeal existing investor citizenship schemes, which the Commission claimed pose inherent risks.

Other measures implemented to help attract foreign investment include the easing of some labor regulations to increase workplace flexibility and EU-funded programs.

Portuguese citizens can alternatively register a business online through the “Citizen’s Portal” available at Portal do Cidadão . Companies must also register with the Directorate General for Economic Activity (DGAE), the Tax Authority (AT), and with the Social Security administration. The government’s standard for online business registration is a two to three day turnaround, but the online registration process can take as little as one day.

Portugal defines an enterprise as micro-, small-, and medium-sized based on its headcount, annual turnover, or the size of its balance sheet. To qualify as a micro-enterprise, a company must have fewer than 10 employees and no more than €2 million in revenues or €2 million in assets. Small enterprises must have fewer than 50 employees and no more than €10 million in revenues or €10 million in assets. Medium-sized enterprises must have fewer than 250 employees and no more than €50 million in revenues or €43 million in assets. The Small- and Medium-Sized Enterprise (SME) Support Institute ( IAPMEI ) offers financing, training, and other services for SMEs based in Portugal.

More information on laws, procedures, registration requirements, and investment incentives for foreign investors in Portugal is available at AICEP’s website .

The Portuguese government does not restrict domestic investors from investing abroad. On the contrary, it promotes outward investment through AICEP’s customer managers, export stores and its external commercial network that, in cooperation with the diplomatic and consular network, are operating in about 80 markets. AICEP  provides support and advisory services on the best way of approaching foreign markets, identifying international business opportunities for Portuguese companies, particularly SMEs.

Spain

Executive Summary

Spain is open to foreign investment and actively seeks additional investment as a key component of its COVID-19 recovery. After six years of growth (2014-2019), Spain’s GDP fell 11 percent in 2020 – the worst performance in the Eurozone – due in large part to high COVID-19 infection rates, a strict three-month lockdown, border closures, and pandemic-related restrictions that decimated its tourism and hospitality sectors. By building on healthy fundamentals and fueled by up to 140 billion euros in Next Generation EU recovery funds, Spain rebounded with 5.1 percent GDP growth in 2021, and unemployment improved to 13.3 percent. Economic activity is expected to return to its pre-crisis level in 2023, though Russia’s unprovoked war in Ukraine could threaten the recovery by pushing up energy prices, compounding supply chain disruptions, and stoking inflation. Service-based industries, particularly those related to tourism, and energy-intensive industries remain most vulnerable to the economic shock. Spain’s key economic risks are high public debt levels and ballooning pension costs for its aging population, though these areas are targets for government reforms.

Despite COVID-19’s economic shock, Spain’s excellent infrastructure, well-educated workforce, large domestic market, access to the European Common Market, and leadership on renewable energy make it an appealing foreign investment destination. Spanish law permits up to 100 percent foreign ownership in companies, and capital movements are completely liberalized. According to Spanish data, in 2021, foreign direct investment flow into Spain was EUR 28.8 billion, 17.7 percent more than in 2020. Of this total, EUR 1.6 billion came from the United States, the fifth largest investor in Spain in new foreign direct investment. Foreign investment is concentrated in the energy, real estate, financial services, engineering, and construction sectors.

Spain aims to use its Next Generation EU recovery funds to transform the Spanish economy, especially through digitalization and greening of the economy, to achieve long-term increases in productivity and growth. Full financing is contingent on additional economic reforms beyond labor reform. Spain’s credit ratings remain stable, and issuances of public debt – especially for green bonds – have been oversubscribed, reflecting strong investor appetite for investment in Spain. However, small- and medium-sized enterprises (SMEs), which account for more than 99 percent of Spanish businesses and have been acutely impacted by the COVID-19 pandemic, still have some difficulty accessing credit and rely heavily on bank financing. Small firms also experience more challenges accessing EU recovery funds.

Table 1: Key Metrics and Rankings
Measure Year Index/Rank Website Address
TI Corruption Perceptions Index 2021 34 of 180 http://www.transparency.org/
research/cpi/overview
Global Innovation Index 2021 30 of 132 https://www.globalinnovationindex.org/
analysis-indicator
U.S. FDI in partner country ($M USD, historical stock positions) 2020 $38,500 https://apps.bea.gov/international/
factsheet/
World Bank GNI per capita 2020 USD 27,360 https://data.worldbank.org/indicator/
NY.GNP.PCAP.CD

1. Openness To, and Restrictions Upon, Foreign Investment

Foreign direct investment (FDI) played a significant role in modernizing the Spanish economy during the past 40 years. Foreign companies set up operations in large numbers to take advantage of Spain’s large domestic market, export possibilities, and growth potential. Spain’s automotive industry is mostly foreign-owned, and multinationals control half of the food production companies, one-third of chemical firms, and two-thirds of the cement sector. Foreign firms control about one-third of the insurance market.

The Government of Spain recognizes the value of foreign investment and sees it as a key part of its post COVID-19 economic recovery. U.S. FDI is especially attractive as Spain looks to deepen its transatlantic ties after Russia’s full-scale invasion of Ukraine. Spain offers investment opportunities in sectors and activities with significant added value. Spanish law permits 100 percent foreign ownership in investments (limits apply regarding audio-visual broadcast licenses and strategic sectors of the economy; see next section), and capital movements are completely liberalized. Due to its openness and the favorable legal framework for foreign investment, Spain has received significant foreign investments in knowledge-intensive activities.

New FDI into Spain increased by 17.7 percent in 2021 compared to 2020 when the COVID-19 pandemic reduced FDI, according to data from Spain’s Ministry of Industry, Trade, and Tourism. In 2020, acquisitions of existing companies were the predominant form of foreign investment, representing 42.7 percent of the total, compared to 17.8 percent of new greenfield and brownfield investments. In 2021 the United States, as ultimate beneficial owner, had a gross direct investment in Spain of EUR 4.2 billion, accounting for 14.5 percent of total investment and representing an increase of 1.5 percent compared to 2020. According to the latest available Spanish data, U.S. FDI stock in Spain totaled about $88.6 billion in 2019.

Spain has a favorable legal framework for foreign investors. The Spanish Constitution and Spanish law establish clear rights to private ownership, and foreign firms receive the same legal treatment as Spanish companies. There is no discrimination against public or private firms with respect to local access to markets, credit, licenses, and supplies.

Spain adapted its foreign investment rules to a system of general liberalization, and its inbound investment screening mechanism is focused on protecting national security. Law 18/1992, which established rules on foreign investments in Spain, provides a specific regime for non-EU persons investing in defense, aerospace, gambling, television, and radio. For EU investors, the only sectors with a specific regime are the manufacture and trade of weapons or national defense-related activities. For non-EU investors, the Spanish government restricts individual ownership of audio-visual broadcasting licenses to 25 percent. Specifically, Spanish law permits non-EU companies to own a maximum of 25 percent of a company holding a digital terrestrial television broadcasting license; and for two or more non-EU companies to own a maximum of 50 percent in aggregate. In addition, under Spanish law a reciprocity principle applies (art. 25.4 General Audiovisual Law). The home country of the (non-EU) foreign company must have foreign ownership laws that permit a Spanish company to make the same transaction in the audio-visual sector.

The Spanish government issued new regulations on foreign investment in March 2020 that stipulate prior authorization for foreign investments in critical sectors. Prior approval is also required if the foreign investor is controlled directly or indirectly by the government of another country, if the investor has invested or participated in sectors affecting the security, public order, or public health in another EU Member State, or if administrative or judicial proceedings have been initiated against the investor for exercising illegal or criminal activities. Failure to request authorization for a transaction is a serious infringement of the law. These new regulations are outlined below (see Laws and Regulations on Foreign Direct Investment).

Spain is a signatory to the convention on the Organization for Economic Co-operation and Development (OECD). Spain is also a member of the World Trade Organization (WTO) and the United Nations Conference on Trade and Development (UNCTAD). Spain has not undergone Investment Policy Reviews with these three organizations within the past three years.

To set up a company in Spain, the two basic requirements include incorporation before a Public Notary and filing a public deed with the Mercantile Register (Registro Mercantil). The public deed of incorporation of the company can be submitted electronically by the Public Notary. The Central Mercantile Register is an official institution that provides access to companies’ information supplied by the Regional Mercantile Registers after January 1, 1990. Any national or foreign company can use it but must also be registered and pay taxes and fees. According to the World Bank’s Doing Business report, it takes on average about two weeks to start a business in Spain.

“Invest in Spain” is the Spanish investment promotion agency to facilitate foreign investment. Services are available to all investors. It has partner offices in five major U.S. cities.

Useful web sites:
Mercantile register: http://www.rmc.es/Home.aspx
Mercantile register for the Madrid region: https://www.rmercantilmadrid.com/RMM/Home/Index.aspx
Investment promotion agency: http://www.investinspain.org/invest/es/cabecera/faq-s/establecimiento-de-una-empresa/index.html

Among the financial instruments approved by the Spanish Government to provide official support for the internationalization of Spanish enterprise are the Foreign Investment Fund (FIEX), the Fund for Foreign Investment by Small and Medium-sized Enterprises (FONPYME), the Enterprise Internationalization Fund (FIEM), and the Fund for Investment in the Tourism Sector (FINTUR). The Spanish Government also offers financing lines for investment in the electronics, information technology and communications, energy (renewables), and infrastructure concessions sectors.

Sweden

Executive Summary

Sweden is generally considered a highly favorable investment destination. Sweden offers an extremely competitive, open economy with access to new products, technologies, skills, and innovations. Sweden also has a well-educated labor force, outstanding communication infrastructure, and a stable political environment, which makes it a choice destination for U.S. and foreign companies. Low levels of corporate tax, the absence of withholding tax on dividends, and a favorable holding company regime are additional incentives for doing business in Sweden.

Sweden’s attractiveness as an investment destination is tempered by a few structural business challenges. These include high personal and VAT taxes. In addition, the high cost of labor, rigid labor legislation and regulations, a persistent housing shortage, and the general high cost of living in Sweden can present challenges to attracting, hiring, and maintaining talent for new firms entering Sweden. Historically, the telecommunications, information technology, healthcare, energy, and public transport sectors have attracted the most foreign investment. However, manufacturing, wholesale, and retail trade have also recently attracted increased foreign funds.

Overall, investment conditions remain largely favorable. In the World Economic Forum’s 2019 Competitiveness Report, Sweden was ranked eight out of 138 countries in overall competitiveness and productivity. The report highlighted Sweden’s strengths: human capital (health, education level, and skills of the population), macroeconomic stability, and technical and physical infrastructure. Bloomberg’s 2021 Innovation Index ranked Sweden fifth among the most innovative nations on earth; a pattern reinforced by Sweden ranked second on the European Commission’s 2021 European Innovation Scoreboard and second on the World Intellectual Property Organization/INSEAD 2021 Global Innovation Index. Also in 2021, Transparency International ranked Sweden as one of the most corruption-free countries in the world – fourth out of 180. Sweden is perceived as a creative place with interesting research and technology. It is well equipped to embrace the Fourth Industrial Revolution with a superior IT infrastructure and is seen as a frontrunner in adopting new technologies and setting new consumer trends. U.S. and other exporters can take advantage of a test market full of demanding, highly sophisticated customers.

The COVID-19 pandemic considerably impacted the Swedish economy, but following several fiscal stimulus packages, a successful vaccination rollout, and a relaxation of pandemic-related restrictions, Sweden’ economy has recovered fully to pre-pandemic levels with no notable impact on the investment climate. Climate and the environment are a central concern for the Swedish government, political parties across the political spectrum, businesses, and the public at large. Successive Swedish governments have actively lobbied for ambitious action to protect the environment and to curb greenhouse gases within a multilateral, internationally binding framework and by welcoming research, innovation, and investment within the fields of climate and the environment.

Table 1: Key Metrics and Rankings
Measure Year Index/Rank Website Address
TI Corruption Perceptions Index 2021 4 of 175 http://www.transparency.org/research/cpi/overview
Global Innovation Index 2021 2 of 131 https://www.globalinnovationindex.org/analysis-indicator
U.S. FDI in partner country ($M USD, historical stock positions) 2020 $63,847 https://www.bea.gov/international/di1usdbal
World Bank GNI per capita 2020 $54,050 http://data.worldbank.org/indicator/NY.GNP.PCAP.CD

1. Openness To, and Restrictions Upon, Foreign Investment

There are no laws or practices that discriminate or are alleged to discriminate against foreign investors, including and especially U.S. investors, by prohibiting, limiting, or conditioning foreign investment in a sector of the economy (either at the pre-establishment (market access) or post-establishment phase of investment). Until the mid-1980s, Sweden’s approach to direct investment from abroad was quite restrictive and governed by a complex system of laws and regulations. Sweden’s entry into the European Union (EU) in 1995 largely eliminated all restrictions. Restrictions to investment remain in the defense and other sensitive sectors, as addressed in the next section “Limits on Foreign Control and Right to Private Ownership and Establishment.”

The Swedish Government recognizes the need to further improve the business climate for entrepreneurs, education, and the flow of research from lab to market. Swedish authorities have implemented a number of reforms to improve the business regulatory environment and to attract more foreign investment. In addition, Sweden introduced supplementary provisions to the EU Regulation on Foreign Direct Investments (adopted in March 2019), which entered into force November 1, 2020. Sweden is in the process of drafting its domestic Investment Screening Regime, and the government commission report has been circulated for comments. A final comprehensive regime is expected to enter into force in 2023. In the meantime, Sweden does however have the obligation and ability to review and prevent investments that pose national security threats.

There are very few restrictions on where and how foreign enterprises can invest, and there are no equity caps, mandatory joint-venture requirements, or other measures designed to limit foreign ownership or market access. However, Sweden does maintain some limitations in a select number of situations:

  • Accountancy: Investment in the accountancy sector by non-EU-residents cannot exceed 25 percent.
  • Legal services: Investment in a corporation or partnership carrying out the activities of an “advokat,” a lawyer, cannot be done by non-EU residents.
  • Air transport: Foreign enterprises may be restricted from access to international air routes unless bilateral intergovernmental agreements provide otherwise.
  • Air transport: Cabotage is reserved to national airlines.
  • Maritime transport: Cabotage is reserved to vessels flying the national flag.
  • Defense: Restrictions apply to foreign ownership of companies involved in the defense industry and other sensitive areas.
  • On January 1, 2020, Sweden enacted new regulations giving Swedish armed forces and security services authority to deny or revoke operating licenses to mobile radio providers that threaten national security.

Swedish company law provides various ways a business can be organized. The main difference between these forms is whether the founder must own capital and to what extent the founder is personally liable for the company’s debt. The Swedish Act (1992:160) on Foreign Branches applies to foreign companies operating through a branch and also to people residing abroad who run a business in Sweden. A branch must have a president who resides within the European Economic Area (EEA). All business enterprises in Sweden (including branches) are required to register at the Swedish Companies Registration Office, Bolagsverket. An invention or trademark must be registered in Sweden in order to obtain legal protection. A bank from a non-EEA country needs special permission from the Financial Supervisory Authority, Finansinspektionen, to establish a branch in Sweden. Sweden also adheres to EU regulations on investment screening and approval mechanisms for inbound foreign investment.

Sweden has in the past five years not undergone an investment policy review (IPRs) by the World Trade Organization (WTO), the United Nations Committee on Trade and Development (UNCTAD), the United Nations Working Group on Business and Human Rights, or the Organization for Economic Cooperation and Development (OECD). In the past five years, Sweden has not undergone a review of investment policy-related concerns by civil society organizations, including those based in the host country or in third countries.

Business Sweden’s Swedish Trade and Invest Council is the investment promotion agency tasked with facilitating business. The services of the agency are available to all investors.

All forms of business enterprise, except for sole traders, have to be registered with the Swedish Companies Registration Office, Bolagsverket, before starting operations. Sole traders may apply for registration in order to be given exclusive rights to the name in the county where they will be operating. Online applications to register an enterprise can be made at https://www.bolagsverket.se/en  and are open to foreign companies. The process of registering an enterprise is clear and can take a few days or up to a few weeks, depending on the complexity and form of the business enterprise. All business enterprises, including sole traders, need also to be registered with the Swedish Tax Agency, Skatteverket, before starting operations. Relevant information and guides can be found at http://www.skatteverket.se . Depending on the nature of business, companies may need to register with the Environmental Protection Agency, Naturvårdsverket, or, if real estate is involved, the county authorities. Non-EU/EEA citizens need a residence permit, obtained from the Swedish Board of Migration, Migrationsverket, in order to start up and/or run a business. A compilation of Swedish government agencies that work with registering, starting, running, expanding and/or closing a business can be found at http://www.verksamt.se .

The Government of Sweden has commissioned the Swedish Exports Credit Guarantee Board (EKN) to promote Swedish exports and the internationalization of Swedish companies. EKN insures exporting companies and banks against non-payment in export transactions, thereby reducing risk and encouraging the expansion of operations. As part of its export strategy presented in 2015, the Swedish Government has also launched Team Sweden to promote Swedish exports and investment. Team Sweden is tasked with making export market entry clear and simple for Swedish companies and consists of a common network for all public initiatives to support exports and internationalization.

The Government does not generally restrict domestic investors from investing abroad. The only exceptions are related to matters of national security and national defense; the Inspectorate of Strategic Products (ISP) is tasked with control and compliance regarding the sale and export of defense equipment and dual-use products. ISP is also the National Authority for the Chemical Weapons Convention and handles cases concerning targeted sanctions.

The Netherlands

Executive Summary

The Netherlands consistently ranks among the world’s most competitive industrialized economies. It offers an attractive business and investment climate and remains a welcoming location for business investment from the United States and elsewhere.

Strengths of the Dutch economy include the Netherlands’ stable political and macroeconomic climate, a highly developed financial sector, strategic location, well-educated and productive labor force, and high-quality physical and communications infrastructure. Investors in the Netherlands take advantage of its highly competitive logistics, anchored by the largest seaport and fourth-largest airport in Europe. In telecommunications, the Netherlands has one of the highest levels of internet penetration in the European Union (EU) at 96 percent and hosts one of the largest data transport hubs in the world, the Amsterdam Internet Exchange.

The Netherlands is among the largest recipients and sources of foreign direct investment (FDI) in the world and one of the largest historical recipients of direct investment from the United States. This can be attributed to the Netherlands’ competitive economy, historically business-friendly tax climate, and many investment treaties containing investor protections. The Dutch economy has significant foreign direct investment in a wide range of sectors including logistics, information technology, and manufacturing. Dutch tax policy continues to evolve in response to EU attempts to harmonize tax policy across member states.

Until the COVID-19 crisis, economic growth had placed the Dutch economy in a very healthy position, with successive years of a budget surplus, public debt that was well under 50 percent of GDP, and record-low unemployment of 3.5 percent. This allowed the Dutch government significant fiscal space to implement coronavirus relief measures. In response to COVID, the Dutch government implemented wide-ranging support for businesses affected by the COVID crisis, including support to cover employee wages, benefits to self-employed professions to bridge a loss of income, and compensation for fixed costs other than wages. The financial support measures added up to about $70.5 billion (€60 billion) in the first year of the crisis. These programs prevented a wave of bankruptcies – bankruptcy filings in 2020 and 2021 were the lowest in two decades.

The new coalition government announced in early 2022 plans to be climate neutral by 2050. The government said it would adjust domestic climate goals to at least 55 percent CO2 reduction by 2030 compared to 1990, with ambitions to aim higher for a 60 percent reduction.  The government has named a Minister for Climate and Energy Policy to work on domestic issues in addition to a Climate Envoy focused on international efforts.  The Netherlands joined the U.S.-EU Global Methane Pledge and promised to end all investment in new coal power generation domestically and internationally.  In April 2022, the government joined the AIM for Climate initiative.

The 2019 National Climate Agreement contains policy and measures to achieve climate goals through agreements with various economic sectors on specific actions.  The participating sectors include electricity, industry, “built environment,” traffic and transport, and agriculture.

The Netherlands business community suffered a two-pronged loss in the planned departure of two of its major national corporate champions. Energy leader Shell and food and household products conglomerate Unilever announced in 2021 a relocation of their corporate headquarters from The Hague and Rotterdam, respectively, to London. The companies cited concerns with Dutch tax law relative to dividend taxation and need for consolidated management structure. (Note: Both companies previously split their corporate governance between the Netherlands and the UK. End Note.)

In March 2022, the Dutch Central Planning Bureau (CPB) published its 2022 economic projections. Due to the Russian invasion of Ukraine, the outlook was marked by uncertainty and flagged “even higher” energy prices as the most important economic consequence. Because of increased energy prices and high inflation from the COVID pandemic, CPB estimates a 5.2% inflation rate for 2022 with a range of 6.0% and 3.0% depending on how long energy prices remain high. CPB estimated economic growth of 3.6% in 2022 and 1.7% in 2023. CPB predicted unemployment at 4 percent in 2022, down from 4.2% in 2021. The low unemployment rate reflects a similar challenge also faced by the United States – businesses are finding it difficult to recruit qualified staff. Government debt is expected to rise to 61 percent of GDP by 2025 due to increased spending under the new coalition government, including on defense, outlays to support an aging population, and support to low-income families to offset inflation in energy and food prices.

According to the U.S. Bureau of Economic Analysis (BEA), when measured by country of foreign parent, the Netherlands is the second largest destination for U.S. FDI abroad in 2020 after the UK, holding $844 billion out of a total of $6.1 trillion total outbound U.S. investment – about 14 percent. Investment from the Netherlands contributed $484 billion FDI to the United States, making it the fourth largest investor at the end of 2020 of about $4.6 trillion total inbound FDI to the United States– about 10.5 percent. Measured by ultimate beneficial owner (UBO), the Netherlands was the seventh largest investor at $236 billion. For the Netherlands, outbound FDI to the United States represented 14 percent of all direct investment abroad.

Table 1: Key Metrics and Rankings
Measure Year Index/Rank Website Address
TI Corruption Perceptions Index 2021 8 of 180 https://www.transparency.org/en/cpi/2021 
Global Innovation Index 2021 6 of 132 https://www.globalinnovationindex.org/analysisindicator
U.S. FDI in partner country ($M USD, historical stock positions) 2020 $844 million Bea: Netherlands – International Trade and Investment Country Facts
World Bank GNI per capita 2020 $ 51,060 https://data.worldbank.org/indicator/NY.GNP.PCAP.CD

1. Openness To, and Restrictions Upon, Foreign Investment

In 2020, the Netherlands was the 18th largest economy in the world and is the fifth largest economy in the European Union with a gross domestic product (GDP) in 2020 of over $913 billion according to the World Bank. The Netherlands consistently ranks among the world’s most competitive industrialized economies in global rankings that measure competitiveness, innovation, and access to infrastructure. According to the OECD and the International Monetary Fund (IMF), in 2020 the Netherlands was the second largest source and recipient for foreign direct investment (FDI) in the world, although the Netherlands is not the ultimate destination for the majority of this investment. Similarly, in its 2020 investment report, the UN Conference on Trade and Development (UNCTAD) identified the Netherlands as the world’s fourth largest destination of global FDI inflows and the third largest source of FDI outflows.

The government of the Netherlands maintains liberal policies toward FDI, has established itself as a platform for third-country investment with some 145 investment agreements in force, and adheres to the Organization for Economic Cooperation and Development (OECD) Codes of Liberalization and Declaration on International Investment, including a National Treatment commitment and adherence to relevant guidelines.

The Netherlands is the recipient of eight percent of all FDI inflow into the EU. The Netherlands has become a key export platform and pan-regional distribution hub for U.S. firms. Roughly 60 percent of total U.S. foreign-affiliate sales in the Netherlands are exports, with the bulk of them going to other EU members. The nearly 3,000 U.S. owned corporations represent more than 20% of all foreign owned firms in the Netherlands and they create more than 200,000 jobs. Foreign owned firms operate predominantly in business services, wholesale, and retail sectors.

Although policy makers feared that Brexit would have an extremely negative impact on the Dutch economy, the Netherlands is benefitting from companies exiting the United Kingdom in search of an anchor location inside the EU Single Market. The European Medicines Agency (EMA) also relocated from London to Amsterdam. According to the Netherlands Foreign Investment Agency (NFIA), since the referendum in 2016, 316 companies have chosen to relocate to the Netherlands. The companies are mainly from the health, creative industry, financial services, and logistics sectors. The Dutch Authority for the Financial Markets (AFM) expects Amsterdam to emerge as a main post-Brexit financial trading center in Europe for automated trading platforms and other ‘fintech’ firms, as more of these companies cross the Channel to keep their European trading within the confines of the EU regulatory oversight.

Dutch tax authorities provide a high degree of customer service to foreign investors, seeking to provide transparent, precise tax guidance that makes long-term tax obligations more predictable. Advance Tax Rulings (ATR) and Advance Pricing Agreements (APA) are guarantees given by local tax inspectors regarding long-term tax commitments for a particular acquisition or greenfield investment. Dutch tax policy continues to evolve as the EU seeks to harmonize tax measures across member states. A more detailed description of Dutch tax policy for foreign investors can be found at https://investinholland.com/why-invest/incentives-taxes/ .

Dutch corporations and branches of foreign corporations are currently subject to a corporate tax rate of 25 percent on taxable profits, which puts the Netherlands in the middle third among EU countries’ corporate tax rates and below the tax rates of its larger neighbors. Corporate income tax rates  in the Netherlands are currently 15% for the first €395,000 of taxable profits and 25.8% for taxable profits exceeding €395,000 in 2022.

Dutch corporate taxation generally allows for exemption of dividends and capital gains derived from a foreign subsidiary. Surveys of the corporate tax structure of EU member states note that both the corporate tax rate and the effective corporate tax rate in the Netherlands are around the EU average. Nevertheless, the Dutch corporate tax structure ranks among the most competitive in Europe considering other beneficial measures such as the possibility for the tax authorities to provide corporations with clarity on future treatment of taxes via “advance” rulings and agreements such as ATR and/or APA. The Netherlands also has no branch profit tax and does not levy a withholding tax on interest and royalties.

Maintaining an investment-friendly reputation is a high priority for the Dutch government, which provides public information and institutional assistance to prospective investors through the Netherlands Foreign Investment Agency (NFIA) ( https://investinholland.com/ ). Historically, over a third of all “greenfield” FDI projects that NFIA attracts to the Netherlands originate from U.S. companies. Additionally, the Netherlands business gateway at https://business.gov.nl/  – maintained by the Dutch government – provides information on regulations, taxes, and investment incentives that apply to foreign investors in the Netherlands and clear guidance on establishing a business in the Netherlands. The NFIA maintains five regional offices in the United States (Washington, DC; Atlanta; Chicago; New York City; and San Francisco). The American Chamber of Commerce in the Netherlands ( https://www.amcham.nl/ ) also promotes U.S. and Dutch business interests in the Netherlands.

With few exceptions, the Netherlands does not discriminate between national and foreign individuals in the establishment and operation of private companies. The government has divested its complete ownership of many public utilities, but in a number of strategic sectors, private investment – including foreign investment – may be subject to limitations or conditions. These include transportation, energy, defense and security, finance, postal services, public broadcasting, and the media.

Air transport is governed by EU regulation and subject to the U.S.-EU Air Transport Agreement. U.S. nationals can invest in Dutch/European carriers as long as the airline remains majority-owned by EU governments or nationals from EU member states. Additionally, the EU and its member states reserve the right to limit U.S. investment in the voting equity of an EU airline on a reciprocal basis that the United States allows for foreign nationals in U.S. carriers.

The Netherlands has not recently undergone an investment policy review by the OECD, World Trade Organization (WTO), or UNCTAD.

All companies must register with the Netherlands’ Chamber of Commerce and apply for a fiscal number with the tax administration, which allows expedited registration for small- and medium-sized enterprises (SMEs) with fewer than 50 employees: https://www.kvk.nl/english/registration/foreign-company-registration/ 

The Netherlands business gateway at https://business.gov.nl/  – maintained by the Dutch government – provides a general checklist for starting a business in the Netherlands: https://business.gov.nl/starting-your-business/checklists-for-starting-a-business/how-to-start-a-business-in-the-netherlands-a-checklist/ .

The Dutch American Friendship Treaty (DAFT) from 1956 gives U.S. citizens preferential treatment to operate a business in the Netherlands, providing ease of establishment that most other non-EU nationals do not enjoy. U.S. entrepreneurs applying under the DAFT do not need to satisfy a strict, points-based test and do not have to meet pre-conditions related to providing an innovative product. U.S. entrepreneurs setting up a sole proprietorship only have to register with the Chamber of Commerce and demonstrate a minimum investment of 4,500 euros. DAFT entrepreneurs receive a two-year residence permit, with the possibility of renewal for five subsequent years.

In order to sustain the top ten ranking of the Netherlands among the world’s largest exporting nations, the Minister for International Trade and Development Cooperation within the Ministry for Foreign Affairs coordinates with the government and private sector trade promotion agencies in setting an annual ‘overseas trade mission’ agenda. The Netherlands Enterprise Agency (https://english.rvo.nl/) has the lead in organizing a custom-tailored and topical format of trade missions to accompany State visits and other official delegations abroad. Participation in these missions is open to any enterprise established in the Netherlands.

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