II. Residence permit for self-employment, § 21 of the Residence Act
Self-employed activities include all activities carried out by an entrepreneur in their own name, in their own permanent establishment, on their own account, and at their own risk. Self-employment must always be distinguished from an employment relationship.
1. General provisions on the right of residence
Citizens from third countries (neither the EU nor the EEA) who wish to pursue self-employment in Germany require a residence permit according to § 21 of the Residence Act. The residence permit for the purpose of self-employment is issued as a temporary residence permit for a maximum of 3 years, according to § 21 (4) of the Residence Act, provided that certain conditions are met. Subsequently, you can apply for a permanent resident permit (Niederlassungserlaubnis) in accordance with § 21 (IV) of the Residence Act if you have successfully implemented your business idea and furthermore fulfil the provisions for a secure livelihood. § 9 of the Residence Act regulates the requirements for a residence permit.
2. Assessment criteria for the issuance of a residence permit
The legal basis for issuing a residence permit is § 21 (1) of the Residence Act. Under that provision, a foreign national may be granted a residence permit for their own activities if the following conditions are met:
- there is an economic interest or a regional need,
- the activity can be expected to have a positive impact on the local economy, and
- the financing of the implementation is secured through equity capital or a loan commitment.
The criteria of § 21 of the Residence Act are examined, among other things, according to the:
- viability of the underlying business idea,
- entrepreneurial experience of the foreigner,
- amount of the capital investment,
- impact on the employment and training situation,
- and the contribution to innovation and research.
According to § 21 (3) of the Residence Act, foreign nationals over the age of 45 must prove that they have adequate retirement provisions.
- § 21 of the Residence Act regulates in further paragraphs special provisions for facilitating residence permits, for example when taking up self-employment after university studies.
3. Assessment of the start-up project with the involvement of expert bodies
When examining whether the general requirements of § 21 (1) of the Residence Act are met, the immigration authorities involve the relevant departments for the place of establishment, such as the Chambers of Crafts (Handwerkskammern, or HWK) or Chambers of Industry and Commerce (Industrie- und Handelskammern, or IHK). In the case of commercial activities in Berlin, this is basically the Chamber of Commerce and Industry (IHK) of Berlin. The task of the IHK is to represent the interests of the Berlin economy as a whole, including its members and founders.
After examining the general requirements of the residence permit, the immigration authority asks the IHK to issue a statement on the applicant’s planned business activities. This is not a binding decision, but rather an assessment which serves as a guide for the immigration authority to take the final decision on the granting of a residence permit.
The following documents must be submitted to the diplomatic mission or immigration office along with the application documents:
- Business plan, including capital and financing plan, earnings forecast for the next three years, and liquidity plan
The business plan must show that there is an economic interest or regional need for the planned activity. This is generally the case if a sustainable improvement in the sales or market opportunities of local companies is recognisable or if the creation or safeguarding of a significant number of jobs (credibly demonstrated) is present. Furthermore, the marketing of environmentally friendly or innovative products, as well as the establishment of a production site, may also justify the existence of the prerequisites.
An economic interest is generally not assumed in the case of retail or service enterprises that are purely oriented towards regional consumption. However, if there is a regional need, for example because without the offer there would be an existing or foreseeable undersupply in the region or the offer has a unique selling point, an exception may be considered.
If you intend to employ other staff in addition to yourself, you will be required to provide detailed information on the number, respective tasks and requirements for the position, as well as the forms of employment (part-time or full-time), salary and the expected period of employment. It is important to note that the actual implementation of the planned jobs may be reviewed after some time.
The earnings forecast (revenue expectations) for the first three years must be explained or presented in a comprehensible manner, e.g. by calculating prices, commissions or fees, and, if possible, supported with evidence. Such proof is not provided solely by submitting a “client list”. Rather, you should submit existing business relationships or (future) customer acquisitions together with existing offers and planned projects as detailed as possible. Furthermore, it is important to present competition and market analyses. These have to describe your competitive environment as well as the concrete demand of your product in a comprehensible way.
In the case of managing directors and other legal representatives of partnerships and corporations, an annual net income of EUR 24,000 must be earned according to the procedures of the Berlin Immigration Authority. Managing directors of a corporation prove the corresponding income through a managing director’s contract.
Managing directors of a corporation (e.g. GmbH, AG, UG) must hold the majority of the shares or at least the same number of shares as the other shareholder(s) in the company. The distribution of the shares must be proven in an appropriate form (e.g. articles of association or list of shareholders).
In addition, in the case of a corporation, entry in the commercial register or at least a notarial registration in the commercial register is required.
- Proof of capital or loan commitments
Furthermore, the need for capital and financing must be known and clarified. Business start-ups often fail due to underestimation of capital requirements and a lack of financing.
- Curriculum vitae (Resume)
A CV should also be included with the application documents. This must show that the applicant has the necessary professional and commercial qualifications to successfully run a business.
You must also submit proof of qualifications, such as university degrees or professional experience (e.g. job references, letters of recommendation).
Proof of cooperation is also important. If you do not yet have such evidence, you should submit declarations of intent or expressions of interest from potential or future business partners/customers.
- Managing director’s contract
In the case of corporations, proof of a managing director’s contract must also be provided.
If you have already signed a (commercial) lease agreement, you must also present this to the authorities.
- Certificate of incorporation, articles of association, commercial register extract or notarial application to the commercial register, business registration
If your establishment process already permits, you should enclose the certificate of incorporation, the articles of association, and an extract from the commercial register or notarial registration to the commercial register or a business registration.
For existing companies, you must also include the following:
- Balance sheets of the last two years
- Business assessment (Betriebswirtschaftliche Auswertung, or BWA) of the last six months
- Income statement (Einnahme-Überschuss-Rechnung), if no balance sheet is prepared
- Tax assessment notices of the last three years (if available)