Freedom of establishment

The freedom of establishment is a fundamental right of the European Union enshrined in Article 49 of the TFEU, which allows EU citizens and companies to establish themselves permanently in any Member State and engage in gainful employment there-without facing discriminatory restrictions compared to nationals. In real estate law, the freedom of establishment is particularly relevant when it comes to the cross-border acquisition of real estate and access to real estate brokerage activities in other EU countries.

Freedom of Establishment and Real Estate Acquisition

Within the EU, all EU citizens have the right to acquire and hold real estate in any Member State. National restrictions that disadvantage non-German EU citizens compared to German nationals when purchasing real estate violate the freedom of establishment and the free movement of capital (Art. 63 TFEU). Germany generally treats EU citizens equally with German citizens when it comes to real estate purchases-exceptions apply, if at all, to certain agricultural lands in individual federal states.

Different rules apply to investors from third countries (e.g., the U.S., China, Russia): In these cases, national regulations and, where applicable, investment control procedures under the Foreign Trade Act (AWG) apply, provided the properties in question are of strategic importance. While the EU’s freedom of capital movement generally applies to third countries as well, it contains exceptions that member states may invoke for investments relevant to national security.

Freedom of Establishment for Real Estate Brokers and Agents

The freedom of establishment also applies to individuals engaged in commercial activities: A real estate broker from France may establish a business in Germany and carry out their activities here. However, they must meet the German requirements for commercial licensing-in particular, the licensing requirement under Section 34c of the Trade Regulation Act (GewO) as well as the requirements of the Real Estate Broker and Developer Ordinance (MaBV).

Conversely, German brokers can operate in other EU countries, but must comply with the applicable national licensing requirements there. The EU Professional Qualifications Directive (2005/36/EC) facilitates the mutual recognition of professional qualifications. In countries such as Austria or Spain, which have stricter licensing requirements for brokers, practical implementation can nevertheless be complex.

For brokers operating across borders in the Nuremberg metropolitan region-for example, when brokering deals for Austrian or Swiss buyers-the freedom of establishment also plays a role, as the applicable commission rules and advisory obligations in the destination country must be known.

Significance for International Buyers in the Nuremberg Region

The Nuremberg metropolitan region is attractive to international professionals and investors due to its economic strength (Siemens, Schaeffler, Diehl, GfK). EU citizens who work in Nuremberg or the region and wish to purchase real estate enjoy the same legal options as German citizens-including access to financing from German banks and full land registry entry.

Practical challenges often arise with financing: Foreign banks often do not provide loans for properties located in Germany, and German banks may be deterred by foreign sources of income or the lack of German Schufa entries. We assist international buyers and are familiar with the banks in the region that have experience handling cross-border financing.

Practical Tip for Property Owners in Nuremberg and Franconia

We regularly assist international buyers in Nuremberg and the metropolitan region who are settling in the area for professional reasons and wish to invest in real estate. As EU citizens, all opportunities in the German real estate market are open to you. We support you from the search through financing assistance to the handover-even if language barriers or unfamiliarity with German real estate law require additional consultation.

Frequently Asked Questions

Are EU citizens allowed to purchase real estate in Germany without restrictions?

In principle, yes. EU citizens enjoy the same right to purchase real estate as German citizens. Special approval requirements may apply only to certain agricultural land in individual federal states. There are no general restrictions on the purchase of residential or commercial real estate.

Does the freedom of establishment still apply to British citizens after Brexit?

No. Following the United Kingdom’s withdrawal from the EU on January 31, 2020, British citizens in Germany are to be treated legally as third-country nationals. They may continue to purchase real estate but may need to meet additional residency requirements. The Agreement on Residence and Freedom of Movement protects the rights of British citizens who were already residing in Germany prior to Brexit.

Can a foreign real estate agent operate in Germany?

Yes, EU real estate agents may establish themselves in Germany but must meet the German licensing requirements (§ 34c GewO, MaBV). For the temporary provision of services from another EU country, simplified regulations under the EU Services Directive apply. Prior notification to the German authorities is generally required.

Freedom of Establishment and Freedom of Capital Movement in Conjunction

The freedom of establishment is closely intertwined with the freedom of capital movement (Art. 63 TFEU). While the freedom of establishment protects permanent economic activity, the freedom of capital movement guarantees the cross-border transfer of money and capital-including investments in foreign real estate. Both fundamental freedoms protect EU citizens from discriminatory national regulations.

In practice, this means: A French citizen living and working in Nuremberg can not only purchase real estate here but also rent it out, use it as collateral, resell it, and transfer rental income abroad-without requiring additional permits. For tax purposes, they must pay income tax in Germany on rental income from German sources but can take advantage of applicable double taxation agreements.

Special Considerations for Real Estate Purchases by Non-EU Foreigners

For nationals of third countries-that is, those outside the EU and the European Economic Area-there are no general restrictions in Germany on the purchase of residential real estate. German law does not impose a general restriction on real estate purchases by foreigners. However, for certain properties (border areas, military restricted zones, strategic infrastructure), investment reviews under the Foreign Trade Act (AWG) may apply.

Another practical consideration is that non-EU citizens without permanent residency in Germany often face difficulties obtaining financing: German banks secure their loans through the land register but also require evidence of the borrower’s economic ties to Germany. Buyers without secure residency status therefore often receive financing only if they meet significantly higher equity requirements or provide collateral.

Tax Considerations for International Owners in the Nuremberg Region

International buyers who purchase real estate in Nuremberg or the metropolitan region are subject to limited tax liability in Germany-regardless of their citizenship-provided they do not have a German residence. This means: Rental income from German sources is taxable in Germany, as are profits from the sale within the speculation period (10 years).

For owners residing in another EU member state, the EU prohibition on discrimination also applies in tax law: they must not be treated less favorably than German taxpayers. European law has led to important reforms in this area, such as regarding access to loss carryforwards and tax allowances.

Outlook for the Nuremberg Metropolitan Region

Nuremberg and the surrounding metropolitan region are a major magnet for skilled workers from across Europe and the world, thanks to internationally established employers such as Siemens, Schaeffler, Diehl, Bosch, and numerous small and medium-sized enterprises. These individuals often settle in the region for the long term and are interested in purchasing residential property.

In recent years, we have assisted numerous EU citizens-French, Spanish, Dutch, Austrian, Polish, and others-in purchasing single-family homes and condominiums in Nuremberg and the surrounding region. The legal options are identical to those available to German citizens. The difference often lies in financing and in understanding the German real estate market, which differs from other European markets in several respects: no direct online land registry, mandatory notarization, and no statutory brokerage fee payable by the buyer (apart from the statutory brokerage commission split).

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