Location Promotion Act (Standortfördergesetz): Broad VC and Infrastructure Investments Regulations Take Effect

The recently adopted Location Promotion Act is intended to facilitate investments in renewable energies and infrastructure, mobilize venture capital, and strengthen Germany’s position as a financial center. The new provisions are of particular relevance for fund initiators and asset managers, private equity and venture capital investors, and institutional investors.

The Act on the Promotion of Private Investment and the Financial Center (Location Promotion Act) was passed on December 19, 2025 by the Federal Parliament (Bundestag) and received final approval from the Federal Council (Bundesrat) on January 29, 2026. It will largely enter into force on the day after its promulgation.

KEY ASPECTS OF THE LOCATION PROMOTION ACT

The Location Promotion Act is mainly consistent with the governmental draft. The key areas of changes are summarized below; for a more detailed description regarding changes to tax, finance/regulatory, and capital markets law, please refer to our September 22, 2025 LawFlash.

Improved Access to Capital Markets

The Act is intended to make capital market access easier for small and new companies while simplifying legal and regulatory requirements for fund investments, especially by institutional investors.

Tax Adjustments for Fund Investments

Amendments to the German Investment Tax Act (InvStG) affect, in particular, the taxation of fund investments in commercial partnerships. The objective is to reduce tax-related investment barriers and promote investment in specific sectors.

Changes to Investment Law

Supplementary amendments to the German Capital Investment Code (KAGB) are intended to create a legally secure framework for fund investments and reduce existing uncertainties in the structuring of investment vehicles.

Reducing Bureaucracy in the Financial Market Sector

The plan is to reduce selected auditing, reporting, and notification requirements. This should lead to a reduction in the administrative burden for market participants and simplify transaction processes.

The new regulations are particularly important for fund initiators and asset managers, private equity and venture capital investors, and institutional investors. Depending on the design of the fund structure and investment strategy, tax, regulatory, and structural adjustments may be required.

The Fund Risk Limitation Act (Fondsrisikobegrenzungsgesetz), which is still in the legislative process, will accompany the measures adopted by the Location Promotion Act. It provides for the implementation of the requirements of the AIFM Directive II (AIFMD II) into German law and contains, in particular, relevant amendments to the KAGB.