Munich – The Secret Capital (Heimliche Hauptstadt)
Munich is the capital city of the State of Bavaria, Germany. Located on the banks of the Isar River, the city covers an area of 310.71 km2 (119.97 sq mi) and is the third-largest in Germany after Berlin and Hamburg. In 2020 official Bavarian statistics estimated the Munich population at 1,488,202 people, with a density of 4,800/km2 (12,000/sq mi). The urban population has been estimated at 2,606,021 people. The metropolitan population has been estimated at 5,991,144 people. The official spoken language is German, although many people speak with a distinct Austro-Bavarian dialect.
Munich today retains much of its sophisticated heritage while operating as one of Germany’s economic powerhouses with a rich political and cultural history. The city has a reputation for steady growth and consistently ranks as one of the world’s top cities in terms of quality of life. The city is also one of Germany’s most important cultural centers and home to several internationally acclaimed art galleries and museums. Its traditional character, beautiful architecture, vibrant festivals, and spectacular scenery have made Munich a popular tourist destination, attracting millions of visitors each year.
Belonging to the Upper Bavaria Government Region, Munich is currently governed by a coalition of the Social Democratic Party of Germany (SDP), and the Greens. The city’s current mayor is Dieter Reiter of the Social Democratic Party, elected on May 1st, 2014.
Munich is Bavaria’s economic heartland and, with its enviable geographic location and strong industry and business sectors, has become one of Germany’s most important economic centers. In 2020 government statistics estimated Bavarian GDP at €610 billion (puts it ahead of 22 of the 28 EU member states). Munich and its surrounding areas were estimated to generate over 28% of the total regional GDP.
Munich’s tertiary sector is its most prominent, followed by manufacturing, construction, and agriculture. The city’s primary industries are media, finance, automotive, biotechnology, science, tourism, and retail. Munich is considered Germany’s second-largest banking hub and, as a leading center for technology, has earned a reputation as the country’s very own “Silicon Valley.”
Munich’s economic strength lies in its diverse structure, blending traditional industries with a broad spectrum of fast-growing innovative sectors. Its dynamic economic landscape has led Munich to host several leading international businesses, including Allianz, BMW, Infineon, Linde, and Siemens.
Munich’s agricultural sector, although small is, still plays an essential role in the local economy. Farms and agricultural land surround the city center, producing wheat, barley, sunflowers, flax, and meat products.
Major exports from the region include Machinery, Vehicles, Chemicals, Metals, Foodstuffs, and Textiles.
Munich’s location makes it a central transportation hub for goods traveling from the north to south and east to west of Germany. The city is linked to other major cities and neighboring countries by a well-maintained Autobahns and Railways network.
The city center operates a modern and efficient public transport system that consists of a U-Bahn, S-Bahn, trams, and buses. Munich’s central railway station, or Hauptbahnhof, moves over 450,000 passengers per day, making it the second-largest station in the country. The station operates frequent Eurocity and Intercity trains to Hamburg, Frankfurt, Berlin, and numerous other European cities, alongside extensive regional services.
Munich’s U-Bahn and S-Bahn systems form the backbone of public transport moving passengers throughout the metropolitan area and beyond. The combined networks boast 27 lines running over 500 kilometers with more than 140 stations.
Munich’s award-winning Franz Josef Strauss International Airport is the city’s largest airport and lies 30 kilometers northeast of the city center. The airport is the second busiest in Germany, with around 47,959,885 annual passengers and over 200,000 metric tons of freight to destinations throughout the world. Flight schedules serve over 220 destinations in 65 countries.
According to Muenchen.de, in Munich City, there is a total workforce of 898,000 people, and in the entire metro area, there are over 1,5 million employees. The workforce is predominantly German, with Turkish, Croatian, Serbian, and Dutch.
Around 79% of the workforce was employed in the city’s services sector, followed by 20% in Manufacturing and Construction. Agriculture and forestry accounted for the remaining 2%. Primary industries within the services sector included Motor Trade, Financial, Information and Communication, Health & Welfare, and Sciences.
Munich’s highly skilled workforce results from the city’s unique public education system, widely regarded as one of the best in Germany. As Germany’s second-largest university center, Munich is home to over 120,000 students who attend its many esteemed universities, technical universities, or polytechnics. Munich is also a leading location for science and research, containing many research organizations and institutes, including the Max Planck and Fraunhofer Societies.
Local consumers enjoy purchasing power of €79,690 per capita, 34% higher than the national average.
Munich’s unemployment rate averaged 4.5 % in 2020 as a result of the COVID-19 pandemic, following a historic low of 3.3 % in 2019, the lowest of all major German cities.
Business Costs in Munich
Germany’s individual income tax rates work on a 0% – 45% progressive scale.
Corporate tax rates vary depending on what municipality the company is located in. On a federal level, there is a set 15% flat rate, in addition to a 5.5% solidarity tax. The trade tax (municipal) starts at 14% and never exceeds 17%; thus, total corporate tax rates are between 30% – 33%.
From January 1st, 2021, the minimum wage is 9.50 euros per hour worked and from July 1st, 2021, the minimum wage is 9.60 euros per hour worked. Since 2020, the minimum wage rate in Germany is around 1.584,00 EUR net.
The standard VAT rate in Germany is 19%, while a reduced VAT of 16% can be applied to food and agriculture products.
Munich offered competitive location costs versus other major European cities, with an average office rental cost of €409/sq.m per year.