Naturalization for self-employed individuals: How does the LEA (State Office for Foreign Education) verify financial security?

Anyone who has become self-employed in Berlin and is now applying for German citizenship often hears a sentence from their caseworker that initially sounds like a hard and fast rule: The self-employment hasn't been running for three years yet, so the application should be withdrawn. For many clients, this is a shock, as they have often worked towards this moment for years. In reality, this statement is frequently a misapplication of the State Office for Immigration's internal guidelines. We will show, using the actual review process of the State Office for Immigration, how the authority truly assesses the secure livelihood of self-employed individuals – and why the three-year period is only one of several criteria.

What is the legal basis for the assessment of livelihood?

Naturalization, according to Section 10 Paragraph 1 Sentence 1 Number 3 of the Nationality Act, requires that the applicant and their dependent family members can support themselves without recourse to benefits under the German Social Code, Book II (SGB II) or Book XII (SGB XII). Section 2 Paragraph 3 of the Residence Act defines what constitutes "support." For practical application, the State Office for Migration and Refugees (LEA) refers to internal guidelines, known as VAB. For self-employed individuals, VAB S.10 (Nationality Law) refers to the criteria in VAB A.2.3.10 from the Immigration Act – thus, the assessment criteria are uniform for both residence and naturalization procedures.

Is the duration of self-employment alone sufficient grounds for rejection?

No – and this is precisely where misunderstandings are currently arising in practice. Following internal training for the citizenship department, some case workers have apparently changed their review procedures to reject applications outright if the applicant's self-employment has not been in place for three years. As the LEA management confirmed to us upon inquiry, this practice is not covered by the VAB (Visitors' Registration and Applicant Guidelines). The duration of self-employment must not, under any circumstances, lead to rejection without considering the applicant's employment history, qualifications, and the nature of their work. The criterion of "self-employment for at least three years" is one of several indicators that an income is sustainable – nothing more, but also nothing less.

How does the LEA proceed step by step when assessing the means of subsistence?

Those familiar with the LEA's internal audit checklist can assess their own situation much more realistically. The audit proceeds in five consecutive steps.

First, it is determined whether self-employment exists in the legal sense – this includes sole proprietors and freelancers, as well as partnerships and corporations, even if the applicant is a controlling shareholder. If the case officer answers this question in the affirmative, the examination proceeds to step two; if it answers negatively, the examination continues according to the general criteria for employees.

The second step focuses on the sustainability of income. This is based on the tax assessments of the last three years or, if these are not yet available, the electronic tax returns submitted via ELSTER – for sole proprietorships and partnerships, income tax; for corporations, also corporate income tax. Self-employment is viewed favorably if it has existed for at least three years, its income is stable or increasing, its tax has been assessed, and it has proceeded without significant interruptions. Crucially, these criteria must outweigh the negative ones overall – a single negative characteristic, such as a recently commenced activity, is not sufficient on its own. If the assessment is positive, the process continues to step three; if the negative criteria outweigh the positive ones, the review proceeds directly to step five.

The third step focuses on securing the applicant's current livelihood. First, a valid audit report must be submitted – following the official template, signed and prepared by a tax advisor, lawyer, auditor, or certified public accountant. Based on this report, the LEA (Local Economic Authority) assesses the average income of the last six months. The initial plausibility check involves verifying whether the current income aligns with the most recent tax assessments and the business's track record. A sudden increase in profits shortly before the application, high distributions despite losses, or discrepancies between the audit report and tax documents are considered suspicious and require further investigation. If doubts exist, the LEA may request additional documentation such as a business analysis, an income statement, or a balance sheet before conducting the actual calculation. If the income is deemed plausible, the LEA uses an internal calculator to determine the net income – a flat rate of ten percent less than the gross income from the audit report.

The end result is one of two: If the applicant's livelihood is secured, naturalization can proceed, provided the other requirements are met. If it is not, the LEA (State Office for Migration and Refugees) will usually request further documentation or reject the application.

What does this mean for self-employed people, freelancers and their families?

For highly qualified self-employed individuals from the USA, Great Britain, or other countries who have established their own businesses in Berlin, this review process demonstrates one thing above all: a rejection notice due to insufficient self-employment is not an automatic end to the process. Those who have been self-employed for just over two years but can demonstrate stable, verifiable income, proper tax assessment, and a sound audit report have strong arguments to prove the sustainability of their income to the LEA (State Office for Migration and Refugees) through other means.

What can you do if you are advised to withdraw your application?

From our experience, we know that many affected individuals either withdraw their application prematurely at this point or wait, hoping the caseworker will change their mind. Both approaches carry risks: Withdrawing an application costs valuable time and jeopardizes the progress already made in the proceedings, while simply waiting does not prevent rejection. Template letters from the internet are also inadequate here because they do not reflect the specific employment history of each individual. We review the LEA's internal criteria for our clients to determine whether the requirements are actually met and submit the documents to the agency in accordance with our own review procedures. If the agency upholds an unlawful rejection, the last resort is legal action before the administrative court.

Conclusion

The assessment of self-employed individuals' ability to secure their livelihood is more complex than the initial information from the case worker often suggests. The duration of self-employment is just one of several criteria within a multi-stage review process that encompasses everything from the type of work and tax history to the current audit report. Understanding the actual review process at the State Immigration Office (LEA) allows for targeted preparation of naturalization applications and provides well-founded counterarguments to blanket rejections.