The stopper will be out contract at the end of the month so he will technically be a free agent.
The Gunners are looking for a backup to keep Bernd Leno on his toes with Petr Cech retiring and David Ospina likely to seal a move to Napoli.
Schubert, 21, has impressed at Dynamo Dresden and is highly-rated as one of the most promising goalkeepers in Europe.
Arsenal have struggled to pick up free transfers in recent years, with Sead Kolasinac being one of the only exceptions.
But the word ‘free’ does not actually apply in the case of Schubert’s move, due to a technicality within FIFA’s rules.
German newspaper Bild have revealed that Arsenal will still have to pay Dresden compensation thanks to Article VII of FIFA’s Transfer Regulations.
Clubs who have trained players under the age of 23 must be compensated for each season played between the ages of 12 and 21 if the star moves abroad.
This is ‘regardless of whether the contract expires or not’.
The amount depends on the ‘donating’ and ‘receiving’ clubs, but it ‘significantly higher’ when switching to England.
In Schubert’s case, Arsenal will have to ‘squeeze out’ around €70k for each year the goalkeeper played at Dynamo Dresden, which is likely to total around €560k.
This must be paid ‘within four weeks of signing the contract’.
Bild explains this corresponds to ‘only half his current market value’.
The Schubert deal shouldn’t put too much of a dent in Arsenal’s reported transfer budget of £45m.
Gunners boss Unai Emery reportedly favours signing Ryan Fraser over Yannick Carrasco.
But the Bournemouth winger says he does not know what the future holds for him next season.