Research allowance as a tax incentive for research and development (R&D)

Since 1 January 2020 the German federal government has been using the research allowance to support companies that either conduct basic, applied or experimental research themselves or commission it from another company based within the EU. The allowance is based on the salaries of the research staff participating in the respective research and development (R&D) project and their share of working hours on the project. Both are included in full in the assessment basis. The German Growth Opportunities Act extends the eligible expenses to the depreciation of certain assets used for tax-privileged research and development projects. In addition, the eligible costs for contract research have been increased from 60% to 70% of the consideration paid by the contracting entity to the contractor – small and medium-sized enterprises (SMEs) can now also apply for an increase in the research allowance by 10 percentage points to 35% of the assessment basis. The maximum research allowance has also been increased from EUR 1 million per financial year to a maximum funding amount of EUR 2.5 million per year due to a significant increase in the assessment basis (from EUR 4 to 10 million per year). The increased support amount applies indefinitely to eligible expenses incurred after the promulgation of the German Growth Opportunities Act.

Research activities that commenced after 1 January 2020 are eligible for support. In order to receive the allowance, an annual application must be made to the German Certification Office for the Research Allowance [Bescheinigungsstelle Forschungszulage, BSFZ] and the certificate submitted to the tax office. The research activities and time spent must be documented as evidence. To take advantage of the new support opportunities for the depreciation of certain assets, companies must also justify and substantiate why the asset is essential and necessary for the implementation of the research project.

Our tax expert Dr Jan Wendland has compiled further information on research funding for you.

We will be happy to support you with an initial assessment of the eligibility of your research projects and with the application process. Our experts from Tax and Consulting will be happy to assist you. Get in touch.