Research allowance as a tax incentive for R&D

German federal government strengthens Germany as a research location with tax incentives for companies engaging in research

German federal government strengthens Germany as a research location with tax incentives

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Since 1 January 2020, the federal government has been supporting companies that carry out innovative and risky research and development in Germany through the Act on Tax Incentives for Research and Development (Forschungszulagengesetz, FZulG). This funding covers all areas of technology and is available to companies of all sizes.

Since the law came into force, the research allowance has already been optimised several times and currently supports a large number of project-related costs, also in combination. These include

Research and development personnel costs, including social security expenses
Costs for contract research with contractors within the European Economic Area
Project-related depreciation for projects starting after 27 March 2024
Own work by self-employed persons or co-working owners of partnerships

These eligible costs in their entirety form the assessment basis for the research allowance.

Denise Wollmann

Director, Tax

KPMG AG Wirtschaftsprüfungsgesellschaft

+49 711 9060-41096

Angebotsanfrage (RfP) einreichen

Continuous improvement of the assessment basis

When the law was introduced, the maximum assessment basis for a group of companies was two million euros per year, subsidised with an allowance of 25 percent. This upper limit was raised to four million euros in the same year.

With the Growth Opportunities Act 2024, the limit for expenses after 27 March 2024 rose to ten million euros. The Act also introduced the inclusion of depreciation and an increased subsidy rate of 35 per cent for small and medium-sized enterprises.

Immediate investment programme strengthens research funding

The immediate tax investment programme, which was approved by the Federal Council on 11 July 2025, further improves the conditions of the research allowance:

Increase in the maximum assessment basis to twelve million euros per group of companies for expenditure incurred after 31 December 2025.
Flat-rate consideration of additional overheads and other operating costs through a surcharge of 20 percent on the additional eligible expenses - valid for projects that begin after 31 December 2025.
Faster depreciation possibilities through the so-called "investment booster", which can lead to higher depreciation in the project period and could therefore result in an increased research allowance.

Your way to the research allowance

1. application to the Certification Centre for Research Grants (BSFZ): Projects must first be submitted to the BSFZ, which checks whether they are eligible for funding in principle. The result of this assessment is a basic decision.

2. application to the tax office: Applications for research allowances can be submitted to the tax office for completed financial years on the basis of the basic decision. These applications only relate to the respective financial year, but should directly include all projects that were carried out in that year.

3. offsetting of the allowance notice: The allowance notice issued by the tax office is then offset against the subsequent initial assessments or advance payments.