What is the research allowance?
The research allowance is a tax incentive that financially supports companies that invest in research and development (R&D). It complements the existing project funding landscape and aims to strengthen Germany as a location for innovation. Small and medium-sized enterprises (SMEs) in particular benefit from this funding, as it helps them to increase their innovative capacity and remain competitive.
Who can apply for the research allowance?
All taxable companies based in Germany that generate income from commercial operations, agriculture and forestry or self-employment are entitled to apply for the research allowance. The prerequisite is that the company is not exempt from taxation and that the R&D project was started after January 1, 2020. The funding is independent of the size of the company and the sector, which makes it particularly flexible and attractive.
Which projects are eligible for funding?
R&D projects that fall into the categories of basic research, industrial research or experimental development are eligible for funding. These projects must aim to acquire new knowledge or significantly improve existing technologies. It is important that the project is original, follows a planned approach and that there are uncertainties about the end result.
How is the research allowance calculated?
The amount of the research allowance depends on the eligible expenditure. In particular, this includes personnel costs for employees employed in R&D projects. In the case of contract research, 15 percent of the contract value is funded. The maximum funding amount was increased to 4 million euros as part of the economic stimulus package to deal with the corona crisis, which corresponds to a tax advantage of up to 1 million euros per year.
The application process: step by step
The application process for the research allowance is divided into two stages:
1. Application to the Research Allowance Certification Body (BSFZ): First, a certificate of eligibility for the R&D project must be applied for from the BSFZ. This certificate is the basis for further application to the tax office. The application is deliberately kept simple so that it can be processed even without external support.
2. Application to the tax office: After receipt of the certificate, the research allowance can be applied for from the responsible tax office. The application is submitted retroactively for the previous financial year and independently of the tax return. It is important that the research allowance is not paid out immediately, but is taken into account as part of the next initial assessment of income or corporation tax.
Benefits of the research allowance
The research allowance offers numerous benefits:
Financial relief: Companies can recover up to 25 percent of their R&D personnel costs, which significantly reduces the financial burden.
Attractiveness for start-ups: Companies in a losing phase or without turnover can also benefit from the funding, as the allowance can be paid out as a tax credit.
Flexibility: Funding can be applied for both before and during the project or afterwards, which offers companies a high degree of flexibility.