Germany
The German R&D tax incentive scheme (Forschungszulagengesetz, FZulG) was established in 2020
and offers a 25% tax deduction of the elible costs, where the eligible costs are staff costs and 60%
of external contract research. To apply for tax credits, companies have to follow a 2-step-approach.
First: Applying for a technical certificate for the eligibility of projects. This certificate is automatically
transferred to the tax office. Second: Filling in the financial claim in ELSTER (German online tax
office system) and deduction of the company’s taxes.
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25% reduction of tax liability, or cash credit paid to a maximum of 1.000.000 Euro per company (group) and year.
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| Benefit Overview
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25% on R&D labour costs and effective 15 % of contract research costs, to a maximum claim of 1.000.000 Euro per company (or group/holding if the company is part of a larger organisation). The tax benefit is taken as a reduction of the corporate tax owed or, if there is insufficient tax liability, a credit is paid out.
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| Eligible Claim Period
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This is a retrospective regime – the first application can be made for 2020. Projects must not have started before 1st of January 2020.
There is a possibility to claim more than 1 year back on any eligible R&D activity. The eligible claim period can go back for 4 years.
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| Historical Background
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This is a very new regime, started on 1 January 2020. For the technical evaluation of projects, the “Bescheinigungstelle Forschungszulage” (BSFZ) was established, and a complete digital application platform was online in January 2021. All other necessary processes are now also digitally mapped.
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| Ease of Application
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This is a retrospective regime. However, the eligibility of a project(s) can be checked and confirmed upfront, which need to be submitted electronically.
Since it is a.) a new regime that impacts and involves a lot of governmental bodies (at least two ministries, one new grantor body (consortium of three existing grantor bodies) and the local finance authorities and b.) these
bodies strongly refer to the European General Block Exemption Regulation (GBER) and follow their regulations, it took almost two years until the entire process was established. Still some procedures and assessments at the authorities need to be further standardized. |
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| Regulating Body Policies
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The regulation is managed by the Ministry of Finance and the Ministry of Research and Education and a separate, grantor body (BSFZ) that handles all R&D claims. The assumed/estimated budget will be approximately €2.5bn per
year. |
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| Eligible Costs
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Labour (25%) and extrnal contract research to contractors (15%) located in the EU or EEA.
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| Issues to Consider
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R&D definitions are Frascati-based. Even if companies’ projects are claimable in a first step, the amount of costs can be doubted during tax declarations. In addition to the documents to be submitted, many documents must be kept available in response to possible inquiries. This applies in particular to a comprehensive recording and documentation of the hours of the employees involved.
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