The Act on Tax Subsidies for Research and Development (R&D) (Forschungszulagengesetz – FZulG) of December 14, 2019, introduced a new tax-based research and development subsidy in the form of a R&D allowance. The tax incentive thereby joins the well-developed project funding landscape and is intended to strengthen Germany as an investment location and to stimulate the research activities of small and medium-sized enterprises in particular.
Eligibility to apply
- unrestricted and restricted taxpayers, insofar as they are not exempt from taxation
- The R&D allowance is available to all taxpayers with income from agriculture, forestry, trade or self-employment and can be claimed regardless of the respective profit situation
- R&D project must have been started on or after January 2, 2020
- Beneficiary R&D projects are those that fall into one or more of the categories of basic research, industrial research or experimental development
A two-step procedure is provided for the application and granting of the R&D allowance:
Step 1: Application for a certificate at the Bescheinigungsstelle Forschungszulage (BSFZ)
- First, an application must be made to the BSFZ for a certificate stating that an R&D project is eligible for a research grant
- BSFZ is responsible for assessing the content of the R&D project, i.e. whether it qualifies as a subsidized R&D project. The applicant company receives a certificate from the BSFZ stating that the R&D project qualifies for preferential treatment
- BSFZ also sends the certificate directly to the relevant tax office of the applicant company. This certificate is a prerequisite (basic decision) for applying for the R&D allowance at the tax office (step 2)
Step 2: Application for the R&D allowance to the relevant tax office
- The R&D allowance must be applied for at the tax office responsible for the taxation of the eligible company according to its income
- This application must always be submitted for all eligible R&D projects of an eligible company after the end of the fiscal year in which the eligible expenses for eligible R&D projects were incurred. This means that the application for the R&D allowance is made on a fiscal year basis and the R&D allowance is not only granted for a specific R&D project. In the case of multi-year R&D projects, an application for a R&D allowance must be submitted to the tax office for each fiscal year
- The application for the R&D allowance is made using an electronic application form, in which all the information required for the determination of the R&D allowance is entered
- The tax office checks the information provided in the application for the R&D allowance and determines the R&D allowance in a notice, provided that all requirements are met. However, the R&D allowance is not paid out immediately after it has been assessed, but is credited in full against the assessed tax as part of the next initial assessment of income or corporation tax. If there is a surplus after this credit, it is paid out as an income tax or corporate income tax refund
We Are happy to assist you with the application process.
Sources: Federal Ministry of Finance, NWB
Photo: Michael Longmire, Unsplash
Disclaimer: We assume no liability for the accuracy and completeness of the information. The information provided here does not constitute recommendations for action.