The R&D Tax Allowance is a federal public funding program in Germany available for start-ups and SMEs involved in innovative research and development projects. The program provides a tax credit for eligible R&D costs, which can be applied retroactively for up to 4 years
What is funded?
The program funds R&D costs for developing innovative products or services that stand out from standard industry offerings. Eligible expenses include:
- Internal Costs
- 25% of personnel costs e.g. salaries, bonuses, overtime pay (35% from April 2024)
- 25% of depreciation of economic goods used for R&D (only for projects starting from April 2024 with acquisition/production from April 2024 onwards)
- Examples include (1) designing software licenses for the product or high-performance computing hardware, (2) specialized robotic systems in the manufacturing industry, (3) high-performance computing hardware in for AI/biotech
- External costs
- 15% of cost for R&D service providers/freelancers within the EU (24.5% from April 2024)
- Maximum grant of EUR 3.5m per year
- Costs can be claimed retroactively for up to 4 years
- Double funding is prohibited, the same costs cannot be claimed under multiple funding sources
Note: If no corporate or income tax is due, the grant will be paid directly to the company’s bank account.
Funding Criteria
All expenses must be related to the main project for which the application is being submitted.
Criteria include the following:
- Novelty - Project aims at gaining new knowledge
- Creativity - Project is original and not based on obvious concepts
- Uncertainty - there are uncertainties regarding the final outcome
- Systematic Approach - Project follows structured plan
- Reproducibility - Results are reproducible
Please find an example of a start-up optimizing small business deliveries with real-time traffic + weather data below:
Criteria | Example: Start-up optimizing small business deliveries with real-time traffic + weather data |
Novelty | Integrates real-time traffic and weather data, a new feature for local delivery optimization |
Creativity | Designed specifically for small businesses, filling a gap in accessible logistics solutions |
Uncertainty | Challenges in ensuring the algorithm accurately predicts delays from traffic and weather changes |
Systematic Approach | Follows a structured process with development, small-scale testing, feedback collection, and gradual expansion |
Reproducibility | Tested across multiple cities to ensure reliable performance in diverse conditions |
Application Process
Step 1 - Application for Funding Decision
- Apply at the BSFZ Application Portal (Bescheinigungsstelle Forschungszulage)
- BSFZ evaluates the project against the above-mentioned criteria
- If a positive funding decision is made a BSFZ certificate is created
Step 2 - Research Allowance Application
- The BSFZ certificate is automatically sent to the tax office
- Companies then apply for the research allowance via the ELSTER portal.
- Determination of the R&D tax allowance seize
Our partner, SectorPi, offers assistance through their AI-powered platform, simplifying public funding applications and helping companies manage R&D to maximize funding opportunities. For questions, please contact them directly or mail Johanna Junkermann.