Germany’s new tax allowance for Research & Development finally kicks off
As of 2020, Germany has introduced a new tax allowance for Research and Development (R&D): the Forschungszulagegesetz (FZulG). Similarly to other programs, such as the WBSO in the Netherlands, the main goal of the Forschungszulage is to incentivise and support R&D and to strengthen economic growth. After a long waiting period, the programme has finally kicked off and the application system is now open. Even though the Forschungszulage is targeted at SMEs, all companies that pay taxes and operate in Germany can apply for the subsidy.
Furthermore, the Forschungszulage covers the whole array of R&D projects: from fundamental and industrial, to experimental R&D. It is important however, that the project has an innovative and risky character that leads to new insights, meaning it should go beyond routine activities.
A unique aspect of the German programme is that contract research within the European Union (EU) and European Economic Area (EEA) is also eligible. Hence, the advantages of the Forschungszulage do not stop at the border, but also affect R&D-work outside of Germany. Additionally, not just companies, but any entity (such as universities) is allowed to conduct contracted research. Are you conducting R&D for a German client? Contact us to find out more about what the Forschungszulage can mean for you and your client.
What costs are eligible for Forschungszulage?
The subsidy covers a part of the salary costs of the R&D employees and considers the hours they spend on certified R&D projects. The total sum of eligible costs per financial year that can be subsidized is capped at € 4 million per independent company or group of related companies. The subsidy is 25% of the eligible costs. This brings the maximum subsidy to € 1 million per financial year.
Important to note: costs that have been declared in other governmental subsidies cannot be included in the Forschungszulage!
How to apply?
The application process consists out of the following steps:
- Apply for certification: projects are eligible if there is sufficient technical innovation and risk involved. To determine this, a technical project description has to be prepared which outlines what the envisioned activities and results are. This description will then be reviewed by the governmental agency “Bescheinigungsstelle Forschungszulage”. Does your project meet the minimum thresholds? Then you will get a certificate. This certificate is a mandatory attachment for the declaration phase. Note, you can apply for the certification of an R&D-project during any stage: before the start of the project, during the run of a project and afterwards. However, the starting date of a project has to be after the 1st of January 2020.
- Executing the project and maintaining a project and hours documentation: afterwards you will need to be able to prove, for example during an audit, what has been done, by whom and for how many hours.
- Declaration: after the financial year in which you carried out the certified R&D project, you will need to file a declaration in which you provide a quantified justification of the subsidy you are entitled to. This declaration will be set off against your corporate tax filing and has to be filled at your local tax bureau. Is the subsidy higher than your corporate tax? You will be paid out the remaining amount.
Interested in the Forschungszulage?
For over 25 years Hezelburcht has been offering optimal support to organisations in (and outside of) the Netherlands with comparable grants, such as WBSO. This resulted in an amazing track record with thousands of organisations receiving subsidies. Our specialists are able to understand you and your organisation as well as your way of doing things. Because of that we’re able to translate the innovative character of your R&D activities into a strong application.