Jun 20, 2024
Is the research allowance under the FZulG suitable for your company?
Is the research allowance under the FZulG suitable for your company?
The tax research promotion is a significant initiative by the Federal Ministry of Education and Research (BMBF) aimed at strengthening Germany as a development location. If you are considering whether the Research Allowance Act (FZulG) is suitable for your company, you are in the right place. Let's highlight the key aspects of this funding.
What is the research allowance?
The research allowance is a government subsidy that allows companies to claim certain expenses for research and development (R&D) for tax purposes. This subsidy is available to all taxable companies based in Germany, regardless of industry and size.
Funding rate and conditions
The research allowance offers attractive financial support - retroactively for the last four financial years: Funding rate: 25% of eligible personnel costs and 15% for external contract research. Maximum funding: Up to 1 million euros annually, based on an assessment basis of 4 million euros per financial year. It is important to note that the opportunity to apply for funding for the year 2020 will soon expire, as the 4-year deadline expires at the end of 2024. Companies should therefore hurry to take advantage of this opportunity.
For current details, see the article Research Allowance in Germany (2025).
Eligible Projects
The eligibility of projects in a technological context is determined by assigning them to three main categories:
Basic Research
Industrial research
Experimental development
In addition, R&D projects must cumulatively meet the following five frascati criteria:
Novelty: The project must be novel and aimed at gaining new insights.
Creativity: The project must be based on original, non-obvious concepts and hypotheses.
Uncertainty: The outcome of the project must be uncertain.
Systematic approach: The project must be systematically feasible, follow a plan, and be budgetable.
Reproducibility: The results of the project must be transferable and/or reproducible.
Conclusion
The research allowance under the FZulG offers a valuable opportunity to financially support your R&D projects. If your company is based in Germany and taxable, you should check with us to see if your projects meet the criteria mentioned. With proper planning and documentation, you can significantly benefit from this government subsidy. Take advantage of the opportunity and apply for your research allowance in a timely manner to strengthen your company's innovation capabilities.
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