Aug 08, 2025
Patents and their impact on Research Allowance in Germany
What is a patent? What could be patented? These are the common questions in the mind of stakeholders of a company with R&D projects and innovations. In Germany, the patent is part of the industrial property right that grants the holder the exclusive right to use their innovation. The answer to what could be patented is broad as it is not limited to any type of invention, sectors of organisations or their size, but will be granted based on the newness, non-obviousness and industrial applicability of the invention.
To get an invention patented the application must be sent to the German Patent and Trade Mark Office (Deutsches Patent- und Markenamt, DPMA). The applicant needs to disclose the details of the invention including its technical specifications, and should ensure transparency in a way that a specialist should be able to use or reproduce it without the need for any further information. It is not possible to add additional information after the submission of the application. The application for the patent can be submitted in two ways, either by submitting in writing via a patent information centre or electronically via DPMAdirektPro software.
After the application submission, there is a statutory examination process to determine the eligibility of the invention to be patented. The detailed examination process includes compliance assessment, classification under the International Patent Classification (IPC), and validation of the novelty of the invention. Once an invention is patented, it has a validity up to 20 years, subject to the renewal charges starting from the third year. It will be published in the Gazette (Patentblatt) and the information will also be available on websites such as EPATISnet and DPMAregister.
The Forschungszulage, is a tax incentive programme focusing on promoting R&D projects and innovations. Here, the financial assistance is given as tax credits to the companies with qualified research projects and it is granted on the basis of the eligible R&D costs incurred for the project.
A project's eligibility is defined by analysing its aspects based on criteria outlined in Frascati Manual, which mandates that the features like novelty, creativity, uncertainty, and systematic approach be present in it. The validation to determine whether a project qualifies as R&D is handled by BSFZ (Bescheinigungsstelle Forschungszulage), and it is the first step in the process of claiming the research allowance to acquire a BSFZ certificate which states the qualification of the project as an R&D project. And, the second step being claiming the research allowance by submitting the application to the tax office.
Why is a patent important for R&D?
A patent is a protection given to the inventor or company to exclusively use their work and avoid the duplication or replication of it by others. Germany follows a strict criteria to grant patents to any inventions and only technical inventions are eligible. To be eligible to receive the patent, an invention is required to meet the following criteria under Section 1(1) of the Patent Act:
Novelty:
The invention needs to be brand new and delineable to the state of the art. It should not be publicly disclosed before through written or oral descriptions, or exhibitions.
Inventive steps:
The invention should not be obvious and it must have a technical advancement from what is already known.
Industrial applicability:
The invention should be usable in any industry with the scope to be reproducible.
These aspects closely align with the criteria that defines an R&D project regarding Research Allowance. For example, the Frascati Manual states that R&D work must generate new knowledge, should not be routine work, and include uncertainties.
Novelty as a Criterion: For Patent and Forschungszulage Claim
Novelty is a common concept in both, patent and Forschungszulage approval.
For patents, the way novelty is defined is very strict and global. The application of a particular invention for patent will be denied if the same type of knowledge is available to the public anywhere in the world by any means before the date of filing the application.
In the Forschungszulage application process, the novelty is assessed in the framework of business enterprise. Based on the specifications in the Frascati Manual, an R&D project must generate novel knowledge which is not already present in the industry and new to the business. Reproducing existing work and known results and reverse engineering are not considered novel. A new application or use case for an existing technology with all its associated risks and uncertainties could be eligible for the Forschungszulage, even if it is not patentable. Overall, the eligibility standards for the Forschungszulage are lower than those for patents.
How Does a Patent Add Value During the BSFZ Review Process?
Even though a patent is not mandatory in the process of claiming the Forschungszulage, it can add significant value to the project during the BSFZ review. Following are a few reasons:
Proven Novelty:
A patent proves the novelty of an invention satisfying a core R&D criterion. There will not be any room for doubt of the newness of the project that has received a patent by fulfilling all the complex requirements.
Inventive step confirmation:
One of the conditions to receive the patent for an invention is its non-obviousness. This closely aligns with the criteria of creativity and systematic approach, proving the project is qualified as R&D.
Evident systematic documentation:
The application for the patent itself requires detailed and accurate documentation and this reflects positively while seeking research allowance and resulting in a successful application.
Note: The cost incurred to apply for a patent is not eligible to be added under the expenses in the Forschungszulage claim. The eligible expenses are purely the ones incurred for research and development activities and not any administrative costs.
Practical recommendations for companies regarding patents and Research Allowance
To leverage the best out of patent and research allowance, the companies can consider these practical steps:
1. Maintaining the confidentiality of the invention:
Before filing for the patent, the details of the invention need to be kept confidential including in presentations or internal meetings with all stakeholders to maintain its novelty and avoid duplication due to early disclosure. At this stage, applying simultaneously for the research allowance and a patent can be beneficial, as it helps companies to navigate the complex documentation in a single process, saving a considerable amount of time.
2. Using patent documents to support Forschungszulage claim:
Similar to Research Allowance application, patent application needs detailed technical documentation and this structured information can be strong evidence while claiming the allowance as it reflects the systematic approach and reproducibility of the research work during BSFZ review.
3. Applying early for the Research Allowance:
Even though it is possible to claim the research allowance retroactively for up to four years, applying early has its own advantages, such as faster approval. This can help a company maintain liquidity and budget for new innovation.
Conclusion: A patent is a strong ally but not a requirement
Although a patent is not mandatory to claim Forschungszulage, it can add substantial value during the application process by demonstrating the eligibility of the R&D project highlighting elements such as novelty and systematic approach. Ultimately, companies need to consider patents as a strategic ally to research allowance, not essential, but potentially can contribute value when integrated carefully with research objectives and timelines.
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How to document R&D hours for a successful Forschungszulage claim
Forschungszulage (Research Allowance) is the tax incentive launched by the government of Germany to promote innovation by providing financial assistance to R&D projects. The programme allows companies with qualified research activities to claim up to 25% (35% for SMEs) of their eligible expenses, mainly the personnel expenditures through the R&D tax credits. To substantiate the claims, it is mandatory to produce accurate and transparent documentation of working hours using the timesheets meant for the R&D activities. Suggested Reading: To learn more about how the Research Allowance works and who is eligible, see our comprehensive Research Allowance guide for 2025.Maintaining a timesheet is not just a formality, it is a significant document that depicts the time spent by the human resources on the project while claiming the research allowance. As per the Federal Ministry of Finance (BMF) and BSFZ, only the hours logged in the documents are eligible for the claim, and the data which is omitted or misrepresented will not be considered during the Forschungszulage application.To ensure the compliance of the applications with guidelines and aid auditing, the BMF has established an official timesheet template. The template is designed to give transparent guidelines for the applicant in order to log their data in the correct format by checking all the mandatory fields. The statutory requirements do not mandate the applicant to follow this template but it is designed with alignment to GoBD. In case the company has multiple projects running simultaneously, it is needed to maintain separate timesheets for each of them.Components of the official timesheetThe timesheet outlines the documentation of the effective working hours in a standardised structure for the companies. There are two main sections in the timesheet showing annual working hours and monthly working hours.1. Annual time calculationThe various aspects of the yearly time recording are ascertained on the basis of the following main points.Contractual working hours: The total effective hours for the year are calculated as weekly hours x 52 weeks. Deductions: Public holidays, vacation days taken by personnel, sick leave, and maternity or paternity leave are subtracted when calculating the effective working hours, as a basis for calculating the percentage of hours spent on R&D out of the total annual working time.2. Documentation of R&D activitiesMonthly data: Over the course of the month, the time spent on each day by each individual performing the tasks should be recorded separately.Project identification: If a company runs multiple R&D projects simultaneously, it is required to maintain different timesheets for the projects. One timesheet is meant for one particular project certified by BSFZ.Details of human resources: While entering the data, the details of the personnel performing the activities need to be recorded clearly including their names, designations, type of R&D work they conducted.Excluded activities: The activities such as administration, management, and logistics are not qualified to be added in the timesheet meant to claim research allowance.Approvals: The data mentioned in the timesheets need to be confirmed and approved by the personnel and project lead by verifying the information and authorised with their signatures.3. Additional guidelinesThreshold: Of the total hours spent on R&D project activities, only up to 40 hours per week, i.e., 2080 hours per year for an individual is eligible, even if the employee works overtime on the project.Retention of documents: Timesheets need to be stored and produced on request of verification of claim and future audits. Reasons why to maintain an accurate timesheetMaintaining an authentic and verifiable timesheet confirms the claim from the company is:Transparent with traceable documents and is audit-proofClarity in terms of the claim based on qualified expenses and effective application.Compliance with the claim and process with the guidelines of BSFZ and Tax office.ConclusionThe Forschungszulage programme offers the financial advantage to the small and large organisations alike, and it's in the hands of the company to make the best out of this government initiative. Following accurate documentation with transparency and verifiable records is one of the important steps in the application process. The timesheet provides clarity to the companies about what information needs to be recorded with regard to the human resources involved in the R&D project and how it is processed under the claim for research allowance. Having an authentic documentation process and effective application helps a company to acquire financial aid in the form of tax credits and elevate their R&D efforts to promote innovation. Connect with innoscripta to know more about the efficient R&D project documentation process and explore user-friendly time tracking software platform to successfully apply for Forschungszulage.
Jul 17, 2025
Forschungszulage application rejected? What to do next?
In Germany, Forschungszulage (Research Allowance) is the program dedicated to providing financial support for companies that focus on innovation, research, and development. Companies across industries and various sizes can claim Research Allowance based on the eligible expenditures of their qualified R&D projects. The Research Allowance is usually given to the companies in the form of a tax credit and if a certain company's tax liability is less than the research grant, the amount would be issued as a cash refund to them. The Research Allowance application process consists of two steps, first obtaining a BSFZ certificate that confirms the project is eligible for research allowance and second, sending an application to the Tax Office seeking the actual financial support.What happens if the application gets rejected? This question often gets a lot of attention from the companies applying for the allowance from the initial stage and even after the submission of the application. The rejection might be from the BSFZ (Bescheinigungsstelle Forschungszulage) or in the second stage from the Tax Office (Finanzamt). The important point the applicant needs to understand is that the rejection is not ultimate. Here, the rejection could be reversed or pave the road for a well-prepared reapplication. When an applicant receives feedback from the BSFZ or Tax office, the first thing they should do is to understand the feedback and analyse it carefully to confirm whether it was an application rejection or they are asking for further information about the project before proceeding to the next stage. Here's the comprehensive information about reasons for rejection, corrective steps, and strategic elements to acquire the approval for the application.Reasons for the rejection of the Forschungszulage applicationThe rejections do not always come from a point of the R&D projects being completely unworthy to get the allowance but due to the lack of compliance with the predefined criteria such as the Frascati Criteria or any specific BSFZ guidelines.The main causes for the rejection of Forschungszulage application include:Absence of technological uncertainty:The project should aim at achieving unexpected outcomes which aren't obvious to the existing knowledge and it should have an element of uncertainty as defined under Frascati Criteria which is a core factor that distinguishes a research project from others.Ambiguous project documentation:BSFZ gives a lot of weightage to the precise and transparent project documentation. If the documents required for Forschungszulage application are unclear or inconsistent, it can result in application rejection or follow-up queries from the BSFZ office.Missing information:Along with the need for clear documentation, BSFZ also considers some mandatory points to be present in it. Information about project timelines, personnel costs, clear breakdown of work packages, and project milestones are some of the examples of areas which need top-level clarity. This information needs to be definitive and justifiable with valid evidence and failure to adhere to this, the application may lead to disqualification even for an excellent research project.Unqualified research activities:There is a pre-set eligibility for the projects to apply for research allowance. The research projects should fall under the category of either basic research, industrial research or experimental development. When there is a misalignment with the eligible activities and project types, it results in rejection. The projects or activities such as test marketing, market research, UI/UX activities, or integration of known technology are not eligible to claim research allowance.Vague terminologies:The project description needs to be drafted with clear terminologies that express the research nature of the project and give clarity to its details. Adding vague terms or wordings may not be successful since it does not demonstrate the core values of the R&D project.What is the next step if a Forschungszulage application is rejected? Following the rejection of an application, there are two options the applicant can pursue.Filing an appealThe appeal could be filed within one month after receiving the rejection and it should be done if the applicant company finds that the application was wrongfully rejected due to a misunderstanding or incorrect assessment. The focus on appeal should be mainly on providing additional explanation and evidence supporting the claim and not on questioning the rejection.The applicant should analyse and adhere to the following factors in this process:Examining why the application was rejected and its rationale point by point.Compare the application against the statutory standards to understand where the information provided is vague and insufficient.File a well-structured appeal addressing the issue and submitting any additional evidence supporting the claim. Resubmitting an improved applicationIf the application is rejected in terms of any structural shortfalls without enough required information, then it is effective to submit a revised application instead of appealing. The revised application needs to be well prepared ensuring all the crucial elements are mentioned accurately in project documentation. Merely adding more details to existing ones would not be successful. Elements to be considered while reapplying:Rewriting the project descriptionProvide accurate and transparent details supporting the claimConfirming the alignment of the project with BSFZ guidelines and Frascati Criteria.Note: When an appeal is filed, the BSFZ office might take 6 months to a year to review the appeal and make a decision. However, in the case of reapplication, BSFZ has an approval deadline of 3 months, which can be a tremendous advantage for applicants.Measures to avoid application rejectionThe rejection of the application majorly indicates deficient application process and not the flawed research project. The following depicts measures to strengthen the application:Evaluation of the project:One of the effective measures to ensure the successful application is to have the project evaluated by an external advisor with expertise in Forschungszulage. This audit helps to uncover the eligibility of the projects and defines the eligible expenses to claim the research allowance.Accurate internal documentation:Documenting each aspect of the project holds a key value if the company is seeking research allowance. Accurate records of timesheets, human resources, work packages, costs incurred, milestones, and prototypes are very useful during the application process as it serves as a clear reference to build the project description and also works as the supporting evidence to the claims. Providing clear information:For the explanations, it is important to use clear scientific terms that show the quality of the research projects. It is an ideal practice to refrain from using ambiguous terms and buzzwords in the project description.Proactive planning:Planning ahead by considering the Forschungszulage (research allowance) as a funding strategy, and ensuring the alignment of the documentation, financial planning, and other relevant internal processes of the project can help the company to submit an error free and successful application.How can innoscripta help you?innoscripta provides a one-stop solution involving an excellent R&D management software platform that manages each aspect in the process of applying for research allowance and the advisors who guide you through each and every step in the process strategically. The software platform offers the end-to-end solution from documenting the multiple research activities including time tracking and the costs incurred until the application submission and archiving all the documents for any future requirements including the tax audit. The top-tier software tool combined with expert advisors at innoscripta enables the company to strategically plan and successfully apply for research allowance.Connect with innoscripta to evaluate your research projects and determine their eligibility for research allowance.
