Oct 09, 2025
What is the BSFZ seal? Recognition for R&D in Germany
Innovation is a crucial factor contributing to economic growth and development, especially in a competitive and highly evolving global environment. In Germany, the BSFZ seal acts as a prestigious symbol for organisations that are actively pursuing innovative research and development (R&D). The BSFZ seal is issued by the Research Allowance Certification Office (Bescheinigungsstelle Forschungszulage) and represents innovation capabilities in addition to improving a company's credibility among stakeholders, investors, and customers. The BSFZ seal highlights that the company is a contributor to forward-thinking and futuristic ecosystems, enhancing Germany's position as an international innovation hub.
Classification of the BSFZ seal
For a company engaging in research and development, the BSFZ seal is awarded in two different types, indicating the nature of a company's research and development initiatives.
Red seal for in-house R&D projects
The red seal certifies that a company has efficiently carried out its own R&D activities using its internal resources. Involvement of a third party at any stage of the particular R&D project is facultative. It demonstrates the company's ability to initiate and manage the entire R&D process.
Orange seal for contract research
The orange seal is given to a company when they execute a R&D project in collaboration with external partners. Research projects can be outsourced to external parties such as a research institution, university or private organisation. This seal reflects the company's commitment to nurturing innovation and facilitating collaborative R&D projects.
Both of these versions of the BSFZ seal act as proof for qualified R&D projects under Germany’s Research Allowance Act (FZulG), which was introduced to financially support companies with eligible R&D projects across industries and sizes. The monetary support is provided for the qualified projects in terms of tax credits on the basis of their eligible R&D expenditure.
Criteria for receiving the BSFZ seal
To receive the BSFZ seal, the R&D project must obtain a BSFZ certificate confirming that the project qualifies as research and development. The certificate is issued based on criteria defined in accordance with established international standards, specifically those outlined in the OECD’s Frascati Manual.
These criteria include:
Novelty: The R&D project must bridge a gap by generating new knowledge or by developing a new product, process or service that is beyond the existing ones.
Creativity: The project should have an innovative problem-solving approach that is different from existing standard practices.
Systematic approach: The research should be conducted as per a defined and systematic methodology.
Uncertainty: The final results or outcome of the R&D project should not be known in advance and should include an element of technical risk.
Reproducibility: The results of the R&D project should be documented in a way that allows verification and reproduction of the results, enabling further validation of the outcomes.
Once an R&D project meets these standards and acquires the BSFZ certificate confirming its eligibility to claim the research allowance, the company gains access to the BSFZ seal via the application portal. Clear instructions regarding its usage and design guidelines are made available to the company to ensure the correct representation.
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Sep 30, 2025
How does the BSFZ assess R&D projects for Forschungszulage certification?
Introduction to the BSFZ and its role regarding ForschungszulageThe Bescheinigungsstelle Forschungszulage (Research Allowance Certification Office) is the official authority designated to determine if a project is eligible to claim the research allowance. The BSFZ evaluates if the activities defined in the research allowance application fall under the category of research and development (R&D). The preliminary decision is then forwarded to the relevant tax office for assessment and settlement with the income tax liability.BSFZ functions under the technical and legal supervision of the Federal Ministry of Research, Technology and Space and is operated by a consortium of experienced project sponsors:VDI Technologiezentrum GmbHAiF Projekt GmbHDLR Project Management AgencyWith the objective of ensuring an optimum and professional review of the applications, an interdisciplinary team is established with staff from various scientific fields who hold extensive experience in validating R&D projects. The application process with the BSFZ is fully digital, which increases convenience. The application is submitted through a web portal that is custom-developed by the BSFZ. BSFZ offices are present in various cities such as Bonn, Berlin, Düsseldorf, and Dresden with the scientific experts from multiple fields evaluating the R&D project applications. The BSFZ review is a key step for applicants as it is the first step in seeking the research allowance and the approval is crucial. Without BSFZ approval the project cannot advance to the tax authority stage.Assessment basisWhile assessing the research project, the BSFZ reviews if it falls into any of the defined categories under the Research Allowance Act (FZulG) and adheres to the EU’s General Block Exemption Regulation (GBER) and the OECD’s Frascati Manual. Criteria for approval involve:Basic research: The experimental or theoretical research project that is focused on acquiring new knowledge without any direct commercial application.Industrial research: The planned research projects aim to gain new knowledge and skills in order to develop new products, processes, or services and also to make significant improvements to the existing ones. Examples of industrial research include prototype construction and validation of technological concepts.Experimental development: Experimental development involves research based on using existing scientific and technological knowledge to develop a new product or improve the existing ones. As per the Frascati Manual, a research project must include the following features:Novelty: The project must generate new know-how that is not available in the state of the art and the research work needs to be original without similarity to existing work.Uncertainty: The outcome of the R&D work should not be known to the public yet. It should be uncertain and not predictable. Additionally, there must be an element of risk involved.Systematic approach: The research work should be conducted according to a systematic plan and methodology.Creativity: The work should consist of an innovative approach and an element of non-obviousness.Reproducibility: The results of R&D work should be verifiable and reproducible with the scope of obtaining the same results. Evaluation processOnce a company submits its application for the certificate from the BSFZ in the process of seeking the research allowance, there are three potential results they can expect.1. ApprovalThe positive response and issuance of the certificate stating that the research project is eligible to claim the Forschungszulage. The BSFZ office validates the R&D nature of projects using the pre-defined criteria and indicates the approval for the company to proceed with the application to tax authorities to claim the research allowance.2. RejectionAn application can get rejected if the BSFZ office finds that the project lacks the necessary characteristics to be considered as R&D. In certain instances, the application of an excellent R&D project may get rejected if the application is not clear due to any of the following reasons:Vague project documentationMissing important information in the project descriptionInclusion of unqualified activities in the application Using vague terminology to describe the project elements.When an application gets rejected, the applicant company has two options as corrective measures:a. Appeal:It is allowed to submit an appeal within 4 weeks after receiving the rejection from the BSFZ. The appeal should be submitted if the company finds that its application is wrongfully rejected due to misunderstanding and incorrect assessment. The objective of the appeal should be to provide additional information and proof supporting its claim and not merely to question the previous assessment result.b. Reapplication:In case an application is rejected due to shortcomings in the application preparation, as a next step it is ideal to submit a revised and well-prepared application instead of submitting an appeal as the BSFZ is obliged to review the reapplication within three months. The revised application should include all the crucial information with clear technical details of the projects. It is important to submit the details supporting the claim and to ensure the project meets BSFZ guidelines and criteria mentioned in the Frascati Manual.3. Request for additional informationIt is common to receive a request from BSFZ to submit certain additional details about the project to continue the review process. This is not a rejection but it occurs when the submitted information does not suffice to make a final assessment. Note: BSFZ application process is done through the web portal and there are different character limits in the sections where the applicant needs to submit the project details. It is necessary to phrase the details clearly and concisely so that all required information can be provided for the review process. Best practices for applicantsTo obtain a positive response from the BSFZ and receive the certificate on the first attempt, the applicant should follow our best practices that include:1. Early documentation of R&D projectsThe documentation and recording of necessary information, technical and financial, helps in the submission of the well-prepared application and increases the chances of approval.2. Defining the innovationClear definition of newness and technical innovation of the project without the use of vague terminology is an important factor for the approval. It is required to mention details of the problem being solved, novelty of the R&D approach, and addressing uncertainties and risks during the project.3. Knowledge of deadlinesIt is possible to claim research allowance retroactively for up to four years. But, early application to the BSFZ and to the tax authorities ensures an early inflow of funds even in the event of stricter assessment guidelines.4. Seeking expert adviceFor companies, especially first-time applicants, the advice of external consultants who have expertise in Forschungszulage guidelines and the documentation process can be effective in submitting a successful application. The external advisors can help with documenting R&D projects and preparing well-structured applications in alignment with the statutory requirements.Considering applying for Forschungszulage? Connect with innoscripta to streamline your documentation with expert guidance and the intelligent software platform.
Sep 22, 2025
Forschungszulage for start-ups in Germany
Growth of start-ups in GermanyGermany is one of the global leaders in terms of innovation, engineering, and manufacturing and therefore termed an industrial powerhouse. In recent years a new wave of innovation and transformation is reshaping the start-up ecosystem and strengthening the entrepreneurial passion, and start-ups are contributing highly towards promoting innovation in Germany just like the bigger enterprises. In cities like Berlin, Munich, Hamburg, and Cologne, start-ups are rapidly growing, with incubators thriving, and entrepreneurs solving complex challenges in evergreen and growing fields like artificial intelligence, biotech, sustainable development, climate tech, and many more. The growth of start-ups promises vast opportunities for innovators who are creative and exploring the unexplored new ways of development. From initiatives like healthcare apps to using robotics in restructuring complex manufacturing processes, start-ups are a significant value addition to Germany's innovative development.The financial challenges start-ups faceDespite having innovative ideas and transformational capacity, start-ups in Germany frequently face financial challenges concerning the funding of R&D projects. Often, R&D projects are expensive and require more investments to acquire experts and special equipment for the R&D work–without the assurance of success. Additionally, a start-up might fail to raise funds on its own. For early-stage start-ups, revenue is limited, and in some instances, it is nonexistent. The traditional method of raising venture capital is helpful to an extent but the heavy competition among start-ups to obtain it puts some start-ups on the losing end, even though they might have excellent innovative projects. The lack of required finance to proceed with the intended work slows down the growth of start-ups and brings down their capacity to innovate even if they have ground-breaking ideas. How can Forschungszulage support start-ups?To promote research and development projects in Germany, the government has initiated the programme Forschungszulage, which provides financial support for companies with qualified R&D projects, in the form of tax credits or a direct cash refund if the company does not have any tax liability. Unlike other grant opportunities, the Forschungszulage is non-competitive and enables companies with eligible projects to acquire the monetary support they need. Following are the reasons why the start-ups in Germany should seek the support under Forschungszulage as part of their financial strategy:Significant financial supportUnder Forschungszulage, a company can claim up to 25% of its total eligible expenses as tax credits and for SMEs, the funding rate of 35% makes it even more helpful. The limit of total eligible expenditure was raised from €4 million to €10 million in the year 2025. An SME that has incurred €2 million as eligible personnel expenses, under Forschungszulage it could receive €700,000 back, and it is non-dilutive. This also helps start-ups to acquire financial support without giving away equity or share of ownership. Cash payouts for start-ups in financial lossIn the early years of a start-up, most of them don't generate any profit but suffer financial losses due to no or less revenue. Forschungszulage supports early stage start-ups who aren't generating profits and do not have any tax liability by granting the research allowance in the form of a direct cash payment. Broader eligibility criteriaAll taxable companies in Germany, irrespective of their size and industry can apply for research allowance if they have a qualified R&D project. Eligible projects can seek research allowance retroactively for up to 4 years and the application process remains the same for ongoing and recently completed projects. In the case of contract research, as per the recent update in 2025, the company can claim 70% of the total eligible cost incurred and the depreciation of movable fixed assets used for R&D is also included in the category of eligible expenses. These opportunities support start-ups engaged in R&D projects to apply for Forschungszulage and obtain monetary support in the case of completed and ongoing projects.Streamlined application process with higher approvalThe application for Forschungszulage involves two steps, namely: obtaining the BSFZ certificate and applying to the Tax Office. The application process in both of these stages has pre-determined criteria and guidelines. When an application for an eligible project is submitted adhering to the specified guidelines, the project gets approved within three months. This streamlined process makes it easier for applicants and lacks the usual bureaucratic nature of other funding programmes.Signal effect for investorsAlong with offering financial support, Forschungszulage also creates a powerful signal effect for investors. When a project receives a BSFZ certificate, confirming the project is genuine R&D under German law, it serves as proof that the start-up is actively engaged in recognised innovation activity. This government-backed validation improves trust, reduces perceived risk among investors and enables start-ups to leverage external funding opportunities from venture capitalists, business angels, or corporate partners.Support for start-ups with early lossesForschungszulage does not automatically exclude “companies in difficulty,” which means young companies with high start-up losses can apply for the allowance without restriction within the first three years. Even if the start-up's balance sheet shows losses, the allowance still applies as long as it has sustainable profit motive. This is a decisive advantage over traditional subsidy programmes, which are often not accessible during the critical growth phase.Practical advantages for start-upsFinancial bridging: The allowance can secure liquidity when other subsidies are no longer available due to a balance sheet that does not meet the requirements for other funding programmes.No proof of creditworthiness or own funds: Unlike loans or some grants, no collateral needs to be provided or own funds need to be proven.Planning security: Since Forschungszulage is enshrined in law and can also be applied for in advance before the projects has even started during the early phase, start-ups can count on this support during uncertain growth phases, regardless of early financial losses. ConclusionFor German start-ups, Forschungszulage is a remarkable opportunity to reclaim a significant part of their R&D expenditures. Early-stage start-ups who are generating low revenue or even incurring loss can also be eligible to seek the research allowance if they have qualified research projects matching the pre-defined criteria and other statutory guidelines from the BSFZ and the Tax Office. Even though the research allowance is primarily given in the form of tax credits, a company without tax liability can also receive it as a direct cash refund, which makes the programme more attractive for start-ups.
