Nov 04, 2024
How is the Research Tax Credit Disbursed?
The research tax credit provides an attractive way for companies to support their innovation projects. But how exactly is this benefit disbursed?
In most cases, companies do not receive a direct payment. Instead, the tax credit is applied as part of the tax return process—specifically offset against the assessed income or corporate tax. This means the research tax credit acts as a tax reduction, lowering the overall tax burden.
But what happens if the credit exceeds the tax amount owed? In such cases, the excess amount is refunded as a tax reimbursement. This ensures companies can fully benefit from the research tax credit, even if their tax liability is lower.
It’s important to note, however, that companies wishing to claim the credit must not be classified as “companies in difficulty.”
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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 sealFor 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 projectsThe 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 researchThe 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 sealTo 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.
Jul 30, 2025
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.
