Name in original language
Forschungszulage
Initiative overview
The Forschungszulage (Research Allowance Act, FZulG) was introduced effective 1 January 2020 to align Germany with the R&D tax incentive structures of other major economies. It applies to all taxable companies in Germany, regardless of size or sector, that conduct basic research, applied research, or experimental development. Eligible costs include R&D personnel costs, external contract research costs (eligible at 70% since 2024), — from 2024 — depreciation on R&D capital assets acquired after 27 March 2024 and from 2026 overhead and other operating costs, in the form of a 20 percent flat rate of the other eligible costs incurred during the fiscal year. The standard credit rate is 25%; SMEs (fewer than 250 employees) can receive an enhanced rate of 35% (effective from 2024 under the Wachstumschancengesetz/Growth Opportunities Act). The maximum annual eligible expenses were raised from EUR 4M to EUR 10M in 2024 (yielding a maximum annual benefit of up to EUR 3.5M for SMEs); from January 2026, this cap rises further to EUR 12M (EUR 4.2M maximum for SMEs). The credit is offset against income or corporate tax; any surplus is paid as an (corporate) income tax refund, making it particularly valuable for loss-making startups. The application is a two-step process: first, obtain a project certificate from the BSFZ (Certification Office); second, claim the credit via the research allowance application at the responsible tax office. The application can be submitted up to 4 years after the entitlement to the research allowance arises. From 2025, companies can offset the credit against quarterly income or corporate tax prepayments for faster liquidity. By 2026, over EUR 2.5B had been paid out under the scheme.
