As you surely know, the German government has passed a new law Forschungszulagengesetz (or FZulG) for tax incentives for research and development expenditures which is entering into force in 2020. This law allows to claim, on an annual basis, a research allowance established against a maximum of 4M€ of eligible research expenditures for the 2020-2025 period.
The annual research allowance
The annual research allowance, capped to 1 million euros per year (25% of R&D eligible expenses) will bevoffset against the next tax assessment and paid out if it exceeds the assessed tax.
Following the Frascati Manual (European Reference for R&D projects), research and development activities eligible for a tax allowance must focus on:
- Basic Research
- Applied Research
- Technological development
Regarding eligible spending, this concern:
- lR&D Personnel salaries and fees
- Subcontracting costs stemming from R&D activities in the European Union.
Example of activities that obviously fall under eligible research categories are :
- Clinical trials
- Prototype Development
- Analysis of test data
- New methods and processes
- Contract research…
Additional activities, which can also be considered as research depending on their characteristics, include :
- Quality control in direct connection with a research project
- Technology-related working time for the management of scientific personnel
- Trial production, if the production requires series tests/design and engineering work and Brainstorming discussions on technical problem solutions during the project.
Receiving this research allowance and securing it imply to previously provide the German government with relevant and well justified documentation (technical, financial and administrative).
Procedure and Steps to Obtain an R&D Tax Allowance
More precisely, the new Tax incentive will rely on a two-stage procedure for granting the research allowance:
- An application to obtain a certificate for the R&D projects. In principle, there is no deadline to apply for the certificate. However, the statute of limitations for follow-up instructions regulated by the Tax Code must be observed. We recommend sending the application to the certifying body by the end of each year (December 2020 for 2020 projects).
- An application for the determination of the research allowance based on the certified R&D projects.
The procedure can be achieved by your company itself. Nevertheless, our experience has shown that not only the actual object of research, but especially the scientific description and terminology used, have a considerable influence on the assessment result of the authorities. Indeed, the R&D potential of a project must be assessed based on a clear analysis and understanding of the technical, scientific and technological challenges associated with the project as well as its innovation potential and capacity to go beyond the state of the art.
EPSA Innovation & Energy has been supporting companies throughout Europe for decades in the preparation of such process.
300 scientific consultants have been involved in the description, evaluation and valorization of research projects for years and bring a wealth of experience in a wide range of research fields.
We attach great importance to a neutral and conservative, monetary assessment of the individual research projects.
Here you can find further information about the authority and the application procedure:
EPSA offers you :
- Free preparation of documents and communication with the authority
- A free tax and monetary evaluation of your research projects
- Free of charge until the final, positive decision by the tax office fees only arise in case of success
- Three years of legal security and reimbursement of the bonus in case of subsequent withdrawal of the allowances
Would you like a free audit?
EPSA helps companies put together a solid application through the advice and guidance of our seasoned experts.
For more information, contact our expert Andre Wandel: