- Forschungszulage:
- Germany's R&D tax credit — a tax-based incentive for research and development activities, governed by the FZulG.
- FZulG:
- Forschungszulagengesetz (Research Allowance Act) — the legal basis for Germany's R&D tax credit, effective since January 1, 2020.
- BSFZ:
- Bescheinigungsstelle Forschungszulage — the certification body that evaluates and certifies R&D projects for eligibility.
- Assessment base:
- The total eligible R&D expenditure (max. EUR 12M/year) to which the 25% rate (SMEs: 35%) is applied to calculate the tax credit.
What Is the R&D Tax Credit?
The R&D Tax Credit (Forschungszulage) is a tax incentive for research and development (R&D) activities in Germany. It was introduced through the Research Allowance Act (FZulG) and has been available to all taxpaying companies since January 1, 2020 – regardless of industry, size, or profitability. This makes the R&D Tax Credit the first cross-industry, tax-based instrument for research funding in German history.
The legal basis is Section 2 FZulG (Research Allowance Act), which defines the eligible research and development projects. Activities in the following three categories qualify:
- Basic research: Experimental or theoretical work primarily aimed at acquiring new knowledge without targeting any immediate practical application.
- Industrial research (applied research): Planned research to acquire new knowledge and skills with the aim of developing new products, processes, or services, or substantially improving existing ones.
- Experimental development: The acquisition, combination, shaping, and use of existing scientific, technical, economic, and other relevant knowledge and skills with the aim of developing new or improved products, processes, or services.
What makes the tax-based R&D funding under the FZulG special: Unlike traditional funding programs (such as ZIM or KMU-innovativ), the R&D Tax Credit is not tied to a competitive process. Every company that meets the requirements has a legal entitlement to the funding. There are no limited funding pools and no deadlines. The R&D Tax Credit is applied as a tax credit against income or corporate tax – and if there is a tax surplus, it is even paid out directly.
Who Can Apply for the R&D Tax Credit?
The tax-based R&D funding under the Research Allowance Act is generally available to all taxpaying companies in Germany:
Corporations
GmbH, AG, UG
Partnerships
GbR, OHG, KG, GmbH & Co. KG
Sole Proprietors
Freelancers & business owners
Permanent Establishments
Foreign companies in Germany
Co-Entrepreneurships
Section 15(1) No. 2 EStG
Branchenunabhängig
KMU bis Großkonzern
The key point: The R&D Tax Credit is independent of industry and company size. Both small and medium-sized enterprises (SMEs) and large companies and corporations can apply. Since the Growth Opportunities Act, SMEs even benefit from an increased funding rate of 35% instead of 25%.
Special Rules for Affiliated Companies
For affiliated companies within the meaning of Section 15 AktG or the EU SME definition, an important restriction applies: The maximum assessment basis of EUR 12 million is shared among all affiliated companies. This means: If multiple entities belong to one group, they share the cap. This applies to both horizontal and vertical corporate relationships.
Requirements at a Glance
To apply for the R&D Tax Credit, the following requirements must be met:
- Unlimited or limited tax liability in Germany
- Conducting own R&D projects or commissioning R&D contract research
- The R&D activity must meet the criteria of Section 2 FZulG (novelty, uncertainty, systematic approach, transferability, reproducibility)
- No double funding of the same project through other state aid for the same eligible expenditures
How Much Is the R&D Tax Credit in 2026?
The amount of the R&D Tax Credit has been increased several times since the FZulG was introduced in 2020. Since the Growth Opportunities Act 2024 and the adjustments for 2025/2026, the following key figures apply:
Standard funding rate: 25% of eligible expenditures
SME funding rate: 35% of eligible expenditures (since 2024)
Maximum R&D Tax Credit: up to EUR 4,200,000 per year (SMEs at full utilization)
Standard: up to EUR 3,000,000 per year
The Calculation in Detail
The R&D Tax Credit is calculated according to the following formula: Eligible expenditures x Funding rate = R&D Tax Credit. The eligible expenditures consist of various cost categories (see next section). The key calculation parameters for 2026:
- Personnel costs: Gross wages and salaries of employees working on R&D projects, proportional to the time spent on each project
- Owner contributions: Flat rate of EUR 100 per hour for sole proprietors and partners who are personally engaged in research (maximum 40 hours per week)
- Overhead allowance: From 2026, 20% of personnel costs can be claimed as a flat-rate overhead – a significant improvement over previous years
- Contract research: 70% of the fee paid to the contractor
Calculation Example: SME with 5 R&D Employees
+ Overhead allowance (20%): EUR 80,000
= Assessment basis: EUR 480,000
x SME funding rate (35%): = EUR 168,000 R&D Tax Credit
For a standard company (25%): EUR 120,000 R&D Tax Credit.
Which Expenditures Are Eligible?
The Research Allowance Act defines in Section 3 FZulG exactly which expenditures are included in the R&D Tax Credit assessment basis. The four cost categories at a glance:
1. Personnel Costs (Own Staff)
By far the most important cost category is wages of employees engaged in R&D. Eligible are the taxable gross wages and salaries received by the employee, including:
- Base salary and allowances
- Overtime compensation
- Holiday pay and Christmas bonus (pro rata)
- Bonuses and premiums (if taxable)
Not eligible are employer social security contributions, company pension schemes, benefits in kind, or non-cash benefits. Personnel costs are considered proportionally based on the actual time spent on the R&D project. Careful time tracking is therefore essential.
2. Contract Research
If a company commissions a third party to carry out R&D activities, 70% of the fee paid can be claimed as eligible expenditures. This applies both to commissioning research institutions (universities, Fraunhofer institutes) and to commissioning other companies. The contractor may not claim their own R&D Tax Credit for the same expenditures.
3. Owner Contributions from Sole Proprietors and Partners
Sole proprietors and partners of partnerships who are personally engaged in research can claim their own contributions at a flat rate of EUR 100 per hour. The maximum weekly working time is limited to 40 hours. This results in a maximum annual assessment basis for owner contributions of approximately EUR 208,000 (at 52 weeks x 40 hours x EUR 100).
4. Overhead Allowance (New from 2026)
One of the most important changes: From fiscal year 2026, companies can claim an overhead allowance of 20% on eligible personnel costs and owner contributions. This covers laboratory materials, consumables, software licenses, and other overhead costs on a flat-rate basis that could not be claimed previously.
Non-Eligible Expenditures
Explicitly not eligible under the FZulG are:
- Material costs (materials, machines, equipment) – except via the overhead allowance
- Depreciation on research facilities
- Travel expenses
- Patent costs and licensing fees
- Market launch costs
- Routine quality controls and tests
The Application Process in 2 Steps
The procedure for applying for the R&D Tax Credit consists of two stages:
BSFZ Certification
Substantive review of your R&D projects
- Identify R&D projects
- Submit online application via BSFZ portal
- Receive certification (4–12 weeks)
Tax Office Application
Tax assessment & payout
- Submit Annex FZ
- Document expenditures
- Tax credit / payout
First, the substantive R&D qualification is reviewed by an independent body, then the tax application is filed with the tax office. Both steps are mandatory.
BSFZ Certification: Application to the Research Allowance Certification Body
In the first step, you must submit a BSFZ application to the Research Allowance Certification Body (BSFZ). The BSFZ is a body assigned to the BMBF, operated by a consortium of VDI Technologiezentrum, DLR Projektträger, and AiF Projekt GmbH.
The application is submitted exclusively electronically via the BSFZ portal (ELSTER-based). The following information and documents are required:
- Description of the R&D project (objectives, methods, planned results)
- Presentation of the scientific or technical uncertainty
- Evidence of novelty compared to the state of the art
- Time period and employees involved in the project
- Classification into the categories of basic research, industrial research, or experimental development
The BSFZ exclusively reviews whether the project meets the substantive criteria according to Section 2 FZulG. Processing typically takes 4 to 12 weeks. Upon positive decision, you receive a certification to present to the tax office.
Application to the Tax Office: Assessment of the R&D Tax Credit
With the BSFZ certification in hand, you submit the application for assessment of the R&D Tax Credit to your local tax office. This is done via Annex FZ to the income or corporate tax return or as a separate application under Section 6 FZulG.
In the tax office application, you declare the eligible expenditures – i.e., the actual personnel costs, contract research costs, and owner contributions incurred. The tax office verifies the mathematical accuracy and assesses the R&D Tax Credit. The credit is applied against the next income or corporate tax.
Important notes on the tax office application:
- The application must be filed after the end of the fiscal year in which the expenditures were incurred
- The BSFZ certification must be attached to the application
- Detailed breakdown of eligible expenditures per project
- Evidence of time tracking for proportionally allocated personnel costs
- For contract research: submission of contracts and invoices
Applying for the R&D Tax Credit Retroactively
Many companies are unaware that they can also apply for the R&D Tax Credit retroactively for past fiscal years. In fact, retroactive applications are possible for all open tax years from 2020 onwards – the year the FZulG came into force.
Requirements for Retroactive Application
For a retroactive R&D Tax Credit application, the following conditions must be met:
- The R&D project was carried out in the respective fiscal year (from 2020)
- The eligible expenditures are verifiable (personnel costs, time records, contracts)
- The tax assessment for the relevant year is not yet final or can be corrected through an amendment request
- No BSFZ certification was applied for? No problem – the certification can also be applied for retroactively
Which Assessment Limits Apply Retroactively?
For retroactive applications, the regulations valid at the respective time apply:
2024 (after Growth Opportunities Act): Max. assessment basis EUR 12 million, funding rate 25% (SMEs: 35%), max. credit EUR 3–4.2 million
From 2026: Additional 20% overhead allowance on personnel costs
For companies that have been continuously conducting R&D since 2020 and have not yet applied for the R&D Tax Credit, significant back payments can result. A mid-sized company with annual R&D personnel costs of EUR 500,000 could, for example, receive over EUR 500,000 in retroactive R&D Tax Credits.
2026 Updates: What Has Changed with the R&D Tax Credit?
The Research Allowance Act has been amended several times since its introduction. The most important changes at a glance:
Increased Assessment Basis: From 4 to 12 Million EUR
Arguably the most significant change: The maximum assessment basis was raised from the original EUR 2 million (2020) through EUR 4 million (2021–2023) to the current EUR 12 million per fiscal year. This means the maximum funding amount has increased sixfold. Research-intensive mid-sized companies and large enterprises benefit significantly.
SME Bonus: 35% Instead of 25% Funding Rate
Small and medium-sized enterprises (SMEs) under the EU definition have received an increased funding rate of 35% instead of the standard 25% since 2024. The SME definition includes companies with fewer than 250 employees and either annual turnover of no more than EUR 50 million or a balance sheet total of no more than EUR 43 million. This bonus increases the maximum credit for SMEs to up to EUR 4.2 million per year.
20% Overhead Allowance from 2026
For the first time, from fiscal year 2026, companies can claim a flat-rate overhead component of 20% on eligible personnel costs and owner contributions. Previously, only direct personnel costs and contract research were eligible. The new flat rate covers indirect costs such as laboratory rent, consumables, software licenses, and similar operating costs directly related to R&D activities.
Owner Contribution Rate Adjusted
The hourly rate for owner contributions from sole proprietors and partners has been set at EUR 100 per hour. The maximum weekly working time of 40 hours remains unchanged. For many owner-managed companies, this represents a substantial funding opportunity that has not yet been fully utilized.
Summary of Changes
An SME with EUR 1 million in R&D personnel costs can calculate as follows from 2026:
Personnel costs: EUR 1,000,000
+ 20% overhead allowance: EUR 200,000
= Assessment basis: EUR 1,200,000
x 35% (SME rate): = EUR 420,000 R&D Tax Credit
For comparison: In 2020, the same company would have received only EUR 250,000 (1 million x 25%, no overhead allowance).
Apply for the R&D Tax Credit with NOVARIS
The application process for the R&D Tax Credit requires both technical understanding (for the BSFZ certification) and tax law expertise (for the tax office application). Errors in the application lead to rejections, delays, or an allowance set too low. This is where NOVARIS Consulting comes in.
As a specialized full-service partner for tax-based R&D funding, we support the entire process – from the initial analysis of your R&D projects through the preparation of the BSFZ application to the assessment of the R&D Tax Credit by the tax office.
Our Services at a Glance
- Free initial analysis: We assess without obligation whether your R&D activities are eligible and estimate the potential R&D Tax Credit
- BSFZ application: Professional preparation of the project description for maximum success probability at the certification body
- Time tracking and documentation: Setting up audit-proof documentation of your R&D expenditures
- Tax office application: Preparation of Annex FZ and communication with the tax office
- Retroactive application: Identification and application for all open funding periods from 2020
- Ongoing support: Annual optimization of your R&D Tax Credit for all future fiscal years
Why Professional Support Is Essential
Important: Incorrect or manipulated time tracking can be classified by the tax office as tax evasion – with criminal consequences, fines, and back payments with interest. Tax offices are increasingly scrutinizing documentation for R&D Tax Credit claims. Professional support with the application and documentation protects you from this risk.
Success-Based, Affordable, and Risk-Free
NOVARIS works on a success-based model. This means: Our fee is based on the result. If you do not receive an R&D Tax Credit, you pay nothing. NOVARIS is the most affordable provider on the market – and also the only one with a 100% success rate (as of March 2026, all submitted projects) in R&D Tax Credit applications. The initial analysis is always free and non-binding.
Common Mistakes When Applying for the R&D Tax Credit
In our consulting practice, we repeatedly see the same mistakes. Knowing them allows you to avoid them specifically:
Weak BSFZ Project Description
Scientific uncertainty not demonstrated — most common reason for rejection.
The project description submitted to the BSFZ does not convincingly demonstrate what the scientific or technical uncertainty consists of. Many companies merely describe what they are developing — but not why the outcome is uncertain and what technical hurdles must be overcome.
Clearly describe what problem could not be solved at the start of the project, what alternative approaches were examined, and why the outcome was unpredictable. Use technical language and support the state of the art with concrete sources.
Missing Time Tracking
Without GoBD-compliant time documentation, the tax office reduces personnel costs.
The R&D Tax Credit is based on the actual time spent by R&D employees. Without complete, timely, and project-related time tracking, personnel costs cannot be correctly determined. The tax office may reduce or disallow all personnel costs.
Implement project-related R&D time tracking that is GoBD-compliant. Tracking must be done promptly (ideally weekly) and individually document for each employee how many hours were spent.
Routine Instead of Research
Quality assurance, customization, and regulatory work are not eligible.
Not every product development automatically qualifies as R&D under the FZulG. Routine activities such as quality assurance, customization to customer requirements, regulatory implementations, or maintenance work are not eligible — even if they are technically demanding.
Examine each project against the criteria of novelty and uncertainty. The decisive test: Was the outcome unpredictable at the start of the project? Was new knowledge systematically developed that goes beyond the known state of the art?
Applying Too Late
BSFZ application submitted only after year-end — 4–12 weeks delay.
Companies often apply for the BSFZ certification only after the fiscal year has ended. Since BSFZ processing takes 4 to 12 weeks and the tax office application can only be submitted with the certification, the payout is delayed by months.
Apply for the BSFZ certification during the current fiscal year. This way you can submit the tax office application immediately after year-end and accelerate the payout.
Double Funding Not Verified
ZIM/BMBF-funded costs cannot be claimed again as assessment basis.
If a company already receives other state funding for the same project (e.g., ZIM, KMU-innovativ, BMBF), the same expenditures must not be funded twice. Personnel costs already covered by a grant cannot be used as the assessment basis.
Before applying, review all existing funding and clearly delineate eligible expenditures. The R&D Tax Credit is still possible — only the cost portions not funded elsewhere can be claimed.
Time Tracking & Documentation Requirements
Time tracking is the foundation of every R&D Tax Credit application. Without reliable time records, the tax office cannot recognize the eligible personnel costs — and in the worst case, may deny the entire R&D Tax Credit or claw it back retroactively.
Requirements for R&D Time Tracking
The BMF circular and tax office audit practice set clear requirements:
Individually assigned to each BSFZ-certified R&D project
Individual hour tracking per employee
Retroactive annual estimates are regularly challenged
Immutable, traceable, subject to retention requirements
Hours traceable in relation to total working time
„50 % der Arbeitszeit für FuE" ohne Nachweis reicht nicht
Timesheets and Digital Tracking
Time tracking can be done in various ways: handwritten timesheets, Excel spreadsheets, or specialized software. The key requirement is that records can be archived in an immutable format. In practice, we recommend a digital solution that captures both project allocation and activity descriptions — this way you are optimally prepared for a tax audit.
R&D Tax Credit & Double Funding (De minimis Aid)
One of the most common questions: Can the R&D Tax Credit be combined with other funding programs? The short answer: Yes — but not for the same expenditures. The cumulation prohibition is regulated in Section 7 FZulG.
The Cumulation Prohibition in Detail
Expenditures already funded by other state aid (e.g., ZIM grants, BMBF funding, state funding programs) may not be included in the R&D Tax Credit assessment basis. This applies exclusively to the identical expenditures — not the entire project.
In practice, this means: If a company receives a ZIM grant for personnel costs for an R&D project, these personnel costs cannot additionally be used as the R&D Tax Credit assessment basis. Other personnel costs of the same company — for example, for another R&D project without ZIM funding — remain eligible.
R&D Tax Credit and De minimis Regulation
The R&D Tax Credit is not subject to the de minimis regulation. It is designed as an independent aid category under the General Block Exemption Regulation (GBER). This means: The R&D Tax Credit is not counted against the de minimis threshold of EUR 300,000, and conversely, existing de minimis aid does not limit the entitlement to the R&D Tax Credit.
Combination with Other Programs
| Combination | Possible? | Condition |
|---|---|---|
| FZulG + ZIM | Conditional | Not for the same personnel costs |
| FZulG + KMU-innovativ | Conditional | Same delineation rule as ZIM |
| FZulG + Landesförderung | Conditional | Clearly delineate expenditures |
| FZulG + F&E-Abzug (§4 EStG) | Yes | Business expense + assessment basis in parallel |
| FZulG + De-minimis | Yes | FZulG is not subject to the de minimis regulation |
R&D Tax Credit Consultant: When Is Professional Advice Worth It?
Applying for the R&D Tax Credit requires expertise in two very different areas: technical project description (for the BSFZ) and tax law (for the tax office). Not every company has both competencies internally — and this is exactly where specialized R&D Tax Credit consultants come in.
What an R&D Tax Credit Consultant Does
A specialized consultant typically handles the entire application process — from identifying eligible projects through preparing the BSFZ project description to the tax office application. The consulting includes in detail:
- R&D screening: Analysis of all current and past projects for eligibility under Section 2 FZulG
- BSFZ application: Formulation of the project description that meets the certification body's requirements
- Cost calculation: Calculation of eligible personnel costs, owner contributions, and contract research
- Documentation setup: Establishing audit-proof time tracking and evidence documentation
- Tax office application: Preparation of Annex FZ and communication with the tax administration
- Retroactive review: Identification of all open fiscal years from 2020 for which R&D Tax Credits can be claimed retroactively
Who Benefits from a Consultant?
As a general rule: The higher the potential R&D expenditures, the greater the leverage of professional consulting. Engaging a consultant is particularly worthwhile in the following cases:
- Companies with multiple R&D projects where the distinction between research and routine is complex
- Companies applying for the R&D Tax Credit for the first time or retroactively
- Companies with contract research where the 70% rule must be correctly applied
- Companies whose BSFZ application has already been rejected (objection or new application)
- Tax advisors who want to offer the R&D Tax Credit to their clients as an additional service without having to build R&D expertise themselves
Consulting Costs
NOVARIS Consulting works exclusively on a success-based model – you only pay upon success, with no upfront costs or hidden fees. As the most affordable provider on the market and the only consultant with a 100% success rate (as of March 2026, all submitted projects), we offer maximum security at minimum risk. Consulting costs are tax-deductible as a business expense.
