Research Tax Credit vs. ZIM — Two Funding Paths Compared
Companies investing in research and development (R&D) in Germany can benefit from two powerful funding programs: the Research Tax Credit (Forschungszulage) and the Central Innovation Programme for SMEs (ZIM). Both programs share the same goal — strengthening innovation in the economy — but differ fundamentally in mechanics, target audience, and application process.
Research Tax Credit
Tax credit — project-independent, retroactive, no budget cap. Open to SMEs and large enterprises alike.
ZIM
Direct grant — project-specific, approved upfront, budget-dependent. Only for SMEs and mid-sized companies up to 499 employees.
The good news: both programs can be combined. On this page we explain the differences, pros and cons, and the optimal strategy for your company.
Research Tax Credit vs. ZIM: Detailed Comparison
The following table highlights the key differences at a glance:
Research Tax Credit: A Legal Entitlement
The Research Tax Credit (Forschungszulage) under the German Research Allowance Act (FZulG) is a tax-based incentive claimed via the tax office. Unlike ZIM, it is not a grant but a tax credit: it is offset against your tax liability or — for loss-making companies — paid out directly as a cash refund.
Legal Entitlement
No competition — every company with qualifying R&D has an automatic right to the credit.
Retroactive
Claimable up to 4 years retroactively — no prior approval required for ongoing projects.
The application process is two-step: first a technical certification by the BSFZ (Certification Body for Research Allowance), then the tax office application with cost documentation. The criteria for eligible R&D are: Novelty, Technical Risk, and Systematic Approach.
ZIM: A Traditional Grant for the Mittelstand
The Central Innovation Programme for SMEs (Zentrales Innovationsprogramm Mittelstand, ZIM) is a federal funding program by the German Ministry of Economic Affairs (BMWK). It is exclusively available to SMEs and mid-sized companies with up to 499 employees, funding technological innovation projects as a non-repayable grant.
Individual Projects
Funding of up to 50% of eligible costs for a single R&D project. Maximum grant: €228,000 (small enterprises, eastern German states).
Cooperation Projects
Funding for consortia of multiple companies or with research institutions — up to €380,000 per partner.
Pros and Cons: Side-by-Side Comparison
Research Tax Credit
- • Legal entitlement — no rejection possible
- • Retroactive claims up to 4 years
- • No budget cap — always available
- • All company sizes eligible
- • Owner labour at €100/hour eligible
- • Industry- and topic-independent
- • Lower funding rate (25-35% vs. up to 50%)
- • Only R&D costs, no market launch
- • BSFZ certification + tax office application required
ZIM
- • Higher funding rate (up to 50%)
- • Cooperation projects eligible
- • Market launch phase funded
- • International technology transfer possible
- • Competitive process — rejections possible
- • No retroactive funding
- • Limited budget — funds can run out
- • SMEs only (max. 499 employees)
- • No owner labour eligible
- • High administrative burden (proof of use)
When to Use Which Program: Decision Guide
Choose Research Tax Credit when…
- • R&D projects are already running or completed
- • You are a large enterprise with ≥500 employees
- • Planning certainty matters (legal entitlement)
- • The owner is personally involved in R&D
- • You lack time for a complex application process
- • Your R&D is industry-independent
Choose ZIM when…
- • A specific new project is being planned
- • The higher funding rate (up to 50%) is decisive
- • Cooperation with research institutions is planned
- • The project has not yet started
- • You have ≤499 employees
- • Market launch should be co-funded
Combining Research Tax Credit + ZIM: How It Works
Combining the Research Tax Credit and ZIM is generally possible and encouraged. There is one key restriction: double funding for the same eligible costs is not permitted. In practice this means:
Application Process: Research Tax Credit vs. ZIM
Research Tax Credit — 2 Steps
- BSFZ application: Submit project descriptions → Certification (3-6 months)
- Tax office application: Cost documentation + certification → Payout (1-3 months)
Total duration: 4-9 months. A specialist consultant handles both steps entirely.
ZIM — 4 Steps
- Project outline: Technology and market description
- Formal application: Detailed planning + financial plan
- Expert evaluation: External jury assesses innovation level
- Approval + proof of use after completion
Total duration: 6-12 months until approval, followed by ongoing reporting obligations.
Frequently Asked Questions: Research Tax Credit vs. ZIM
Yes, both programs are generally combinable. The only restriction: double funding for the same eligible costs is not permitted. In practice, ZIM-funded costs are deducted from the assessment basis of the Research Tax Credit. Remaining R&D costs can still be claimed via the Research Tax Credit.
That depends on your situation. ZIM offers a higher funding rate (up to 50%) but is limited to individual projects and requires upfront application. The Research Tax Credit has a lower rate (35% for SMEs, 25% for large companies) but covers all R&D costs across the company and can be claimed retroactively. For companies with high ongoing R&D costs, the Research Tax Credit is often more rewarding.
For ZIM, unfortunately no — the application must be submitted before project start. The Research Tax Credit, however, can be claimed up to 4 years retroactively. This makes it ideal for ongoing or already completed R&D projects.
No. ZIM is restricted to SMEs and mid-sized companies with up to 499 employees. For larger enterprises, only the Research Tax Credit is available — it is open to all companies regardless of size.
NOVARIS Consulting specializes in the Research Tax Credit and works on a success-based model — you only pay upon approval. For ZIM applications we recommend a specialized grant consultant, and we are happy to connect you. Schedule a free consultation →
Your R&D project must meet three criteria: Novelty (new knowledge or capabilities are being pursued), Technical Risk (the outcome is uncertain), and Systematic Approach (planned, documented methodology). This applies to basic research, industrial research, and experimental development.