Germany's Forschungszulage (research allowance), explained

The Forschungszulage is Germany's tax-neutral R&D credit under the Forschungszulagengesetz (FZulG) — available to any company liable for German tax, regardless of size or profitability, and payable even to a company with no tax bill to offset against (it is paid out as a credit, not just a deduction).

The rate is 25% of the eligible assessment base (qualifying R&D personnel costs, and since later reforms, contract-research costs and capital goods) — raised to 35% for companies that meet the EU's SME definition (see our EU SME definition explainer) since the Wachstumschancengesetz reform took effect on 28 March 2024. Where R&D is contracted out to another party (Auftragsforschung), 70% of the fee paid to the contractor counts as eligible spend (up from 60% before that same reform date).

The eligible assessment base is capped per company per year, and the cap has risen over time: up to €2 million (first half of 2020), €4 million (July 2020 to 27 March 2024), €10 million from 28 March 2024, and €12 million for expenses incurred after 31 December 2025 under the Steuerliches Investitionssofortprogramm. At the standard 25% rate that caps the credit itself at up to €3 million a year (€4.2 million for an SME at 35%). The same 2026 change lets projects starting after 31 December 2025 add a flat 20% for overheads on top of their other eligible costs.

Claiming it is a two-step process: first, apply to the independent Bescheinigungsstelle Forschungszulage (BSFZ) for a certificate confirming the project qualifies as R&D under §6 FZulG — this can be requested before, during or after the project runs. Only then can the company apply to its local tax office (Finanzamt) for the Forschungszulage itself, attaching that certificate. The Forschungszulage can generally be combined with other grants or state aid for the same project, but not to the point of double-funding the same cost twice.