Request a Tax Credit for your R&D expenses
Starting January 1st, 2020, the German government launched a new tax allowance for Research and Development called “Forschungszulagengesetz” (FZulG). This new financial tool allows German companies to register for a tax allowance of up to 25% on spending on innovative projects.
With their proven know-how and expertise on public research financing, our team of experts at EPSA Germany is happy to guide you through your FZulG application to maximize its impact on your business.
What is the FZulG?
It is a Tax Credit of up to 25% of your expenses on R&D, for companies of all sizes, from Start Ups to Large Corporations.
What kind of projects are eligible for FZulG ?
Research and Development activities eligible for the FZulG tax allowance are clearly defined in the Frascati Manual (the international reference for R&D projects). Three main categories are concerned:
- Basic research (analysis of the properties and structure of elements)
- Applied research (application and use of results stemming from basic research)
- Experimental development (creating new products and procedures)
The nature and kind of R&D project will condition the company’s eligibility to the
“Forschungszulagengesetz” tax allowance. Also, the Research and Development project must be in compliance with current taxation and fiscal guidelines.
The project must tackle particular scientific issues and technical difficulties and propose pertinent solutions through technological innovation advanced by the company in their current field. Applications must respect these criteria of eligibility concerning the project’s nature and scope.
How to apply for a FZulG Tax Credit ?
All spending pertaining to Research and Development (R&D) is eligible for a FZulG tax allowance.
R&D expenses eligible for a tax allowance can be found in two categories:
- Upcoming payroll and staffing costs stemming from an approved R&D project (brut salary and employers’ contributions).
- Subcontracting costs tied to a R&D project conducted inside the European Union (up to 60%).
Examples of eligible projects:
- Clinical trials, prototype development, analysis of test data, new methods and processes as well as 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.
What happens after applying ?
Calculating your FZulG Tax Credit
The FZulG is calculated on the basis of your past year’s R&D spending. It covers up to 25% of eligible R&D costs and is capped at 4 million euros of declared expenses, for a total amount of up to 1 million euros per company, per year.
You may also register for other public financing and grants, but expenses are only eligible for aid once and cannot accumulate different forms of financial aid, tax allowances and credits.
Financing will be allocated in the form of a tax credit on future tax declarations, or will be deposited directly if the amount exceeds your previous year’s declaration. Reimburses are allowed under certain conditions, accelerating the financing process and creating an immediate cash flow for your company.