Do you have questions about the R&D Tax Credit or specific details of the application process?

Our FAQ section provides answers to all your questions. 

How does the R&D Tax Credit work?

The R&D Tax Credit is a tax incentive for companies engaged in research and development activities. The credit allows for the retrospective tax deduction of incurred employee costs and external development contracts from January 2, 2020. 

How is the R&D Tax Credit paid out?

The credit is offset against the next assessment of income or corporate tax. If the credit exceeds the tax liability, the excess amount is refunded. 

How do you apply for the R&D Tax Credit?

The process starts with applying for a certificate from the Certification Office for Research Tax Credits (BSFZ), which confirms the existence of an eligible R&D project. This certificate is submitted along with the commercial accounts to the tax office. 

How do we identify eligible projects?

Eligible projects must encompass clearly defined research and development activities that can be classified according to the criteria of the Frascati Manual as basic research, applied research, or experimental development. It’s crucial that the projects are novel and aimed at expanding technical or scientific knowledge. 

At what expense does it become worthwhile to go through such application procedures?

In general, it’s worthwhile to go through an application procedure if the expected tax relief exceeds the internal costs for application and documentation. For larger projects or regular R&D activities, these incentives can significantly contribute to financing. 

When do I receive the funding?

The R&D Tax Credit is offset after approval of your application and the next tax assessment. If the credit exceeds the tax liability, a refund is issued by the tax office. 

What internal documentation work is necessary?

For the application, detailed documentation of all R&D activities is required, including: 

  • Time records of involved employees. 
  • Detailed descriptions of research and development projects. 
  • Evidence of external contract research and corresponding contracts. 
  • Financial statements clearly outlining directly attributable costs. 

This meticulous documentation not only aids in the application process but is also crucial for substantiating the eligibility in case of a tax audit. 

What happens if the R&D Tax Credit is deemed unlawful during a tax audit?

If the received R&D Tax Credit is deemed unlawful during a tax audit, the company must repay the received amount plus 6% interest to the tax office. Hence, precise and comprehensive documentation of R&D activities is of paramount importance.