It’s not too late to take advantage of Germany’s new research and development (R&D) tax credit. This credit was introduced in January 2020 and is worth up to EUR 1 million per tax year. The best part? If the credit exceeds your tax liability, the excess is fully refundable. This means that the German government will refund all or a portion of the credit back to you in cash. The German authorities are giving taxpayers four years to file their R&D claims. So, even if you have already filed your 2020 tax return, or do not have time this year to get started on it, you can still benefit through 2024. It’s not too late, but don’t wait too long to file!
How does it work?
The German credit is obtained through a two-part process. The first step is submitting your R&D projects for pre-certification. After the authorities have determined eligibility, any certified projects are then eligible for the credit application. The next step is documenting the wages related to the certified projects. These wages can be wages of your own company along with any R&D subcontracted costs.
How much is the credit?
Unlike some other R&D credits, materials and supplies are not included as qualifying costs for the German R&D credit. The credit is calculated at 25% of the eligible wages of your own personnel. 60% of the subcontracted costs are also eligible for the 25% credit. The credit maximum is EUR 1 million per year.
Leave it to the Specialists
Claiming the R&D credit can be a challenge. Consult a tax specialist who is knowledgeable in the R&D territory as well as Global Incentives. A specialist can help you navigate the tax credit world in order to maximize your benefits.