German Research & Development
TABLE OF CONTENTS
Overview
Research and Development (R&D) is considered to be among the most important areas for the development of the German economy.
A new R&D tax credit was introduced in 2020, and R&D grants are available at both the National and Federal State levels.
German R&D Tax Credit
The German R&D tax credit was introduced January 1, 2020 and is worth up to EUR 1 million per tax year. Any excess of the credit over a company’s tax liability is fully refundable. Refund claims can be made up to four years back.
The German credit is obtained through a two-part process. The first step is submitting 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 the taxpayer along with subcontracted costs.
The credit is calculated at 25% of eligible wages of your own personnel. Material costs do not qualify.
60% of the subcontracted costs are also eligible for the 25% credit.
The credit maximum is EUR 1 million per year.
German Federal Government R&D Grants: High-Tech Strategy
The High-Tech Strategy defines six “future priorities” with a focus on ongoing high-tech research and development:
- digital economy and society;
- sustainable economy and energy;
- innovative workplace;
- healthy living;
- intelligent mobility; and
- civil security.
Each area consists of a number of different R&D programs. More than EUR 6 billion is awarded each year to R&D projects in the form of nonrepayable grants. Grant rates can reach up to 50 percent of eligible project costs. Higher rates may be available for SMEs and collaborative projects. Partnership between project partners, especially between enterprises and research institutions, is usually required. The federal government periodically calls for R&D project proposals followed by a competition of best project ideas. Watch this space for details on calls as they open up.
Central Innovation Program for SMEs (ZIM)
In addition, a number of national programs without a specific technological focus also exist. Of these, the Central Innovation Program for SMEs (ZIM) is the most prominent. Application may be submitted at any time during the year. Companies may apply on their own or in collaboration with others. The Federal Ministry for Economic Affairs and Energy allocates more than EUR 550 million to the ZIM program each year.
German Federal State Funding
In addition to programs run by the federal government, each German federal state offers R&D funding programs. Regional conditions and structures influence the R&D funding programs available. Some states place particular focus on specific industry clusters. However, there are also a number of programs where a specific technological focus is not required. Cooperation between project partners is not always necessary.
