Germany's R&D tax incentive enters 2026 in its most generous form yet: a higher assessment base, a higher hourly rate and a new flat-rate overhead allowance. Any company engaged in development — from machinery manufacturers to software houses — that fails to claim the allowance is giving away predictable liquidity. Because it is paid out regardless of whether the company makes a profit.
What the research allowance is — and what it is not
Since 2020, the Research Allowance Act (FZulG) has provided a tax-based incentive for basic research, industrial research and experimental development. Unlike project grant programmes, it involves no funding competition and no submission deadlines before a project begins: there is a legal entitlement, and claims can be filed retroactively for up to four years. The allowance is credited against the company's tax liability — and for loss-making companies it is paid out in cash. For start-ups and investment-heavy development phases in particular, this makes it effectively a subsidy with real cash impact.
The terms since 1 January 2026
- Funding rate: 25 percent of eligible expenditure; small and medium-sized enterprises can apply for an uplift to 35 percent.
- Assessment base: raised under the Immediate Investment Programme, from 1 January 2026, to 12 million euros per year (previously 10 million) — limited until the end of 2030. Maximum annual funding is therefore 3 million euros, or for SMEs 4.2 million euros.
- Own contributions: From 2026, the eligible hourly rate for active sole proprietors and shareholders rises from 70 to 100 euros per working hour.
- Overheads: New is a flat-rate 20 percent uplift on eligible personnel costs as an overhead allowance.
- Contract research: claimable at 70 percent of the fee, provided the contractor is based in the EU/EEA.
A development team with €1m in eligible personnel costs generates, including the 20% overhead allowance, an assessment base of €1.2m — that is €300,000 in allowance per year, or €420,000 as an SME. Every year, verifiable retroactively for up to four years.
The two-stage procedure
Stage 1 — BSFZ certificate: The Research Allowance Certification Office (BSFZ) assesses whether the project qualifies in principle (novelty, technical uncertainty, systematic approach). Applications are project-specific and can also be filed for ongoing or completed projects; the certificate is binding on the tax office.
Stage 2 — Assessment by the tax office: After the end of the financial year, the allowance is claimed, assessed and either credited or refunded in the next tax assessment.
The critical success factor is project documentation: time records per project, clear separation from routine development, technical uncertainties documented in writing. Companies that integrate this documentation into their DATEV processes turn the allowance into a recurring revenue component rather than a one-off exercise.
Typical use cases beyond the laboratory
- Software: new architectures, AI models, algorithm development — but not routine releases;
- Machinery and plant engineering: prototypes, process development, materials qualification;
- Digitalisation of production processes involving genuine technical risk;
- Contract development for third parties — eligible on the client's side.
For companies investing in parallel, the allowance works in combination: the declining-balance depreciation under the Immediate Investment Programme front-loads depreciation, while the research allowance reimburses ongoing development costs — together, the strongest tax-based investment incentive currently available.
Frequently Asked Questions
Do companies without a profit also receive the research allowance?
Yes. The allowance is credited against the tax liability; any excess is paid out in cash. Loss-making companies receive the full amount of the funding.
How far back can claims be filed?
The BSFZ certificate can also be applied for in respect of ongoing or already completed projects; the assessment deadlines allow retroactive claims of up to four years.
What counts as eligible development?
Projects involving technical novelty and uncertainty that are pursued systematically — the decisive criteria are those of the OECD Frascati Manual. Purely routine adjustments are excluded.
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