Economic stimulus package doubles research allowance to €1 million per year

May 27, 2022 | Research allowance FZulG

The federal government’s economic stimulus package provides for an increase in the new tax research allowance from 500,000.00 euros to one million euros, as well as doubling the assessment limit for project costs from two million euros to four million euros.

The economic stimulus package thus doubles the research allowance to €1 million per year. The other conditions of the Research Grant Act are not affected, such as the amount of the tax credit of 25% of the project costs and the type of grant (tax research grant for personnel costs).

The full utilization of a one million euro research allowance can be claimed retroactively, which makes an early start on documenting project work hours all the more necessary.

At the end of 2019, the German government had passed the Research Allowance Act, which is the first time that the instrument of tax-based research funding has been used in Germany, where it has already existed for around 25 years in other European countries. Major European consulting firms such as the PNO Group assist thousands of such fiscal research funding applications each year, such as the Dutch WBSO, the French CIR and the Austrian Research Premium. The aim of this new program is to increase investment in research and development in Germany to 3.5 percent of GDP and thus enhance the country’s locational advantage.

While the efficiency, feasibility and implementation of this instrument were disputed for years in Germany, a majority in the Bundestag and Bundesrat cleared the way for the Research Grants Act at the end of 2019. As soon as the BMBF finished the call for applications of the responsible certifying body, applications can be submitted.

To wait until this happened is not an option for eligible startups, sole proprietorships, SMEs, large corporations and internationally active groups. The start date for eligible projects is retroactive to January 01, 2020. The review process will consider eligibility with respect to the definition of research based on the OECD Frascati Manual. Therefore, Arttic Innovation GmbH, a subsidiary of the leading research funding consultant PNO Consultants, recommends to start with the project execution in compliance with the rules and regulations at an early stage! For more information on Arttic Innovation’s research grant services visit the page research grants act.

Full utilization of up to four million euros in project personnel costs (contract research is also eligible at 60%) means retroactive documentation of hours worked on the project. With the help of efficient project management and considerable expertise in the application process, up to one million euros can be achieved as a tax credit.

If we were talking about opportunities for international coroprations with partner companies based in Germany, then it should be emphasized that the legislator ultimately opened up the possibility of contract research also being eligible for application. 60% of the costs for external research services are allowable. This is advantageous for affiliated companies, whose total eligible project costs may not exceed four million euros on the one hand, but which carry out contract research within the network and can receive 25% as a research allowance (thus arithmetically 15% of the external costs). This also applies for research contracts that are awarded across borders.

The management of cross-border research projects is the core competence of the specialized consulting company Arttic Innovation GmbH. This German subsidiary of the PNO Group, with 400 employees, has been successful for 25 years in the realization of large research grants, including over one hundred Horizon2020 projects. Unlike ordinary consulting firms, PNO/ARTTIC is focused on research tax incentives and submits thousands of research and development tax credit applications each year.

In cooperation with one of Germany’s largest tax and business consultancies, Ebner Stolz, ARTTIC Innovation GmbH provides convenient one-stop service from the research grant application at the certification office to legally compliant project handling.

Would you like to learn how you can benefit optimally from research funding? We would be happy to provide you with information during a free, no-obligation, one-on-one video call (30 minutes). Book an appointment!