Industry benefits from research allowance

May 27, 2022 | Research allowance FZulG

Not every company has a research department, but every industrial company and every industry in Germany benefits from the research allowance (FZulG).

Tax incentives for research are taking effect at many more companies than is generally known or expected. To strengthen Germany’s innovative power, development activities that do not fit into the major research funding programs are also supported. The consulting company ARTTIC Innovation GmbH is convinced of this. In Germany, more companies are engaged in research and innovation within the meaning of the FZulG than they themselves assume. This also applies to SMEs (small and medium-sized enterprises) that do not see themselves primarily as research companies.

“The law promotes a lot of research and development work – even work that you wouldn’t think of at first,” explains Anne Baumgärtel, Research Allowance Team Leader at ARTTIC Innovation. Eligible tasks in the sense of the FZulG are those in which a question is answered to which there is not yet a scientific or technological answer. These can also be prototypes in the area of design and development, as long as they are not pure variant or design prototypes.

“For example, a company from the plastics industry that adds electronic components to existing products could apply for funding from the FZulG. By linking plastics and electronics in a new way, the manufacturer wants to make its products fit for Industry 4.0. The company doesn’t yet know whether this will work,” says Anne Baumgärtel. “The project would be reviewed by the certifying body in no more than three months, and the personnel expenses can be claimed as a direct tax credit for up to one million euros per year.”

Innovation and new development are therefore much more important prerequisites for the approval of funding than the self-image as a research company. Baumgärtel adds: “Complexity alone does not make a task a research project. The decisive factor is the uncertainty of the result.” This means, for example, that a wide range of tasks from design and development (including, but not limited to, toolmaking, prototyping, prototype development and new, disruptive processes, machines and systems) are also of interest, provided they are not limited to making an existing machine more efficient.

Technical-scientific projects, as in the case of a medical technology company, are also eligible for funding. In Germany in particular, many hidden champions are researching very practical solutions for their products. In this industry, a company could have its research output funded that, for example, develops a new type of surgical scissors for electrocaustics or that develops a memory-enabled, non-metallic material for minimally invasive surgery. Baumgärtel said, “Many medical device companies are based in Germany and are developing new solutions that may be eligible, provided the application is submitted correctly.”

ARTTIC Innovation GmbH has been advising industrial companies on research funding applications at European, national and regional level for 33 years and is intimately familiar with the OECD’s Frascati Manual on which the new research allowance in Germany is based. For more information on tax incentives for research and development via the new research allowance law, please visit the ARTIC Innovation GmbH website.