Why the carousel of amendments to the R&D tax credit law continues to turn
The R&D tax credits in 2024
The year 2024 has proven to be decisive for the German R&D tax credits. Following the most recent amendment as part of the Growth Opportunities Act in March, the Federal Government realized during the budget consultations for 2025 that the R&D tax credit law is an elegant way to reduce the tax burden on companies in a targeted manner and for the benefit of the entire economy. For this reason, a second attempt is now planned to increase the amount of the R&D tax credits from € 10 million to € 12 million (growth initiative). This intention already existed in the government draft for the Growth Opportunities Act, but the federal states had prevailed with a lower assessment amount at this point. Another victim of the negotiations between the Bundesrat and Bundestag was the effective date of the new regulations. Instead of being retroactive to January 1, 2024 as originally planned, the changes only came into effect when the law was passed and therefore during the year; an administrative nightmare for determining the underlying eligible costs as part of the ELSTER application.
The rationale for touching the R&D tax credit law again
The reason why the German government wants to revise the R&D tax credits again is based on the fundamental consideration that the majority of investments in Germany must be made in the private sector in order to meet the extensive transformative challenges. Consequently, an increased annual maximum R&D tax credits of € 3 million for large companies and € 4.2 million for SMEs is a logical measure on this agenda. In contrast to the accelerated depreciation, which is also to be extended until 2028, the research allowance also benefits companies that do not generate a taxable profit and thus, in part, precisely those innovators who want to advance or restructure their business models through intensive research and development. This approach of specifically reducing the – by international standards high – corporation tax for innovators can achieve something that would otherwise not be possible due to political differences.
The likelihood of the R&D tax credit law being amended again
After 2 amendments to the R&D tax credit law (FZulG) within 5 years by 2 federal governments, it would not be an expression of hyperactivity to implement further improvements to the law. Particularly as it has been proven that the R&D tax credit is a sensible, technology-open tax subsidy for companies conducting research and development close to the markets. However, this legislative initiative by the Federal Government will also first involve Parliament and then the Bundesrat. Looking at the history of the Growth Opportunities Act, it is not unlikely that the planned amendment to the FZulG will not come in exactly this form. In ARTTIC ‘s view, however, other changes to the FZulG would be even more relevant anyway and should be considered in the parliamentary debate. This includes, for example, the inclusion of a flat-rate overhead on direct costs (internal personnel costs and investments) to cover the overhead costs incurred in an R&D project (currently still recorded by the BSFZ as “other costs” not eligible for funding).
ARTTIC’s conclusion
Another amendment to the FZulG is anything but certain. Nevertheless, the German government clearly values the FZulG as a lever for stimulating the German economy. Further amendments in the event of stagnating economic conditions – possibly initiated by the Bundestag or the federal states – can therefore not be ruled out.
Your ARTTIC Innovation consultants will be happy to explain how you as a company can prepare for this possibility now so that you don’t have any extra work in the future.
Author
Dr. Daniel Pawliczek
Funding Consultant at ARTTIC Innovation
“Anyone who wants to advise must first and foremost listen.”
As a Funding Consultant, I help clients to benefit from German R&D tax credits. As the instrument is still quite new, I actively approach innovative companies, communicate the specifics & opportunities and analyze whether the scientific, technical and organizational requirements are met.
If you are interested in ARTTIC’s consulting services, please feel free to make an appointment with our FZulG experts.
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