The research allowance is a significant part of the Growth Opportunities Act and can offer great benefits to companies. The planned law took an important step towards relief for companies last week. On March 22, 2024, the Federal Council still has to approve. If this happens, the maximum basis for assessment for the research allowance will more than double, from originally 2 million euros to now 10 million euros.
Increased funding opportunities for research and development projects
The basis for assessment is a crucial factor in determining eligibility for tax incentives in research funding. With the new regulations, the maximum basis for assessment can now reach up to 10 million euros, of which 25% or 35% can be claimed as a tax credit. This provides applicants and their projects with greater flexibility and potential financial support for their research endeavors.
- Eligible expenses incurred between January 1, 2020 and July 1, 2020 can have a maximum assessment base of 2 million euros
- Expenses incurred between 30.06.2020 and the day of the new law can be considered for a maximum assessment base of 4 million euros
- Under the new law, eligible expenses incurred after the enactment date can have a maximum basis of 10 million euros
The utilization of research funding has been relatively low, with only 10 percent of the allocated funds being disbursed so far. This issue has been discussed in the German Bundestag, where new regulations for research funding have also been presented. Federal Minister of Finance, Christian Lindner, emphasized that the utilization of research funding has been gradually increasing in recent years. With the new regulations, a “Full-Flavor” version of research funding will be created, fully exploiting the potentials of tax-based research support.
Increase in Maximum Basis: Research funding limit raised from 2 to 10 million euros
- With the increase of the maximum assessment basis from 2 million euros to 10 million euros, companies can now receive a higher level of funding, allowing for more effective financing of their research projects
- The research allowance offers attractive funding rates, with a general rate of 25 percent of the base amount. However, small and medium-sized enterprises (SMEs) can benefit from a higher rate of 35 percent, making the tax-based research funding particularly attractive for them
- The expanded scope of funding includes not only personnel costs but also eligible expenses for movable fixed assets, providing comprehensive support to companies in carrying out their research and development projects
- The Research Allowance supports the generation of additional knowledge by covering personnel and material costs, thus strengthening domestic value creation and promoting the innovation capacity of the German economy
The new regulations for research grants provide numerous benefits for companies. The increased assessment base, attractive funding rates, and expanded scope of support make research funding even more appealing and efficient. By becoming a central pillar of research and development support in Germany, the research grant can strengthen the competitiveness and resilience of the German economy.
