Germany has introduced an R&D tax incentive scheme since January 1, 2020.
German companies were able to apply for this scheme for the first time in 2021, based on expenses incurred in 2020. The budget dedicated to this scheme could quickly reach several billion euros per year.
The mechanism
The CIR entitles companies to 25% of eligible R&D expenses, including
– Personnel expenses
– 60% of subcontracting fees related to an R&D activity performed in the EU
The maximum amount of eligible expenses is capped at €4 million for the fiscal year (the initial ceiling of €2 million has been doubled). Its rate is 25%, so the maximum CIR can amount to €1 million.
Companies subject to corporate income tax in Germany are eligible.
The eligible R&D activities are the following:
– Basic research,
– Applied research
– Experimental development
The R&D expenses must correspond to the definitions of the General Block Exemption Regulation (GBER) of the European Union and the definitions of the FRASCATI manual.
The declaration procedure
The eligibility of the expenses is controlled “a priori”: the Bescheinigungsstelle Forschungszulage (BSFZ) must be provided with a supporting file presenting the activities from a technical, financial and administrative point of view. The BSFZ must respond within 3 months.
The rescript can be submitted before the start of a project, during a project or at the end of the fiscal year.
If the BSFZ gives a favorable decision, the company then submits a request to its tax center of reference, which will then proceed to the refund of the requested amounts.
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Written by
Plamen Petkov
