Country Profiles

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Germany

The German R&D tax incentive scheme is new and was introduced in January 2020 and offers a 25% reduction in tax liability, or a cash credit.

The scheme is retrospective and the first applications can be made on 1 January 2021. Some aspects of the regime are still to be decided and implemented and are expected to be finalised by the end of Q1 2020.

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germany Germany Gener osity Ease of Application Are other R&D Incentives available? Is foreign-owned R&D eligible? R&D must occur in the country? Is pre-approval required? Are previous financial years claimable? 25%
All Companies
25% reduction in tax liability, or cash credit paid to a maximum of 1.000.000 Euro per company and year.
Benefit Overview


25% on labour and contract research costs, to a maximum claim of €1m per company (or group/holding if the company is part of a larger organisation). The tax benefit is taken as a reduction on the corporate tax owed or, if there is insufficient tax liability, a credit is payed out.
Eligible Claim Period


This is a retrospective regime – the first application can be made for 2020. There is a possibility to claim more than 1 year back on any eligible R&D activity, although this has not yet been confirmed. The eligible claim period can go back for 4 years.
Historical Background


This is a very new regime, started on 1 January 2020. Law has been accepted and the eligible claim period started the 1st of January 2020.
Ease of Application


This is a retrospective regime. However, the eligibility of a project(s) can be checked and confirmed upfront, which need to be submitted electronically. Since it is a.) a new regime that impacts and involves a lot of governmental bodies (at least two ministries, one granting body and the local finance authorities and b.) these bodies strongly refer to the European GBER and follow their regulations, we expect a lot of difficulties at least for the first two years.
Regulating Body Policies


Regulation is managed by the Ministry of Finance, the Ministry of Economic Affairs and the Ministry of Research and Education and a separate, granting body (existing or new) is being set up to handle all R&D claims. The assumed/estimated budget will be approximately €2.5bn per year.
Eligible Costs


Labour and (60% of) external contract research.
Issues to Consider


R&D definitions are Frascati-based. Even if companies’ projects are claimable in a first step, the amount of costs can be doubted during tax declarations.