Research Allowance: De-minimis and Firms in Difficulty

Why state-aid law matters for the research allowance

The research allowance is state aid under EU law. So that it does not have to be individually notified to the European Commission, it is exempted under the General Block Exemption Regulation (GBER). That exemption carries two conditions every applicant should know: the special role of de-minimis aid and the exclusion of undertakings in difficulty.

Both sound like fine print but can decide the entire claim. The good news: with clear criteria, both can be pre-checked in minutes.

De-minimis and the research allowance: the own-work special case

The rule: the research allowance is not de-minimis aid

For corporations and partnerships with employed developers: the research allowance runs entirely outside the de-minimis framework. It consumes none of your de-minimis budget, and other de-minimis measures (such as consulting grants) do not cap the allowance.

The exception: sole proprietors' own hours

It is different for a sole proprietor claiming their own R&D hours: the share of the allowance attributable to that own work counts as de-minimis aid. It therefore counts against the ceiling of €300,000 within three years (since the 2024 de-minimis reform).

Practically: a sole proprietor claiming 1,500 own hours per year uses up de-minimis headroom with the allowance share on those hours. Anyone using other de-minimis measures in parallel should keep the totals in view; the declaration is part of the claim. Salaries of employed staff in the same business are unaffected.

How own hours are valued (at a higher hourly rate since 2026, capped at 40 hours per week) is covered in our research allowance guide; a real example is the case study of an AI startup funded on own work alone.

Undertakings in difficulty: who is excluded and who is not

The GBER criteria

The exclusion applies if, at the relevant time, a company is an undertaking in difficulty (UiD) under Art. 2(18) GBER. The main cases:

• Capital loss: more than half of the subscribed share capital (for limited companies) or of the equity has been lost through accumulated losses.
• Insolvency: proceedings are open, or the conditions for opening them at creditors' request are met.
• Rescue or restructuring aid: received and not yet repaid, or a restructuring plan is still running.
• Large companies additionally: for the past two years a debt-to-equity ratio above 7.5 and an EBITDA interest coverage below 1.0.

The startup exemption

Decisive for young companies: for the first three years after formation the capital-loss criterion does not apply. A two-year-old startup with heavy early losses and depleted share capital is therefore not a UiD under state-aid law, as long as it is not insolvency-ripe. Exactly this constellation, loss-making development before first revenue, is the normal case among our clients and is regularly eligible.

Losses are not an exclusion ground

The most common misconception: "We are loss-making, so we get nothing." The opposite is true. The research allowance is paid out in cash even in loss years, because it is credited against tax and any excess is refunded. Losses only become a problem when they trigger the hard UiD criteria. How the payout works in loss years is shown in our article on the research allowance payout.

How to check both hurdles before applying

• Step 1, UiD quick check: latest annual accounts: is more than half the share capital gone? Any insolvency grounds? Is the company older than three years? If it looks critical, consider countermeasures: a capital increase, shareholder loans with subordination, or conversion into capital reserves can clean up the status before the relevant date.
• Step 2, de-minimis inventory (sole proprietors with own work only): collect all de-minimis certificates of the past three years and compare the free headroom with the expected own-work share.
• Step 3, documentation: write both checks down briefly. The tax office may ask, and a prepared answer speeds up the assessment, see also the requirements in the BMF circular.

Conclusion

De-minimis and the UiD exclusion are not deal-breakers for the research allowance but checkpoints with clear rules: de-minimis only affects sole proprietors' own hours, and UiD status follows hard GBER criteria with a generous startup exemption. Checking both early means applying without nasty surprises.

Our free initial check covers both questions before any effort arises, success-based and end to end.