Research Allowance Germany 2026: Rate, Assessment Basis and Application

What Is the Research Allowance, and Why Does It Matter for SMEs?

The Forschungszulage (Research Allowance) is a tax incentive: companies get a percentage of their eligible R&D expenditure back as a tax credit. It is open to any industry and works as a legal entitlement, which is the part that matters most in practice. Any company that documents eligible R&D costs and holds the BSFZ certificate receives the allowance, whether or not it is currently making a profit.

That entitlement character is also what makes the scheme measurable from the outside. The OECD tracks how much of a company's R&D spending a country effectively covers through its tax system, and its comparison of R&D tax incentives is where Germany appears next to everyone else. The implied subsidy rate follows the statutory rate, so the increase to 35 % for SMEs in March 2024 (Wachstumschancengesetz) counts twice over, once on the individual balance sheet and once for Germany as a research location.

Legal Basis: The Research Allowance Act (FZulG)

The FZulG sets out which projects qualify, how the assessment basis is calculated and which procedure applies. In practice the statute is only half the story. The procedural guidance of the Bescheinigungsstelle Forschungszulage (BSFZ), the certification body for the Research Allowance, shapes what an application has to say, and the competent tax office decides what it is worth.

The Forschungszulage is not a thematic programme with a narrow guideline. It funds eligible R&D projects whatever the industry or the technology behind them, which is what makes Germany's R&D tax incentive unusually accessible to companies whose work never fits a call for proposals.

What the Allowance Is Meant to Achieve

The purpose is structural: more private R&D investment in Germany, across the board. A competitive call ranks applicants against each other; the Research Allowance never does. Meet the statutory criteria with the project and the costs, and the allowance follows, with no waiting list and no jury.

Who Can Apply for the Research Allowance?

All companies subject to tax in Germany with income from commercial operations, self-employment or agriculture and forestry are eligible. This applies equally to corporations, partnerships and sole proprietorships.

Eligible Companies and Taxpayers

Who receives a Research Allowance? In principle, any taxable company whose R&D project meets the statutory criteria. Company size does not decide whether you qualify; it decides the rate.

In contract research the client is the one who can apply for the Research Allowance; the provider doing the work cannot. In group structures that has to be settled before the application goes out. Where do the staff sit, who holds the IP, who signed the contract, and where does the taxable profit actually arise?

The Allowance Does Not Depend on Profit

A company's profit situation does not enter the calculation. The allowance is credited against assessed income or corporation tax, and where it exceeds that tax, the difference is paid out. For a loss-making startup, or a mid-sized company in the middle of a heavy investment cycle, that payout is worth considerably more than a loss carryforward which only helps once profits arrive.

How Much Is the Research Allowance? Rate and Assessment Basis

How much is the Research Allowance in Germany in 2026? 25 % for non-SMEs, 35 % for SMEs, the higher rate in force since March 2024 through the Wachstumschancengesetz. Everything below assumes the SME rate of 35 %.

The 25 Percent Rate for Large Enterprises

The standard rate is 25 % and applies to companies that do not count as SMEs under the EU definition. Eligible expenditure covers:

• Eligible wages of employees working directly on the project
• Certain social security contributions for these employees
• 70 % of fees for eligible contract research (since March 2024, introduced by the Wachstumschancengesetz)
• Pro-rata costs of eligible movable, depreciable capital assets
• 20 % overhead cost flat rate on the remaining eligible expenditure (from 2026 for newly started projects, introduced by the Investitionssofortprogramm, the tax investment stimulus law)

Sole proprietors and co-entrepreneurs may also put a flat rate on their own R&D hours: EUR 100 per working hour from 2026 under the Investitionssofortprogramm, up from EUR 70 under the Wachstumschancengesetz.

Increased Rate of 35 Percent for SMEs

What is the Research Allowance rate for SMEs? Since March 2024 it has been 35 %, courtesy of the Wachstumschancengesetz. For an SME running several development tracks at once, that refinances a serious share of the R&D payroll on a schedule you can plan against.

Take a medtech SME with 15 employees: EUR 800,000 in eligible R&D wages, EUR 150,000 in eligible contract research and EUR 200,000 in depreciation on test equipment used for the project. That third figure is depreciation for a reason, because only the write-down attributable to the project enters the basis, never the full purchase price of the equipment. Direct eligible expenditure comes to 800,000 + 105,000 (70 % of 150,000) + 200,000 = EUR 1,105,000. From 2026 the 20 % overhead flat rate is added on top, another EUR 221,000, so the assessment basis is EUR 1,326,000. At 35 % that is a Research Allowance of EUR 464,100, non-dilutive and with nothing to repay.

Maximum Funding Amount from 2026

From 1 January 2026 the assessment basis is capped at EUR 12 million per fiscal year. That works out as:

• Up to EUR 3 million in Research Allowance for non-SMEs, at 25 %
• Up to EUR 4.2 million in Research Allowance for SMEs, at 35 %

That step from EUR 10 million to EUR 12 million comes from the Investitionssofortprogramm of July 2025. In March 2024 the Wachstumschancengesetz had done something else, raising the SME rate to 35 % and lifting the basis from EUR 4 million to EUR 10 million. The Federal Ministry of Finance makes the general case for the increase: a stronger incentive to do research in Germany, and a more attractive research location.

Eligible Research Activities: What Is Funded?

The FZulG funds projects that set out methodically to generate new knowledge or a new technical solution and carry genuine technical risk. Routine development, adaptation programming, standard integration and product maintenance do not qualify, however much internal resource they consume.

Basic Research, Industrial Research and Experimental Development

Under the FZulG, eligible R&D activity splits three ways:

• Basic research, which generates knowledge without a direct application
• Industrial research, which acquires new knowledge for new products or processes
• Experimental development, which builds prototypes, pilot projects and new processes on existing knowledge

For SMEs the weight typically sits on experimental development. The BSFZ does not judge market potential; it asks whether a systematic R&D project exists at all. That puts the burden on what a CTO writes down along the way, from hypotheses and experimental steps to the failures and the criteria for calling a line of work off. A roadmap on its own is not evidence.

Topic-Neutral Funding Without a Thematic Guideline

The Research Allowance has no thematic guideline that favours one technology over another. What qualifies is spread across industries:

• Software and AI with demonstrable technical uncertainty
• Biotech and pharma with experimental development phases
• Automotive and mobility with new control algorithms
• Mechanical engineering with prototypical process development
• Energy and climate tech with new hardware testing

What does not qualify: sales activities, design without a research question, quality assurance on its own, migration to standard software and routine updates.

Company size is as irrelevant to eligibility as the industry, though it does change what the allowance is worth. The ceiling applies to a group of companies as a whole, so at the scale of Bosch, which spent around EUR 7.3 billion on R&D in 2023, the credit is a rounding error in the consolidated accounts. For the fifteen-person medtech firm above, the same ceiling sits far beyond anything it will ever spend.

How to Apply for the Research Allowance: The Process

The BSFZ assesses the technical side first, and only then does the tax office determine the amount. That order is why the technical argument and the cost documentation have to line up from the first day of the project.

Step 1: Apply for Certification at the BSFZ

The BSFZ confirms whether a project is eligible in principle. You file through its web portal, free of charge, and the description has to cover the objectives, the state of the art, the technical uncertainties, the work programme and where the project ends and the rest of the company's development work begins.

Reviewers reward precision over polish. In practice that means:

• Precisely describe the technical starting point and unresolved uncertainty
• Structure work packages, experiments and decision points
• Show explicitly where the project stops and routine development begins

Step 2: Apply at the Tax Office

With the certificate in hand, the second application goes to the competent tax office (Finanzamt), filed for the fiscal year once the eligible expenditure is final. The tax office then reviews the assessment basis itself: wages, contract research, capital assets, and the documentation behind each of them.

The recurring reasons an assessment basis gets trimmed at this stage:

• Unclear or missing time tracking for R&D employees
• Missing personnel allocation to specific R&D projects
• Imprecise contracts with development partners
• Assumption that external software development fully qualifies as contract research

Most SMEs we work with have stopped treating the Forschungszulage as a one-off. By 2026 it sits in the plan as a fixed line, next to subsidised loans, grants or a financing round, and you can plan around it precisely because nothing about it is competitive. What makes the difference is when the documentation gets built. It has to grow during the research, not be reconstructed from memory a year later, which is the argument for bringing in research allowance advice while the work is still running.