When financing or planning to finance products or software-developed projects in Germany beyond 2019, the German government may grant EUR 500,000 every single year – even when a company has not paid taxes.
Generally, around 25% of the R&D tax credit or Die Steuergutschrift Für Forschung Und Entwicklung from salaries, wages, and eligible contract research costs are granted through the Research Allowance Act of 2019 promulgated by the German Federal Council in 2019.
At a time when concern has risen that business investments are elsewhere, the Act purposes to cause an increase in BERD or business enterprise R&D spending in Germany on technological development.
The German government will pay or refund the Die Steuergutschrift Für Forschung Und Entwicklung if it exceeds a taxpayer’s liability on tax.
Companies who are at a loss may therefore gain or benefit interim from the new Die Steuergutschrift Für Forschung Und Entwicklung and may do so regardless of their company size. A refundable Die Steuergutschrift Für Forschung Und Entwicklung though is available only to SMEs or small medium enterprises.
This new scheme of incentives along with Germany’s robust public grant system for research and development initiatives (and not to mention other EU grants), makes Germany more competitive in terms of R&D investments.
Who is Eligible to Claim Die Steuergutschrift Für Forschung Und Entwicklung
Certain taxpayers and applications can be eligible for Die Steuergutschrift Für Forschung Und Entwicklung in Germany.
Non-tax-exempt companies are subject to the unlimited or limited income tax eligibility of Germany. Non-resident taxpayers can be eligible if they can establish enough connection to Germany as would a non-resident entity with a permanent German establishment.
In terms of application, taxpayers must do two things to claim Die Steuergutschrift Für Forschung Und Entwicklung. First, they have to put together a technical request for them to be issued an R&R certificate indicating that a project on research and development is indeed eligible. And secondly, the entity should tender electronically to the local tax office the application for Die Steuergutschrift Für Forschung Und Entwicklung incentive.
No fee is required for the certificates requested for the first time in a fiscal year. Charges may be incurred if more than one request has been made in a fiscal year. Remember that each claim for R&D incentive must be supported by documentation of expenses and activities that are eligible for the Die Steuergutschrift Für Forschung Und Entwicklung endeavor.
What is Eligible as Die Steuergutschrift Für Forschung Und Entwicklung Support Activities or Expenses
R&D projects that can be grouped into one or more fundamental research categories, experimental research, or industrial research are eligible for Die Steuergutschrift Für Forschung Und Entwicklung subsidies based on the EU’s General Block Exemption Regulation Art. 2 No. 84 to 86.
Referring to the German government’s explanatory memorandum, the Die Steuergutschrift Für Forschung Und Entwicklung covers work that is creative and systematic and intended to expand knowledge and develop new applications on the foundations of existing knowledge. An R&D activity must be innovative, creative, yield uncertain final results, be systematic, and can be copyable. And because of this extensively broad definition, the prime exclusion for activities and expenses to be eligible is likely to product development or adaptations of existing products as well as their optimization. Once falling under an eligible category, the relevance of the field of research the activity falls into or is assigned is deemed irrelevant, provided it is within generic R&D terms.
With regards to the generic term R&D, this requires a clear-cut defined activity with an economic, scientific, or technical disposition with objectives that are precisely defining objectives of those same nature along with the steps to be performed to achieve them. The objective guidelines should also be set such that it verifies whether the objectives have been reached.
It is also irrelevant whether the R&D activity is performed directly on the entity’s premises or is contracted out (as contract research) or done in cooperation with other entities. In the contract research setup, Die Steuergutschrift Für Forschung Und Entwicklung claimants should be noted that only the commissioner is qualified for funding and only if the service contractor is registered with the European Union or EEA. Again, where the research is conducted is likely to be immaterial.
In the German Die Steuergutschrift Für Forschung Und Entwicklung, expenses are eligible if they are qualified R&D activities and projects. Also, if they are either wages subject to the German wage tax or are expenses that secure that entity’s future, or are payments to qualified contractors. Examples of expenses that secure an entity’s future are statutory contributions and pension funds. These expenses should be for the employees conducting eligible R&D activities and they should be supported in the form of verifiable documentation that shows employees’ wage allocation in between eligible activities.
Note that eligible expenses are capped at EUR 2,000,000. The Die Steuergutschrift Für Forschung Und Entwicklung incentive equals a quarter or 25% of qualified expenses. Thus, the maximum incentive for each fiscal year is EUR 500,000. The Die Steuergutschrift Für Forschung Und Entwicklung act limits the research allowance total amount and other state aid granted for R&D developments to EUR 15,000,000 per entity or on an individual level per project throughout time.
Preferential treatment can be given, in particular cases, for qualified Die Steuergutschrift Für Forschung Und Entwicklung expenses beyond the cap and can be in the form of other support measures.
The Die Steuergutschrift Für Forschung Und Entwicklung act explicitly provides for the likelihood of combining several forms of aid. Qualified expenses included in the Die Steuergutschrift Für Forschung Und Entwicklung incentive may not cover other grant programs or funding to do away from double-dipping.
Die Steuergutschrift Für Forschung Und Entwicklung Payment Methods
The totality of the incentive amount is stated in a separate notice of assessment. The Die Steuergutschrift Für Forschung Und Entwicklung incentive amount is credited full against the assessed tax amount at the succeeding income and corporation tax assessment. If the Die Steuergutschrift Für Forschung Und Entwicklung incentive amount is more than the tax amount assessed, the differential is refunded. This fact makes it possible for loss companies involved in R&D activities to be awarded a full refund or 100% refund.
