Industry Business Network 4.0 – Germany

Get tax incentives for digitization projects!

In all companies, digital transformation requires effort in research and development of new products and business models. Thanks to a new law, from January 1’st, 2020, you can receive a 25% subsidy on your costs.

In order to be able to keep up successfully with international competition, German companies must invest substantially in research and development, especially in the area of digitization. This strengthens Germany as a business location and offers small and medium-sized companies in particular the opportunity to remain globally competitive.

The Federal Ministry of Finance has recognized this necessity and at the end of 2019 it launched the law on tax incentives for research and development (Forschungszulagengesetz – FZulG). Following approval in the Bundestag and Bundesrat, the law came into force on January 1’st, 2020. The research allowance allows 25 percent of the wages and salaries, including tax-free social security contributions, of the company’s own research employees to be deducted from the annual tax liability. The project volume for which the research bonus can be applied for is limited to 2 million euros. This means that a maximum of 500,000 euros in funding can be claimed annually.

Compared to many tenders in the existing funding landscape, the research bonus can be applied regardless of the size of the company or the current profit situation. This tax incentive is a law with a legal claim: This means that every person who fulfils the requirements is entitled to receive this tax incentive.

The new law includes basic research, industrial research and experimental development. This applies in particular to the necessary research and development work in the context of the digital transformation of the company, as this generates significant new knowledge for the company, but at the same time there is often considerable uncertainty about the outcome. Both these factors are prerequisites for receiving the research allowance.

As usual with research projects, applications for the research allowance cannot be submitted directly to the Federal Ministry of Finance, but are processed by a funding agency appointed by the ministry. At the moment, this certification office has not yet been established, so that applications cannot yet be submitted. Corresponding research projects can, however, start on January 1’st, 2020 and then be approved retroactively. We will be pleased to inform you as soon as the certification office is established (probably September 2020).

All information as well as the exact legal text can be found on the website of the Federal Ministry of Finance:­Abteilung_IV/19_Legislaturperiode/Gesetze_Verordnungen/2019-12-20-Forschungszulagengesetz-FZulG/0-Gesetz.html

With the research allowance calculator of the Institute for Innovation and Technology in the VDI/VDE Innovation + Technik GmbH, you can already check the possible amount of funding for your project without obligation:

If you have any questions regarding the funding of research and development, please feel free to contact us!