Since mid-September, companies have been able to submit applications to the so-called Bescheinigungsstelle Forschungszulage (BSFZ) for tax relief on personnel expenses for their research and development (R&D). With a maximum of one million euros per company and year, the federal government subsidizes 25 percent of R&D personnel costs, including employer costs for pension benefits. Medium-sized companies in particular should benefit from the Research Allowance Act, which has been in force since January 1, 2020. Compared to traditional grant funding from the state, federal government or EU, the application process is very unbureaucratic. A particular advantage is that companies do not have to wait until approval before starting a project. They can even apply for the grant retrospectively.

"We can see that a lot of companies are currently applying for this funding," says Michael Zahm, Managing Director of Partners for Innovation and Funding (PFIF). However, he points out that the federal government currently only wants to provide around 1.5 billion euros per year. It is likely that not all applications will be approved or that the state will have to increase funding again. Despite the unbureaucratic procedure, it is crucial to formulate the applications strategically and precisely and, above all, to document the personnel costs correctly internally.

Three tips for companies

1. Conciseness before completeness: It is important that the companies meet the evaluation criteria exactly with the very short description (4000 characters). As several applications per company are possible, the certificates should initially be submitted for the large and important projects. Further applications can be submitted later if the selection and assessment of the BSFZ are clear. The specialist advises securing the legal entitlement to the allowance as early as possible before the assessment process becomes more stringent.
2. Strategic application: It is advisable to describe a development project not just for the current year, but as a long-term, multi-year project. This is because the approval is also valid for subsequent years and gives the company greater legal and financial security.
3. Accurate documentation: Michael Zahm strongly advises companies to document and invoice the personnel costs for the project applied for in detail. Many regulations are currently still unclear. The time recording currently practiced in companies does not always meet the requirements. If this is the case, the tax office can reclaim the funding - possibly with interest - during a subsequent audit. This is what happened in Austria, where this type of subsidy has been in place for some time.

Jens Gieseler is a freelance journalist