A guide to the Research Allowance Act: from the application process to the documentation
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A guide to the Research Allowance Act: from the application process to the documentation

Research and development are important components of a country’s economic growth. The increase in the research quota and the associated question of financing is a topic that occupies both politicians and the economy to a large extent. After reporting on the adoption of the Research Allowance Act and its entry into force on 1 January 2020 in June 2020, we have now compiled a guide to the Research Allowance Act and provide an overview from the application process to the documentation.

A guide to the Research Allowance Act: What do I need to apply for a research allowance?

The application procedure for granting the research allowance is a two-step process. In the first step, companies need a corresponding certificate from the „Bescheinigungsstelle Forschungszulage“ (BSFZ) in order to claim the subsidy. This checks whether the research and development project is qualifying for funding. So-called „catalogue requirements“ are used for this check.

A corresponding catalogue of qualifying research and development projects and the activities‘ criteria can be found in our June blog post mentioned above.

The application for a certificate confirming the existence of a qualifying research and development project can be submitted on the website of the Federal Ministry of Education and Research (Bundesministeriums für Bildung und Forschung).

For this purpose it is necessary to register with the BSFZ as a first step. Afterwards, companies can submit their application online.

If the company is qualifying for funding, a corresponding certificate will be issued to the applicant company to certify that it has a qualifying research and development project. This is necessary to apply for the research allowance at the responsible tax office in the second step.

A guide to the proper documentation of the qualifying costs:

At first, when applying for the research allowance, only the BSFZ certificate of the existence of a beneficiary research and development project must be submitted as a supporting document. However, the tax office will continue to request proof of the hours of work during the processing of the application for the research allowance. This means in detail that the employees entrusted with the research and development project and/or individual and co-entrepreneurs must submit time sheets showing the number of research and development hours. These records serve the purpose of verifiable differentiation in cases where the employees and/or individual and co-entrepreneurs are employed in several areas of the company.

Here you can find a corresponding template for the documentation of hours.

How is the research allowance paid?

Following a successful submission of the certificate confirming the existence of a qualifying research and development project through the BSFZ and the thorough documentation of the company’s costs, the application for the research allowance is submitted in the context of the income tax or corporate income tax return. The calculated research allowance is deducted directly from the tax burden to be paid. The research allowance also accrues directly to the company through direct deduction in the context of the tax assessment. All of this happens without any further bureaucratic effort.

An example could look as follows:

Taxable income100.000,00 €
corporate income tax payable

 

15.000,00 €
research allowances25.000,00 €
Amount to be paid by the tax office10.000,00 €

Our guide to the Research Allowance Act: the conclusion

Despite the time-consuming application procedure and the associated documentation obligation, the effort pays off when you take a closer look at the company. This applies especially to medium-sized companies.

If you have specific questions on this topic, please feel free to contact us at any time!

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Steuerfachangestellte Jeannette Brenner
Jeannette Brenner

Steuerfachangestellte
Tel.: +49 211 908 67-606

Steuerberater in Düsseldorf, Johannes Landow
Johannes Landow
Tel.: +49 211-90 86 70
Steuerberater, Fachberater für internationales Steuerrecht
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