R&D Tax Incentive – unused potentials

Started in January 2020, the R&D Tax Incentive supports self-financed innovation projects in Germany that are subject to technical implementation risks with up to €1 million in refinancing per year. The instrument has four clear advantages over traditional research funding:

• it is available across all topics and industries for all project contents and company sizes;
• unlike many traditional funding programs, it is open, long-term, and does not compete for limited budgets,
• any number of projects from the fields of basic research, industrial development and experimental development for products, processes and services can be placed up to the upper limit of € 4 million R & D costs per year;
• the application is possible at any time independent of the project implementation and thus offers not least the chance to support already running and even completed or failed projects.

Whether an innovative start-up, a regularly researching group or a medium-sized company with a one-off innovation project – as long as the R&D costs are borne at a permanent establishment with tax liability in Germany and the R&D nature of the project can be proven, all companies are entitled to the allowance. This includes not only the 33,000 or so companies that are classified as researching companies or the 180,000 companies that regularly produce innovations. A large proportion of the good 3.1 million companies in Germany are likely to be carrying out one or another eligible innovation project without being aware of it themselves.

In contrast, the 5,504 applications for research allowances submitted by the end of January 2022 make for a rather modest total of 7,838 R&D projects. The distribution among the individual size classes of companies is quite even here, with a small advantage for companies with between 10 and 50 employees (28%), followed by large companies with 250 or more employees (26%). Only 2% of all applications were submitted by companies within the first two years of their establishment. In this period, just 4,209 applications were approved. Of these, 3,328 applications were positively evaluated, resulting in a success rate of 79%. Even though this is an impressive rate, especially in comparison to traditional programs, the trend towards more stringent project evaluations is already evident here: Last year, the approval rate was still 83% of all applications.

Since the first day of the research grant, we at Inspiralia GmbH, formerly m27 have been active for our customers and are proud of our success rate of 98%, which we have consistently maintained since 2020. Especially in the critical first step, the project certification, we benefit not only from our expertise from more than 25 years of classic R&D funding, but also from our 10 years of experience with the Austrian equivalent of the research grant, the so-called research premium. If you too would like to find out more about the possibilities and take advantage of them, please feel free to contact us at any time and make an appointment.

The research allowance figures cited can be found here for reference.