R&D Tax Credit in Germany (Forschungszulage)

Since 1 January 2020, the German federal government has been supporting companies that carry out research and development (R&D) in Germany through the Research Allowance Act (Forschungszulagengesetz – FZulG).

The incentive applies across all technology sectors and is available to companies of any size. Thus, the incentive is highly relevant for Biotech, MedTech, Pharma and LifeScience- companies, as these sectors are characterized by very high R&D activity and R&D expenditure.

Since the law came into force, the R&D tax incentive has been refined several times and now supports a wide range of project‑related costs:

• R&D personnel expenses (including social security contributions)
• Costs for contract research performed by contractors within the European Economic Area
• Depreciation for project related assets (only für projects starting after March 27 2024)

Taken together, these eligible costs form the tax base for the R&D incentive. As of 1 January 2026, the maximum benefit amounts currently to up to EUR 4.2 million per year and per group of companies and is tax‑free.

However, the process is multi‑stage and highly complex. In the first stage (BSFZ – „Beschrinigungsstelle Forschungszulage“), the entire project is reviewed only from a technical/content perspective without checking any documentation or company data. Based on a positive BSFZ assessment, annual applications for the Research Allowance can then be submitted to the tax office. Only at this point – often only on a sampling basis – is it  checked whether the required documentation (in particular time tracking, invoices and contracts) is actually available. The projects are then reviewed again as part of tax audits, sometimes years after conducting the project. If the required documents cannot be presented, companies risk having to repay the full amount of the incentive and may even face criminal proceedings.

KPMG supports companies along the entire process – from project selection and application through to defending the claims in subsequent tax audits – and even lawsuits.

In our session on Tuesday, 21 April at 15:45 , we will briefly outline the complex process, including its pitfalls, and discuss recent experiences from tax audits.