Forschungszulage Requirements: Who Is Eligible?

Summary

Process Overview

1Company: Tax-liable in Germany & no company in difficulty
2Project: R&D criteria met (Novel, Risky, Systematic)
3Period: Costs can be claimed up to 4 years retroactively

The Forschungszulage is open to all tax-liable companies in Germany — regardless of size or industry.

Many companies underestimate their funding potential: what is internally referred to as “product development”, “process optimisation”, or “digitalisation” often meets the criteria for Research and Development (R&D). Most start-ups and SMEs carry out this kind of development on a daily basis — often without knowing they can receive funding for it.

Does my company meet the requirements for the Forschungszulage?

If your company meets these basic requirements, there is generally nothing standing in the way of funding.

Requirement	Status	Details
Tax liability in Germany	Required	Fully or partially tax-liable § 1 (1) FZulG
Not a company in difficulty	Required	Incl. insolvency – learn more → § 1 (3) FZulG
No outstanding recovery order	Required	No outstanding EU state aid recovery § 1 (3) FZulG
Legal form	Tax-liable	Corporations (GmbH, AG) Partnerships (KG, OHG) Sole traders Freelancers Agriculture and forestry businesses Opting partnerships under § 1a KStG § 1 (1–2) FZulG
EEA for contract research	Required	Contractor must be in the EEA → § 3 (4) FZulG

Good to know: Start-ups in the loss phase are also eligible. If the Forschungszulage exceeds the tax liability, the surplus is paid out as a tax refund. Young SMEs (under 5 years) are also often exempt from the “company in difficulty” rule.

Still unsure? Get in touch or use our quick check.

Does my project meet the R&D criteria for the Forschungszulage?

This is where it gets interesting — and where most applications fail. What is actually funded? Not just basic research — the vast majority of funded projects fall into experimental development: there's an unsolved technical problem and you systematically test a solution.

Research has 3 categories – and most development in companies falls under one of them § 2 FZulG

Basic research – New scientific knowledge without direct application
Industrial research – Systematic research with a concrete application goal
Experimental development – Using existing knowledge to develop new/improved products, processes, or software ← where most applications land

The three decisive criteria

Your project must answer these three questions with yes:

Novelty: Does your project aim for new knowledge or significantly improved products/processes — measured against the current state of the art?Prüfleitfaden BSFZ, Ch. 1.1.1: „Die Neuartigkeit ist sowohl mit Blick auf das Unternehmen als auch hinsichtlich des Wirtschaftszweigs zu beurteilen. Bei der Entwicklung neuer oder verbesserter Produkte, Verfahren, Dienstleistungen oder Geschäftsmodelle kommt es demnach zum einen darauf an, dass diese für das Unternehmen selbst neu sind. Zum anderen dürfen diese im entsprechenden Wirtschaftszweig noch nicht dem Stand der Technik entsprechen, da ansonsten für das Unternehmen kein erkennbares Umsetzungsrisiko besteht.“
Uncertainty (Risk): Are there technical risks or uncertainties? Could your approach fail? Purely economic risks do not count.Prüfleitfaden BSFZ, Ch. 1.1.2: „Die BSFZ bezieht sich bei der Bewertung des Kriteriums Unwägbarkeit / Risiko ausschließlich auf wissenschaftliche und technische Aspekte. Wirtschaftliche Risiken und Unwägbarkeiten werden zur Beurteilung, ob ein FuE-Vorhaben im Sinne des FZulG vorliegt, nicht herangezogen.“
Systematic approach: Is the project carried out in a planned and documented manner?Prüfleitfaden BSFZ, Ch. 1.1.3: „Ein begünstigtes FuE-Projekt zielt darauf ab, eine genau definierte unteilbare Aufgabe ökonomischer, wissenschaftlicher oder technischer Art mit klar festgelegten Zielen durchzuführen. Es umfasst die Tätigkeiten, die zur Erreichung der Ziele durchzuführen sind sowie konkrete Vorgaben, anhand derer die Ergebnisse dieser Tätigkeiten festgestellt und mit den Zielen verglichen werden können.“

The Red Thread: How to Argue R&D

Technical benchmarks instead of economic goals – that's what convinces the reviewers.

Illustrative example

STATE OF THE ART

81% accuracy

Current measurable technical benchmark

TECHNICAL TARGET

% accuracy92

Technical target – not economic!

WP 1 · Method

New Method / Algorithm

WP 2 · Prototype

Prototype & Validation

WP 3 · Integration

Integration & Testing

STATE OF THE ART

81% accuracy

Current measurable technical benchmark

WP 1 · Method

New Method / Algorithm

WP 2 · Prototype

Prototype & Validation

WP 3 · Integration

Integration & Testing

TECHNICAL TARGET

92% accuracy

Technical target – not economic!

⚠Common mistake: Market goals instead of technical goals (e.g. "50% more revenue")

The BSFZ reviewers think in exactly this framework: Where are you today? → What are you doing? → Where do you want to go?Prüfleitfaden BSFZ, Ch. 1.1.1: „Jeder Forschungs- und Entwicklungsprozess besteht aus drei wesentlichen Teilen: Start/Ausgangslage, Weg zur Umsetzung, Ziel: Produkt, Verfahren oder Dienstleistung.“

Each of these three points must be described in technical, concrete terms. Economic targets like "50% more revenue" or "better user experience" will not convince the certification body.

The most common mistake in applications: the state of the art is described vaguely or in market terms

The BSFZ wants concrete, technical benchmarks — and the reviewers immediately recognise whether someone knows their field.Prüfleitfaden BSFZ, Ch. 1.1.1: „Die Neuartigkeit ist sowohl mit Blick auf das Unternehmen als auch hinsichtlich des Wirtschaftszweigs zu beurteilen. Bei der Entwicklung neuer oder verbesserter Produkte, Verfahren, Dienstleistungen oder Geschäftsmodelle kommt es demnach zum einen darauf an, dass diese für das Unternehmen selbst neu sind. Zum anderen dürfen diese im entsprechenden Wirtschaftszweig noch nicht dem Stand der Technik entsprechen, da ansonsten für das Unternehmen kein erkennbares Umsetzungsrisiko besteht.“

Sometimes it takes a trained eye to identify the technical characteristics of a project and articulate them correctly. Many companies conduct genuine experimental development without framing it that way — leaving hundreds of thousands or even millions in funding on the table.

✓Good technical differentiation

AI / Machine Learning: "Existing models achieve 82% classification accuracy on dataset X. Our approach combines method A with B to exceed 93% — at half the inference time."
Software: "Existing systems process 10 requests/second. Our goal is 50/second through a new caching approach based on X."
Mechanical engineering: "Current manufacturing tolerances are ±0.1mm. Our process aims to achieve ±0.02mm through method Y."
Medical technology: "Standard sensors measure at resolution Z. We are developing a new sensor approach targeting resolution W."

✗Common mistakes

"We want to improve the user experience" → no technical benchmark
"Our goal is 30% more revenue" → economic, not technical
"We are building the best solution on the market" → market positioning, not technology

The BSFZ actively monitors the state of the art. Technologies that were considered novel just a few years ago may now be classified as established. Therefore, it is important to always align the application with the current state of the art and explain precisely why existing solutions are insufficient for your specific use case.

Checklist: R&D or not?

✓Research and Development

New developments or significant improvements to products/processes
New services enabled by digitalisation
Development or significant improvement of software components
Intelligent and self-learning design of industrial and manufacturing processes
New, more efficient algorithms based on new technologies

✗Not Research and Development

Use of already known products/processes
Recurring and routine changesPrüfleitfaden BSFZ, Ch. 1.1.1: „Die experimentelle Entwicklung umfasst keine routinemäßigen oder regelmäßigen Änderungen an bestehenden Produkten, Produktionslinien, Produktionsverfahren, Dienstleistungen oder anderen laufenden betrieblichen Prozessen, selbst wenn diese Änderungen Verbesserungen darstellen sollten. (Art. 2 Nr. 86 UAbs. 3 AGVO)“
Configuration of existing software/hardwarePrüfleitfaden BSFZ, Ch. 2.4.1 ICT: „Vorhaben, die ausschließlich folgende Tätigkeiten aufweisen, sind nicht bescheinigungsfähig: Einführung und Konfiguration von etablierter Software oder Hardware; Portierung von Software (z.B. Standalone-Software zu Cloud-Lösung); Baukastenbasierte Zusammensetzung oder Anwendung (automatisierter) Software-Lösungen ohne wissenschaftliche oder technische Risiken; Routinemäßige Entwicklungstätigkeiten der Software-/Hardware-Entwicklung.“
Porting of software (e.g. standalone to cloud)Prüfleitfaden BSFZ, Ch. 2.4.1 ICT: „Vorhaben, die ausschließlich folgende Tätigkeiten aufweisen, sind nicht bescheinigungsfähig: Einführung und Konfiguration von etablierter Software oder Hardware; Portierung von Software (z.B. Standalone-Software zu Cloud-Lösung); Baukastenbasierte Zusammensetzung oder Anwendung (automatisierter) Software-Lösungen ohne wissenschaftliche oder technische Risiken; Routinemäßige Entwicklungstätigkeiten der Software-/Hardware-Entwicklung.“
Template-based software solutions without technical risksPrüfleitfaden BSFZ, Ch. 2.4.1 ICT: „Vorhaben, die ausschließlich folgende Tätigkeiten aufweisen, sind nicht bescheinigungsfähig: Einführung und Konfiguration von etablierter Software oder Hardware; Portierung von Software (z.B. Standalone-Software zu Cloud-Lösung); Baukastenbasierte Zusammensetzung oder Anwendung (automatisierter) Software-Lösungen ohne wissenschaftliche oder technische Risiken; Routinemäßige Entwicklungstätigkeiten der Software-/Hardware-Entwicklung.“
Routine software development (requirements analysis, testing, debugging)Prüfleitfaden BSFZ, Ch. 2.4.1 ICT: „Vorhaben, die ausschließlich folgende Tätigkeiten aufweisen, sind nicht bescheinigungsfähig: Einführung und Konfiguration von etablierter Software oder Hardware; Portierung von Software (z.B. Standalone-Software zu Cloud-Lösung); Baukastenbasierte Zusammensetzung oder Anwendung (automatisierter) Software-Lösungen ohne wissenschaftliche oder technische Risiken; Routinemäßige Entwicklungstätigkeiten der Software-/Hardware-Entwicklung.“
Pure administrative, certification, or approval activities
Feasibility studiesPrüfleitfaden BSFZ, Ch. 2.3.9: „Durchführbarkeitsstudien sind nicht den Kategorien Grundlagenforschung, industrielle Forschung oder experimentelle Entwicklung zuzuordnen und fallen entsprechend nicht unter den FuE-Begriff des FZulG.“
Work to achieve market readiness

What is funded by the Forschungszulage?

Wage costs for employees in R&D projects
Own work by sole traders / co-entrepreneurs
Contract research (70% of expenditures)
Depreciation on movable fixed assets related to the project

Find the exact calculation and funding amounts under Calculation.

Application Deadline

Costs for R&D activities can be claimed within a 4-year period. The decisive factor is the date the application is received by the BSFZ.

Deadline
To claim costs from 2022, the application must be submitted to the BSFZ by the end of 2026. Costs from 2021 have already expired.

The Forschungszulage is particularly attractive because you can apply retroactively. Unlike European funding programmes where you plan future projects and then report extensively, here you claim costs that have already been incurred. No planning stress, no reporting problems.

Proving Eligibility

The Forschungszulage is granted through a two-step process:

1. Content Review (BSFZ)

Assesses whether your project meets the R&D criteria.Prüfleitfaden BSFZ, Ch. 1.2: „Bezogen auf die Angaben zum finanziellen und personellen Rahmen wird durch die BSFZ eine Plausibilitätsprüfung „dem Grunde nach" durchgeführt. Mangelnde Plausibilität liegt vor, wenn die Angaben des antragstellenden Unternehmens zum personellen Aufwand und/oder zu den Auftragskosten grob unschlüssig, widersprüchlich oder fehlerhaft sind.“

Why consulting with technical understanding makes the difference here

The reviewers at the BSFZ are not financial clerks — they are engineers, computer scientists, and former research directors from institutes like DLR, VDI, and AiF. They immediately recognise whether an application is technically sound or just filled with buzzwords. (More on the application process and the reviewers.)

✗

Typical consultant

✗Finance or funding background
✗Your CTO writes the technical part
✗Hours of back-and-forth explaining
✗Generic application with buzzwords

✓

Our approach

✓Developer who builds own software pipeline
✓Understands your tech without translation
✓One short conversation with your CTO
✓Application written at expert level

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FAQs

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The following criteria must be met:

Tax liability: The company must be fully or partially tax-liable in Germany.
Not a company in difficulty: The applicant must not be a “company in difficulty” under EU state aid law at the time of application.
No pure consultancy: The funded project must involve its own R&D activities.
No insolvency: The company must not be in insolvency proceedings.
No outstanding recovery order: There must be no outstanding recovery order for EU state aid.

No. The Forschungszulage funds not only basic research, but explicitly also experimental development. In fact, the majority of all applications fall into this category. If you are developing (or significantly improving) a new product, process, or software and overcoming technical hurdles, you are very likely eligible.

Most start-ups and SMEs carry out this kind of development every day — often without knowing they can receive funding for it.

All companies tax-liable in Germany, regardless of size, legal form, or industry. Start-ups and agricultural or forestry businesses are also eligible. Only tax-exempt institutions are excluded.

Yes. Even companies that pay little or no tax receive the Forschungszulage. If the allowance exceeds the assessed tax, the surplus is paid out as a tax refund (“cash”). This is particularly attractive for start-ups.

No. The Forschungszulage is open to companies of all sizes. However, SMEs benefit from an increased funding rate (35% instead of 25%) since the Growth Opportunities Act. (See Calculation).

A company is considered “in difficulty” if, without state intervention, it would almost certainly fail economically. Such companies are excluded from funding. Important: Start-ups less than 5 years old are often exempt from this rule.

No. Since research by definition involves risks and uncertainty, it is the effort that is funded, not the outcome. Even abandoned or failed projects are eligible, as long as they were carried out systematically.

Yes. Software development is a classic example of experimental development, provided it overcomes technical hurdles and does not merely configure existing components. However, routine development activities (requirements analysis, testing, debugging) are not eligible — there must be genuine technical uncertainty.

The Forschungszulage funds R&D projects in three categories: basic research, industrial research, and experimental development. Specifically, the following expenditures are eligible: wage costs for employees in R&D projects, own work by sole traders, contract research (70% of costs), and depreciation on project-related assets. The funding rate is 25% (SMEs: 35%) of eligible expenditures.