The Research and Development Tax Credit: A Comprehensive GuideThe statute on Die Steuergutschrift Für Forschung Und Entwicklung (Research Allowance Act, FZulG) permits tax reductions for research spending. Following an investigation into the applicant’s compliance with the substantive requirements, the certification authority issues a certificate stating that a beneficiary R&D project does exist. For the year 2020, the maximum credit or refund is 750,000 euros, whereas for the years 2021-2026, it is one million euros.R&D tax creditWhat Are the Possible Advantages That Could Come From Utilizing the R&D Tax Credit?If a corporation is eligible, claiming research and development tax credits might result in considerable cost savings and these advantages include the following:An increase in the flow of cashRelief from income taxes for companies that are operating at a lossSubmit a credit request for open tax years that occur before 2020. If the R&D initiatives have already been planned, then applications for subsequent years might be submitted in advance as well.A decrease in the tax rate that you payQualifications To Receive Die Steuergutschrift Für Forschung Und EntwicklungCOMPANIESAny businesses that are obligated to pay taxes in Germany according to the terms of the Income Tax Act and the Corporation Tax Act, insofar as they create revenue in conformance with Section 2 Paragraph 1 Sentence 1 Number 1 to 3 of the Income Tax Act, are eligible to make a claim. This includes businesses of any size, legal structure, or sector.In the event of a co-entrepreneurship by the provisions of Section 15 paragraph 1 sentence 1 number 2 of the Income Tax Act, the co-entrepreneurship acts in place of the taxpayer in the capacity of a beneficiary.Activities Eligible for Die Steuergutschrift Für Forschung Und EntwicklungAutomation or enhancement of internal production proceduresSoftware development of new and enhanced versionsIntegration of modern equipmentThe development of data centers, big data, and data mining instrumentsAPI integration and other technologyInnovation in financial technologyEmploying external experts for any of the above activitiesThe creation of new or enhanced itemsCreation of prototypes, first products, and models Evaluation of alternative substances Evaluation of alternative substancesFirmware developmentCreation and enhancement of network hardware as well as softwareThe creation of simulatorsRisk management system developmentProcess of Applying for The Research AllowanceThe application consists of two steps. In the initial phase, the research and development project is being prioritized while in the second phase, this consists mostly of claiming the incurred project expenditures.Phase 1: Technical project proposalA request for Research Allowance must be made to the Certification Office for Technical Projects. Although it also gets some commercial data and an approximate cost estimate for your project, the certifying body’s primary responsibility is to determine whether yours is a research and development project. To do this, the following conditions must be met:It should be novel, thus the initiative must seek to acquire fresh information It should be creative, thus it must be uniqueIt should be done systematically, thus it should follow a strategy and adhere to a budgetIt should be uncertain, thus there must be ambiguities regarding the outcome; andIt should be transferable and/or reproducible, thus there should be opportunities for repeatability.If the certifying organization verifies that your initiative is a research and development project, you are legally entitled to receive financing. To this end, the certifying organization sends the notification immediately to your tax authority.Phase 2: Tax authority… 35 views05:24
