Since 2000, along with Korea, Germany has been part of a small group of countries with constant growth of their R&D compared to GDP.
In the context of the High-tech Strategy 2025, Germany wishes to raise its R&D investment to 3.5% of GNP.
Until now, public support for R&D had been provided through grants at a federal and regional level (which have more than doubled since 2005).
In May 2019, the German government has issued a draft law to introduce a 25-percent R&D tax credit for companies incurring R&D expenses.
The key features of the draft law are the following:
- Any and all taxpayers with unlimited and limited tax liability are entitled to 25-percent tax credit regardless of their size, economic activity, or profitability. There is a cap on the total amount of eligible expenses which is set at EUR 2,000,000. This means that the allowance is limited to EUR 500,000 per financial year (25% of EUR 2,000,000) per taxpayer.
- The funding is restricted to the expenses incurred for R&D purposes, i.e.: (i) basic research, (ii) applied research and (iii) experimental research. Only those R&D projects that were started after the entry into force of the new law will be eligible.
- Eligible expenses include salaries of employees working on R&D (gross salary multiplied by a 1.2 factor) as well as personal contribution of individual entrepreneurs (at flat hourly rate of EUR 30) with a maximum of 40 working hours per week. Eligible expenses are to be disregarded for purposes of the R&D tax credit if they are claimed in connection with other subsidies. Only salary received by the employee after 31 December 2019 are eligible.
- The application for the allowance shall be filed electronically with the office competent for the taxation of income along with a certificate issued by a specific governmental authority.
- The new law shall be re-evaluated after 5 years.
The government draft will now go through the parliamentary process. After it has been discussed and approved by the Federal Parliament, it will also have to be approved by the Federal Council.
Leyton is closely tracking any new development in that field, as it continues to invest in supporting organisations to get the best financing for their innovation efforts.
Olivier Rousselle, Chief Development Strategy Officer
Julien Pierrepont, Innovation BU Managing Director