The formula
Forschungszulage = assessment base × funding rate
Under § 4 FZulG the funding rate is 25 per cent of the assessment base, and 35 per cent for SMEs on application. Since 1 January 2026 the assessment base has been capped at €12 million per financial year. For an SME using the full base, that gives a maximum annual allowance of €4.2 million. Under § 3 (6) FZulG that limit applies per group of companies, not per individual entity.
What feeds into the assessment base
The assessment base is made up of up to four cost types. For financial years from 2026, a flat overhead rate is added on top.
1. Staff costs (§ 3 (1) FZulG): gross wages subject to payroll tax plus the employer's social security contributions, but only to the extent the employee worked on the qualifying R&D project. An engineer spending 80 per cent of their time on research contributes 80 per cent of their wage costs to the assessment base. Time records are the evidence: without robust time tracking, the tax office won't recognise the shares.
2. Own work (§ 3 (3) FZulG): from 1 January 2026, sole traders and actively involved co-entrepreneurs apply a notional rate of €100 an hour, capped at 40 hours a week. For R&D hours before 31 December 2025 the earlier rate of €70 applies.
3. Contract research (§ 3 (4) FZulG): 70 per cent of the fee paid to external contractors based in the EU or EEA feeds into the assessment base, provided the contract was awarded after 27 March 2024. For older contracts it is 60 per cent. The subject of the contract has to be assigned to the R&D project contractually.
4. Depreciation on assets (§ 3 (3a) FZulG): depreciation on movable fixed assets is eligible where the asset was acquired after 27 March 2024 and is used exclusively on the R&D project. A test rig also used for series production doesn't meet the exclusivity requirement.
5. The 2026 overhead flat rate (§ 3 (3b) FZulG): for financial years beginning after 31 December 2025, a further 20 per cent of the remaining eligible expenditure may be claimed with no itemised evidence. Premises costs, IT operations, licences for development environments: they feed into the assessment base through the flat rate even where no individual receipts exist.
Funding rate: 25% or 35%?
The default is 25 per cent. SMEs as defined in Annex I of the General Block Exemption Regulation (GBER) can claim ten percentage points more on application, giving 35 per cent. The SME definition requires fewer than 250 employees and either annual turnover up to €50 million or a balance sheet total up to €43 million. The group view is decisive: where an investor holds a majority stake, all portfolio companies in the group are added together. A nominally small startup can lose SME status that way.
The difference between 25 and 35 per cent is not a detail. On an assessment base of one million euros, those 10 percentage points are €100,000 of annual funding. At the full limit of €12 million they are €1.2 million a year.
A worked example
The starting point: a software company with SME status, financial year 2026. Three developers work 100 per cent on an R&D project and a fourth 50 per cent. Average gross salary €85,000, employer social security contribution taken as a flat 20 per cent. The founder puts in 30 hours a week of own work over 48 weeks. No contract research.
- Staff costs: 3 people at 100% × €85,000 × 1.2 = €306,000; 1 person at 50% × €85,000 × 1.2 = €51,000. Total: €357,000
- Own work: 30 hours × 48 weeks × €100 = €144,000
- Subtotal: €501,000
- Overhead flat rate (20%): €501,000 × 0.2 = €100,200
- Assessment base: €601,200
At the SME rate of 35 per cent that gives a Forschungszulage of €210,420. Without the SME uplift (25 per cent) it would be €150,300, so here the ten-percentage-point bonus is worth €60,120 a year.
Without the overhead flat rate, meaning under the law in force until the end of 2025, the assessment base would have been limited to €501,000. At 35 per cent the allowance would have been €175,350. The 2026 reform brings this company around €35,000 extra.
Cash payment or tax credit?
The tax office assesses the Forschungszulage and, under § 10 FZulG, credits it against the income or corporation tax for the financial year concerned. If the allowance exceeds the tax liability, the excess is refunded. For loss-making companies, which startups often are, the Forschungszulage is therefore in effect a cash payment. It is tax-free and doesn't reduce deductible business expenses.
In practice, typically 12 to 18 months pass between the end of the financial year and the actual assessment. The procedure has two stages: first the company applies to the Bescheinigungsstelle Forschungszulage (BSFZ) for a certificate confirming the R&D quality of the project. Then comes the application to the tax office to assess the allowance on the basis of the evidenced costs. The BSFZ certificate binds the tax office on the substance, but doesn't decide the level of the assessment base. The tax office assesses that independently.
Calculating and claiming retroactively is also possible. The assessment period under § 169 (2) no. 2 AO is four years. In typical situations that makes four full past financial years recoverable, provided the time records are robust and a BSFZ certificate is applied for in good time before the deadline expires.
FAQ
What is the maximum Forschungszulage in 2026? For SMEs the maximum is €4.2 million a year: 35 per cent on a €12 million assessment base. Non-SMEs reach a maximum of €3 million. The €12 million limit applies per group of companies, not per entity (§ 3 (6) FZulG).
What counts towards the Forschungszulage assessment base? Staff costs of R&D employees (gross salary plus the employer's social security contribution), own work by sole traders and actively involved co-entrepreneurs (from 2026: €100 an hour, max. 40 hours a week), 70 per cent of the contract research fee for contracts from 27 March 2024, and from 2026 a flat overhead recognition of 20 per cent on the remaining eligible expenditure.
When is the Forschungszulage paid out? The tax office credits the allowance against the assessed tax. If it exceeds the tax liability, the excess is refunded. For loss-making companies it is in effect a cash payment. Typically 12 to 18 months pass between the end of the financial year and the assessment.
Can I calculate and claim the Forschungszulage retroactively? Yes. The assessment period under § 169 (2) no. 2 AO is four years. In typical situations four full past financial years can be recovered, provided the staff records are robust and a BSFZ certificate is applied for in good time.
Does the Forschungszulage count as taxable income? No. The Forschungszulage is tax-free and doesn't reduce deductible business expenses.
Forschungszulage 2026: the complete guide
A €12m assessment base, a 35% SME rate, a two-stage procedure: an overview of the Forschungszulage in 2026, and where to find the detail.
Forschungszulage: which staff costs are eligible
Which pay components feed into the assessment base, how the 20% overhead flat rate works from 2026, and why time records decide the payout.
Forschungszulage for sole traders: costing your own work correctly
€100 an hour, 40 hours a week, complete time records: how sole traders and actively involved co-entrepreneurs bring their own work into the Forschungszulage.
Forschungszulage 2026: amounts, rates, caps
25% or 35% on an assessment base of up to €12m: what the Forschungszulage is actually worth in 2026 and which rates apply to your company.
All the detail, eligibility and pitfalls:
- [1]§ 3 FZulG — eligible expenditure and the assessment base— Federal Ministry of Justice · gesetze-im-internet.de, 2026 Source
- [2]§ 4 FZulG — the amount of the Forschungszulage— Federal Ministry of Justice · gesetze-im-internet.de, 2026 Source
- [3]Act on an immediate tax investment programme to strengthen Germany as a business location (BGBl. I no. 161, 18 July 2025)— Bundesgesetzblatt, 2025 Source
- [4]The immediate tax investment programme and its effect on the Forschungszulage— Bescheinigungsstelle Forschungszulage (BSFZ), 2026 Source
- [5]Fiscal Code § 169 — limitation of assessment— Federal Ministry of Justice · gesetze-im-internet.de, 2024 Source