Germany is one of the few remaining OECD countries which doesn’t provide tax incentives for R&D investment. This will change in 2020, as the Ministry of Finance is proposing the introduction of new R&D tax incentives. Costs are estimated to be in the region of 1.25bn euros per year.
The new tax incentive :
– is available to all businesses carrying out R&D activities
– is 25% of qualifying expenses – essentially salaries and wages of employees engaged in R&D projects.
– features a maximum amount of qualifying expenses of €2bn per year, meaning each company can benefit by up to €500,000 pa
– defines qualifying R&D activities in line with EU regulations and the ‘Frascati Manual’ used by the OECD
– is a tax credit
– requires R & D activity to be certified by an as-yet unspecified authority.
As in all countries offering incentives for R&D activity, the impact of the new regime in Germany will be watched carefully. As Europe’s largest economy, Germany has clearly recognised the need for stimulus in R&D to maintain its economic dominance in Europe and beyond.