Grants for R&D
Different Types of R&D Incentives
R&D projects can count on numerous forms of financial support. There are many programs allocating R&D grants, interest-reduced loans, and special partnership programs. Financing is provided by the European Union (EU), the German government, and the individual German states.
Research and development (R&D) is considered to be among the most important areas for the development of the German economy. Industry and the public sector have made a commitment to spend around three percent of national GDP per year on R&D activities. This amounts to approximately EUR 70 billion R&D spending each year.
R&D incentives programs generally provide money for R&D project personnel expenditure. Other costs for instruments and equipment may also be eligible if they can be clearly assigned to the relevant R&D project (if such instruments and equipment are used beyond the lifetime of the R&D project, only the depreciation costs for the duration of the R&D project are considered eligible).
How to Profit from Public R&D Spending
To participate in R&D funding programs, companies must define an R&D project with clear objectives and a fixed time line. The project application should highlight the innovative character of the project and the technological risks involved.
An application for R&D funding also has to set out a commercialization plan, detailing how research results will be transformed into products, processes or services which generate additional turnover and/or employment in the region where the R&D project is located.
The total amount of incentives a project may receive depends on the size of the company (small, medium-sized, or large), whether the project is conducted in cooperation with other companies or research institutes, and the research category of the project. The research category expresses the scope of the intended project.
There are three basic research categories:
R&D Grants in Germany
All research programs financed by the German federal government have been concentrated within the federal High-Tech Strategy.
The High-Tech Strategy defines specific lead markets and priorities as well as key technologies with a high dependency on ongoing high-tech research and development - each of these consists of a number of different R&D programs.
Approximately EUR 5 billion annually is reserved for R&D projects in the form of non-repayable project grants. Grant rates can reach up to 50 percent of eligible project costs. Higher rates may be possible for SMEs. Cooperation between project partners, especially between enterprises and research institutions, is usually required.
The federal government periodically calls for R&D project proposals for specific research topics followed by a competition of best project ideas. Germany Trade & Invest's incentives experts regularly update and define the specific support possibilities for R&D projects in the scope of the High-Tech Strategy. Please contact us for more information using the contact button on the right.
A specific funding scheme called "KMU-innovativ" focuses on the participation of small and medium-sized companies (SMEs) within the High-Tech Strategy technology focus. Funding applications within the framework of the "KMU-innovativ" scheme are possible on an ongoing basis and are not connected to a specific research topic.
In addition, a number of national programs without a specific technological focus also exist. The Central Innovation Program for SMEs (Zentrales Innovationsprogramm Mittelstand, ZIM) is the most important one. Application for incentives under these programs is possible at all times and without any prior calls for proposals or application deadlines. Please contact Germany Trade & Invest's incentives experts for more information.
EU R&D Grants
The European Union (EU) offers support to R&D projects in the current 2014-2020 funding period in form of its "Framework Programme for Research and Innovation, Horizon 2020." With a budget of more than EUR 77 billion Horizon 2020 is the world's largest funding program for research and innovation.
Horizon 2020 support is usually provided to R&D projects operating on a transnational level with at least three project partners from different European countries. Support is allocated in the form of grants covering 100% of R&D project expenditures (70% of innovation project expenditures) plus a 25% flat rate for indirect project costs.
Applications are submitted in the form of a proposal by all transnational project partners (so-called "Consortium"). The EU issues calls for proposals announcing the research area, eligibility guidelines, and the available budget.
Calls for proposals are published on the Horizon 2020 Participant Portal. Project proposals (= program applications) must be submitted via this portal.
Further Subsidy Options
R&D loans can be an alternative to R&D grants and entail several specific advantages: they are not usually attached to a specific technology field, application is possible at all times (no deadlines), and they can cover higher project costs.
R&D loans are provided by different governmental programs. For instance, the ERP Innovation Program offers 100 percent financing of eligible R&D project costs up to EUR 5 million.
Public (silent) partnerships are offered by both, the KfW Bankengruppe and state-owned venture capital companies to technically oriented companies. Direct shareholding by a public investment company is also possible. Conditions are negotiated on a case-by-case basis.
Companies with tax status in Germany and performing R&D activities are eligible for a tax credit of up to EUR 500,000 annually.
From January 1, 2020, Germany's new Tax Credit Act allows for tax credits for companies performing R&D activities.
The eligible expenditure is the cost to company of salaries paid to employees working on the project, with the tax credit set at 25 percent of eligible costs to a maximum of EUR 2 million.
As part of Germany's stimulus and crisis management package to cope with economic restrains caused by the coronavirus crisis, this assessment base will be increased, retroactively from January 1 2020 to December 31 2025, to EUR 4 million annually per company, leading to an increased annual credit value of EUR 1 million.
Projects are eligible for the credit as long as they fall under one of the three broadly defined research categories. Projects directed towards creating value within a company’s own products or processes will NOT be eligible.
Companies wishing to apply must get a certificate from statutory bodies determining whether a project is eligible. The financial office responsible for the audit of the company reports will process the certification and the financial aspects of the application along with the company’s financial reports.