The research grant for software development: A guide for companies

What Is the Research Grant (Forschungszulage)?

Short: The research grant (Forschungszulage) is a federal tax incentive for R&D activities in Germany.

The research grant (Forschungszulage) is a federal tax incentive for R&D activities in Germany. It entered into force in January 2020. It applies to companies of all sizes and industries.

Unlike project-based grant programmes, the research grant is a legal entitlement. Every company that meets the criteria has an automatic right to support. There is no competition for a limited budget.

This predictability makes the research grant particularly useful for long-term R&D planning.

Key Figures

• Funding rate: Up to 25% of eligible personnel costs
• Maximum eligible expenses: EUR 4 million per year (for individual companies)
• Maximum annual benefit: EUR 1 million per company
• Application: Filed retroactively after the tax year via a certification process
• Eligible company sizes: All — from sole proprietors to large enterprises

Which Software Projects Are Eligible?

General Requirement

Projects must fall into one of three categories:

• Basic research — Advancing fundamental scientific or technical knowledge
• Industrial research — Planned investigations aimed at developing new knowledge for new products, processes, or services
• Experimental development — Acquiring and testing new knowledge to develop new or substantially improved products or processes

Specific Criteria for Software Projects

The certifying authority (Bescheinigungsstelle Forschungszulage, BSFZ) evaluates two things: novelty and technical risk.

Eligible software projects typically:

• Develop new algorithms, methods, or AI-based systems
• Research technically uncertain approaches with no guaranteed outcome
• Venture into new technical domains beyond recombining existing technologies
• Follow structured objectives and defined project phases
• Address problems that cannot be solved with currently available methods

Not eligible: routine further development of existing software, adding standard features, or adapting existing systems without new technical challenges.

How to Demonstrate Eligibility

Document the technical challenge, the novel approach, and the uncertainty involved. The BSFZ assesses this before the tax office processes the payment. A rejection at the BSFZ stage means no funding — invest in documentation quality upfront.

How to Apply

1. Plan and document the R&D project — describe objectives, approach, and technical uncertainties
2. Apply to the BSFZ — submit for certification before or during the project
3. Receive certification — the BSFZ confirms eligibility within a defined review period
4. File with the tax office — submit the certified application with your tax return
5. Receive the grant — paid as a tax credit or cash payment

What Mid-Sized Companies Often Miss

Short: Many SMEs investing in software development qualify — but do not apply.

Many SMEs investing in software development qualify — but do not apply. Common misconceptions:

• "We are not a research company." — The Forschungszulage is not limited to research labs. Developing new software with genuine technical uncertainty qualifies.
• "Our project is too small." — There is no minimum project size.
• "It is too complex to apply." — A qualified tax advisor with R&D funding experience handles the process efficiently.

The research grant can be combined with other funding programmes in most cases — but double-funding of the same expense is not permitted.

"Good software is not an accident — it comes from a structured development process with clear quality standards." — Björn Groenewold, Managing Director, Groenewold IT Solutions