Germany updates R&D tax-credit guidance for expanded 2026 allowance

The guidance does not enact a new incentive. It consolidates changes already made to the Research Allowance Act and explains how the administration will apply them. Under sections 1 and 2, taxpayers subject to German income or corporation tax may qualify for basic research, industrial research or experimental development projects. Section 3 now caps the annual eligible expenditure base at EUR12 million for expenditure incurred after 31 December 2025. Section 4 sets the allowance at 25% of that base, increased by ten percentage points for qualifying small and medium-sized enterprises. Connected enterprises share the section 3(5) cap.^[1][2]

Different statutory dates remain important

For an in-house project begun after 31 December 2025, section 3(3b) permits a 20% flat addition for overhead and other operating costs. Depreciation of qualifying movable fixed assets can be eligible where the statutory acquisition, exclusive-use and project conditions are met. For commissioned R&D placed after 27 March 2024, 70% of the contract price may enter the base; the contractor-location condition in section 2(5) still applies. The updated letter also explains the EUR100 hourly amount for qualifying own work of individual entrepreneurs or partners after 31 December 2025. These rules should not be applied to periods that do not satisfy their specific cut-offs.^[1][2]

Two-stage claims process retained

A claimant first needs a project certificate under section 6 and then files the electronic allowance application with the competent tax office after the relevant financial year under section 5. The letter also includes a protective approach for certain 2020 and 2021 claims where a valid certificate request was lodged before the ordinary limitation period expired, and explains when a taxpayer may request a reduction of advance payments after an allowance has been assessed.^[1][2]

Practical action for groups

Groups with German claimants should segment open and future claims by expenditure date, project start, contract date and connected-enterprise allocation. They should also reconcile payroll, time records, qualifying asset use, outsourced research contracts and other public funding before applying the revised guidance. The letter changes administrative interpretation and evidential expectations; it does not create a general right for foreign group expenditure or remove the Act’s project-certification and state-aid conditions.^[1][2]