Is the Forschungszulage Tax-Free?

TL;DR – Summary

TL;DR: The Forschungszulage is granted under § 10 FZulG as a credit against assessed income tax or corporate income tax; any excess credit amount is paid out as a (notional) tax refund. Important: whether and to what extent the Forschungszulage is therefore "tax-free" in the income tax sense is not expressly and comprehensively regulated by statute in every scenario. The tax authorities apply a broadly tax-exempt treatment; at the same time there is expert criticism (including from the Bundesrechnungshof), that the tax exemption in particular for the pure credit offset is not fully anchored in statute. For companies this means: application, classification, and documentation should be carried out with particular care so that the funding can reliably deliver its liquidity effect.

Why This Question Matters So Much for Companies

If a subsidy ends up being taxed away at the end, it loses its effect. That is precisely why the question "is the Forschungszulage tax-free" is so important: the Forschungszulage is meant to trigger innovation, increase liquidity, and provide reliable relief for companies – regardless of legal form, size, or profit situation.

How the Forschungszulage Works in Principle (Briefly Explained)

From an economic perspective, the Forschungszulage is a retrospective grant towards certain expenditures (e.g. personnel costs for innovation projects). Formally the procedure runs via the tax office:

• The tax office assesses the Forschungszulage and credits it against income tax or corporate income tax.
• If the credit is higher than the tax liability, the excess credit amount is paid out.

The debate on tax-free status hinges precisely on this mechanism.

Is the Forschungszulage Tax-Free? – The Current Assessment

1) Payout (excess credit): structured in law as a (notional) tax refund

When the Forschungszulage exceeds the assessed income tax or corporate income tax, the excess credit amount is paid out by the tax office. By law this payout is structured as a (notional) tax refund or a refund claim within the tax procedure. This means at least the payout mechanism is clearly anchored in statute; however, the question of a comprehensive, explicitly statutory tax exemption is sometimes assessed differently in practice (partly in the tension between the letter of the law and administrative interpretation).

2) Credit against tax liability: tax-free in practice, but legally debated

When the Forschungszulage is not paid out but instead credited against the tax liability, the core question arises: is this relief also fully tax-free?

• The Bundesrechnungshof criticises that the tax exemption here is not comprehensively regulated by statute and partly rests on administrative interpretation.
• The BMF, by contrast, sees no need for action and considers the tax exemption to be fully guaranteed.

Important for practice: this debate does not mean companies should "do nothing" – quite the opposite. It shows why clean application and project documentation is so important, so that the funding remains reliably usable and the operational benefit remains front and centre.

What Companies Should Do Now (from My Advisory Practice)

To ensure the Forschungszulage delivers its maximum effect as innovation funding, I recommend:

• Describe innovation clearly rather than just "R&D": The application is stronger when novelty, technical uncertainty, and systematic approach are presented clearly.
• Create structure early: Project delimitation, activity records, roles, timeframes, cost logic.
• Apply in a process-secure way: First the certification, then the tax assessment – cleanly, completely, traceably.

If you want to understand how the process works, read further at dieforschungszulage.de (internal guidance and guides). For the certification body you will find the official point of contact here: https://www.bescheinigung-forschungszulage.de/

Why the Forschungszulage Is a Particularly Good Option

The Forschungszulage is attractive because it:

• is open to many companies (even without profits),
• creates liquidity (through credit or payout),
• works in a plannable way based on defined eligible expenditures,
• and specifically strengthens innovation in Germany.

At dieforschungszulage.de we start precisely there: we turn "funding logic" into an actionable strategy – with clear language, solid documentation, and a process designed for auditability.

Conclusion: "Forschungszulage Tax-Free" – Yes in Application, Not Every Detail Fully Settled in Law

In practice the Forschungszulage operates tax-free and is therefore a powerful liquidity lever for innovative companies: it is credited against income tax or corporate income tax via the tax office, and paid out when there is an excess credit amount.

At the same time, the legal certainty of the full tax exemption is not identically clear in every scenario, because the tax-free status is partly secured by statute and partly by administrative interpretation (Bundesrechnungshof vs. BMF). This is why: anyone who wants to use the funding should set up the certification (BSFZ) as well as the application, delimitation of eligible costs, and project documentation professionally – so that neither formal errors nor a challengeable line of argument get in the way.