Germany's Research Allowance for AI and Software Projects
By Dennis Weidner · 13. November 2026
Germany's research allowance (Forschungszulage) is a tax incentive for research and development that any company taxable in Germany can claim, regardless of size or sector and without a call for proposals. Small and medium-sized enterprises get 35 percent of eligible expenses back, since 2026 on an assessment base of up to 12 million euros a year plus a new overhead flat rate. AI and software projects can qualify if they are genuine development. The claim has two steps: a certificate from the certification body (BSFZ), then the application to the tax office. Important this year: for expenses from 2022 both applications must be filed by 31 December 2026. As of November 2026.
What the research allowance is
The legal basis is the Research Allowance Act (FZulG), in force since 2020. Unlike programmes with funding windows and budgets, it is a legal entitlement. It is offset against income or corporate tax, and any excess is paid out, so it also helps companies that are not yet profitable.
How much it is worth since 2026
| Item | Since 2026 |
|---|---|
| Rate | 25 percent, 35 percent for SMEs (since 28 March 2024) |
| Annual assessment base | up to 12 million euros (28 March 2024 to end of 2025: 10 million, before that 4 million) |
| Contract research | 70 percent of the fee paid |
| Own work of sole proprietors and partners | 100 euros per hour, up to 40 hours a week |
| Overheads | flat 20 percent of other eligible costs, for projects started from 2026 |
When AI and software projects qualify
Software qualifies when something new is developed and it is uncertain at the start whether it will work technically. The BSFZ applies the internationally used criteria: novel, creative, uncertain, systematic and transferable. Developing your own model or an agent system that goes beyond known methods has good chances; introducing an off-the-shelf chatbot, configuration or data migration does not count. For implementation projects other programmes apply, see AI and digitalisation funding.
How to apply: two steps
Step 1: describe the project online to the BSFZ: goal, state of the art, technical uncertainty, approach, timeline. It only assesses whether the project is R&D. Step 2: after the end of the financial year, file the claim electronically with the tax office via ELSTER, together with the certificate. The allowance is set by notice and offset at the next tax assessment; any excess is refunded.
Worked example
| Item | Amount |
|---|---|
| Staff (two developers) | 160,000 euros |
| Contract research (70 percent of 50,000 euros) | 35,000 euros |
| Overhead flat rate (20 percent of 195,000 euros) | 39,000 euros |
| Assessment base | 234,000 euros |
| Allowance for an SME (35 percent) | 81,900 euros |
Deadline: 2022 expenses until the end of 2026
The allowance can be claimed retroactively within the four-year assessment period under section 169 of the German Fiscal Code. For expenses from 2022 both the BSFZ application and the tax office claim must be filed by 31 December 2026, even if the certificate has not arrived yet; the BSFZ may take up to three months. For 2022 the rate was 25 percent and the cap 4 million euros. Agree the details with your tax adviser; this guide is not tax advice.
Checklist
- Define the project and state the technical uncertainty in two sentences.
- Describe the state of the art and the intended advance.
- Record people, period and hours per person.
- Document contracts with universities or service providers.
- Apply to the BSFZ, then file with the tax office after year end.
- Check projects from 2022 now and file both applications by 31 December 2026.
Planning an AI project and want to know whether it counts as development? Talk to us in a short intro call. Our approach to agents and automation is described on AI automation for business.
Transparency note: this article was produced with the help of artificial intelligence.