Research grant 2027: Requirements, amount and application

With the Research grant 2027 Research and development companies in Germany can claim up to 4.2 million euros in tax credit per fiscal year directly with the tax office – as a legally established right. 25 are funded % for large companies and 35 % for small and medium-sized enterprises (SMEs) on a base of assessment of a maximum of 12 million euros. Because Research funding law (FZulG) No pre-commencement ban applies; ongoing or completed projects can be submitted retroactively for up to four years. This applies across the industry and regardless of the current profit situation: if a company incurs losses or the tax debt is insufficient, the tax office pays the amount in full and tax-free in cash to the business account.

The most important facts about the research grant for 2027 at a glance

Right of priority: Established by the Research Funding Act (FZulG), open to all sectors, technologies, and legal forms in Germany.
Grant rate: 35 % for SMEs (according to EU definition); 25 % for large companies.
Maximum assessment base: 12 million euros per financial year (or at the level of the entire corporate group).
Maximum payout per year: Up to 4,200,000 euros (SMEs) or up to 3,000,000 euros (large companies).
Eligible costs: Own R&D salaries (gross fees plus employer social contributions), commissioned research by third parties in the EEA (at 70 %%), self-employed contributions (100 €/hour, max. 40 hours/week), project-related depreciation (AfA) on fixed assets, and a 20 %-percent common costs allowance for all direct costs.
Process in two stages: First, the substantive examination via the certificate authority's portal for research grants (BSFZ), then the determination and payment via the competent tax office via ELSTER.
Full liquidity effect: Calculation with the corporate or income tax; unused overages are transferred directly to the company account.

1. Legal framework: Cornerstone of the research grant in 2027

Since its introduction in 2020, legislators have continuously improved tax research funding. What began with tightly controlled ceilings has evolved over the Growth Opportunity Act and subsequent reform packages into one of the most powerful Funding instruments developed in the economic location of Germany.

The following legal guidelines apply for the 2027 application year:

12 million euro threshold: Companies can spend up to this maximum amount on R&D per fiscal year. Important: The amount applies to the entire corporate group, not to each individual company.
35% SME subsidy rate %: Those who meet the European SME thresholds benefit from an increase of 10 percentage points compared to the basic rate for large companies (25 %).
Flat-rate contribution for general costs: For newer projects, a flat-rate contribution of 20 is automatically % granted for the sum of the eligible direct R&D costs, to account for indirect project overheads without a flood of individual invoices.
Investment support through AfA: Non-durable movable assets of the investment portfolio – from measuring stands to prototype hardware – that were purchased specifically for an R&D project are directly included in the funding through their project-specific depreciation.
European aid framework: The exemption limits under the AGVO now allow a funding volume of up to 25 million euros per project, without the need for a lengthy individual notification in Brussels.

„The research subsidy has evolved from a bureaucratic secret tip to a real factor of location. With the expanded calculation limits and the SME subsidy, companies can now reliably plan their R&D budgets – regardless of whether they generate profits this year or not.“

— Efe Duran Sarikaya, CEO of EPSA Deutschland GmbH

2. Requirements: Which companies and projects are eligible for funding?

The research grant does not require affiliation with specific industries or the use of predefined control technologies. The only criteria are the tax liability in Germany and the quality of the development project itself.

Who is eligible to apply

Any business that is subject to the unlimited or limited tax obligation in Germany (income or corporate tax) is eligible to apply. This includes sole proprietorships, partnerships (such as GbR, OHG, KG, GmbH & Co. KG), and limited liability companies (GmbH, AG, UG).

Exclusively excluded are only „companies in difficulty“ (UiS) within the meaning of EU aid law – that is, businesses in which more than half of the share capital has been wiped out by accumulated losses or which are in an ongoing insolvency proceedings.

What is being funded: The criteria of the Frascati Manual

The examination at the certification office is based on the internationally recognized OECD Frascati Manual. A project must fall into one of three categories: basic research, industrial research, or experimental development. In industrial practice, well over 80 percent % of applications for experimental development are rejected.

What is crucial is that five criteria come together in a verifiable way:

Novelty: The project must aim to fill knowledge gaps. It is not enough to simply replicate existing solutions from competitors; the planned outcome must go beyond what is considered the industry standard.
Creative approach: The work must be based on original ideas. Pure routine adjustments, standard maintenance, or the mere assembly of finished components are not allowed.
Scientific and technological risk: At the outset, it must be objectively unclear whether and how the goal can be achieved technically. A project whose success is predetermined from the outset is not an R&D project.
Planification: A comprehensible work and resource plan is needed with concrete work packages, timeframes, and defined milestones.
Reproducibility and documentation: The results and intermediate steps must be recorded in such a way that the findings can be verified by third parties as well.

3. Amount of the grant and eligible expenses

The taxable base consists of clearly defined cost components that were incurred in the financial year for the project:

Internal personnel costs (100 % eligible): Gross salaries of employees directly involved in the R&D project are taken into account, plus the actual employer contributions to social security. The calculation is made exactly based on the project-specific time component.
Entrepreneurial self-employment (100 euros/hour): Sole traders and partners in partnerships that do not receive a regular social security-related management salary set their own working hours at a flat rate of 100 euros per hour (maximum 40 hours per week).
Contract research (70 % eligible): Those who award development contracts to external partners, service providers, or universities based in the European Economic Area (EEA) can include 70 % of the net invoice amount in their own calculation basis.
Project-related depreciation (AfA): For movable assets (e.g., test stands, laboratory measuring equipment, prototype test stands) procured for the project, the regular depreciation for the period of use in the project is recognized on a time-phased basis.
Co-financing fee (20 % surcharge): A 20 percent surcharge is automatically added to the total amount of the direct R&D costs determined above.

Check SME classification

Companies that meet the EU SME definition at the time of application % receive the 35% subsidy:

less than 250 employees and
either a maximum annual turnover of 50 million euros or a maximum balance sheet total of 43 million euros.

Investments in holding structures, affiliated companies or shareholders with more than 25 % shares must be included in the consolidated financial statements in proportion or in full.

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4. Computational Example: SMEs vs. Large Companies Compared

The following annual scenario of a medium-sized industrial company that is developing a new sensor module illustrates how the research grant impacts in practice:

The costs incurred during the project year:

Development team: 5 software and hardware developers with an R&D time share of 80 %; this results in 320,000 euros in eligible salary costs, including employer contributions to social security.
Managing director's own contribution: 500 documented working hours on the test bench at a cost of 100 euros each = 50,000 euros.
Contract research: Special tests at an institute in Graz with a net bill amount of 150,000 euros; 70 % of which are eligible for funding = 105,000 euros.
Measuring equipment: Time-based depreciation (AfA) for newly purchased test hardware in the project year = 25,000 euros.

Calculation of the base for calculation:

Direct R&D expenses: 500,000 euros (320,000 + 50,000 + 105,000 + 25,000 euros)
In addition to the 20 common % costs allowance: 100,000 euros
Total tax assessment base: 600,000 euros

The financial result:

As a small and medium-sized enterprise (35 % subsidy rate): 210,000 Euro tax credit or cash refund.
As a large company (25 % subsidy rate): 150,000 Euro tax credit or cash refund.

5. The 2-step application process: From the BSFZ to the tax assessment

The procedure strictly separates substantive technology testing from financial billing.

Level 1: The technical application at the BSFZ

Function: The certification body only checks whether the project meets the criteria for research and development.
Procedure: The application is submitted digitally via the BSFZ portal. The BSFZ does not require invoices or salary slips, but rather descriptions of the state of the art, the intended innovations, the scientific and technical hurdles, and the work packages.
Fees & Duration: The procedure at the BSFZ is free of charge. The processing time averages 6 to 12 weeks.
Result: A legally binding basic order (§ 6 FZulG), to which the financial administration is subject in terms of content when determining the tax liability.

Stage 2: The application for attachment at the tax office

Function: Upon receipt of the BSFZ decision, the allowance is determined numerically and paid out (§ 5 FZulG).
Procedure: The application is submitted electronically via ELSTER, either together with the annual tax return or separately afterwards.
Audit: The tax office no longer checks whether the project was innovative; instead, it checks the figures: time records, payroll records, invoices from the contract research department, and AfA tables.
Payment: The tax office calculates the fixed amount based on the next tax liability. If there is still a balance, the remaining amount will be immediately transferred to the company account.

6. Software and AI development in the research grant 2027: Specific criteria and pitfalls

Projects in the field of software and artificial intelligence make up an ever-growing proportion of the applications – however, they are under particularly close scrutiny at the BSFZ. Since agile development methods often smoothly transition into regular product maintenance, many IT applications fail due to an imprecise separation between standard coding and genuine experimental development.

Typical distinctions in BSFZ practice:

Generally eligible for funding:

Own model and algorithm development: Conception of proprietary neural networks, new transformer structures or hybrid AI architectures when standard frameworks are demonstrably reaching functional or mathematical limits.
Solution to hard target conflicts: development projects where latency in inference must be drastically reduced without compromising detection accuracy (e.g., in resource-constrained edge hardware through novel quantization approaches).
Mathematically demanding data processing: Novel methods for vector embedding, multimodal fusion algorithms, or mathematical methods for generating synthetic training data in the face of severe data scarcity.
Unexplored system boundaries: Projects where it is not clear at the beginning of the project whether the system converges stably under real production conditions or reaches the required real-time capability.

Not eligible for funding (exclusion criteria):

Pure API wrapping: The mere integration of external speech models or standard APIs into a web portal without its own model or algorithm architecture.
Prompt optimization: The formulation, testing, and customization of system prompts without interfering with the underlying software logic.
Standard development: Typical CRUD applications, front-end re-releases, setting up standard databases, or ordinary middleware connections.
Tool customization: Configuring ready-made cloud services, standard pipelines, or no-code/low-code platforms.

Documentation in agile teams

Anyone working with Scrum or Kanban should not start using general sprint hours for time tracking. Only tickets and epics that address overcoming unresolved technical hurdles are eligible for funding. Once the architecture is in place and it’s just about serial implementation, UI refinement, deployment, or bug fixing, the R&D phase is over.

7. Best practices for documentation and operational audit security

A positive BSFZ certificate is only half the price of the rent. The financial settlement is often only examined in detail years later during a regular tax audit. Defects in the documentation often lead to painful cuts or claims.

Time recording for a specific day or week: Employees in the R&D project must record their working hours in a timely and project-specific manner. General estimates such as „Developer X has researched 40 of % his annual working hours“ are rejected by auditors without any supporting evidence.
Understandable audit trail: Ideally, link project hours to ticket IDs (e.g., from Jira) and code commits. This allows for a complete record of who worked on what technical hurdle when asked about it.
Clear contracts for contract research: Anyone who engages external service providers needs contracts that clearly specify the experimental nature and technological risk involved. Pure service or work contracts that give the impression of a standard supply arrangement are not recognized for tax purposes.
Presenting complex structures clearly: Stakeholder relationships and interdependencies must be documented transparently to demonstrate that the annual €12 million cap is not exceeded across all associated companies.

„The actual sticking point rarely lies in the technical assessment by the BSFZ, but years later in the tax audit. Anyone who estimates their project hours retrospectively or forms contracts with suppliers inaccurately risks bitter reimbursements plus interest. Clean processes from day one are the half of the trick here.“

— Efe Duran Sarikaya, CEO of EPSA Deutschland GmbH

8. Conclusion on the research grant for 2027: Strategic competitive advantage

The Research grant 2027 It offers companies in Germany a rare combination in the funding jungle: a clear legal entitlement instead of uncertain budget pots, predictable funding rates of up to 35, % and a non-bureaucratic 20 %-percent common cost cap. With a maximum funding volume of up to 4.2 million euros per financial year, the instrument significantly mitigates financial risks associated with new developments. A professional approach is crucial for lasting success: Those who structure technical projects precisely according to the Frascati criteria and establish an internally auditable project timeline will transform R&D costs into pure liquidity on a regular basis.

9. Frequently asked questions (FAQ) about the research grant for 2027

Can the research grant be applied for retroactively in 2027?

Yes, that is one of the greatest advantages of the program. Since there is no pre-filing ban, projects can be claimed retroactively as long as the filing deadline for the respective tax year (section 169 of the German Federal Tax Act, usually four years) has not expired.

Do start-ups without a profit also receive the research grant in full?

Yes. If the company’s tax debt is insufficient to offset the fixed research subsidy – which is the usual case for research-intensive start-ups or in years of loss – the tax office transfers the full difference in cash to the business account.

Can the research grant be combined with other funding sources (e.g., ZIM)?

A combination for the same project is fundamentally possible; however, double funding of the same costs is strictly prohibited. Costs that have already been subsidized through project funding such as the ZIM or EU programs must be calculated from the calculation basis of the research grant.

Are failed R&D projects also eligible for funding?

Yes, without restriction. A technical failure is even a particularly clear proof that the legally required technological risk actually existed. All proven expenses incurred up to the formal project termination remain fully eligible.

What is considered self-performance for managing partners?

Sole traders and partners in partnerships (e.g., GmbH & Co. KG) who do not receive social security-based salaried wages for their operational research work may work their hours at a fixed flat-rate of 100 euros per proven working hour (maximum 40 hours per week).