Investors might soon have yet another incentive to invest in Germany. For years, companies in other industrialized countries, including France, Japan and the United States, have been able to deduct part of their research expenditures from their taxes. The same might also soon be the case in Germany if a draft law proposed by Finance Minister Olaf Scholz is enacted.
The provisionally titled Research Allowance Act would provide a total of EUR 5 billion – or EUR 1.25 billion a year – for four years beginning on January 1, 2020, with equal amounts of funding coming from federal and state governments. The grant would be based on the gross wage expenditures of companies for their employees engaged in R&D. Each company would be eligible for a maximum of €2 million, of which 25 percent could be claimed against taxes per fiscal year. This funding will reportedly be available for companies of all sizes rather than for just small and medium-sized enterprises (SMEs).
At the time of writing, the draft law on tax incentives for R&D was still in the coordination phase, so the scope and funding could change. However, the government reportedly plans to have the finalized version quickly approved by the cabinet and to be passed by the two bodies of parliament before the end of 2019.