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Germany's research allowance 2026: how AI projects qualify for funding
An AI project does not qualify for Germany's research allowance (Forschungszulage) because it uses AI, but only if it is meant to answer a technical question whose solution is new, whose outcome is uncertain and which is worked on systematically. Projects that clear this hurdle can claim considerably more in 2026 than before: the assessment base rises to 12 million euros, and newly started projects receive an additional 20 per cent flat rate for overheads.
The research allowance is a legal entitlement without a budget cap or competition. Since 7 July 2026 it has also been the obvious route for many mid-sized companies, because Germany's Central Innovation Programme for SMEs (ZIM) is temporarily not accepting applications; a resumption is targeted for early 2027. The question is therefore less whether an application is worthwhile than how an AI project needs to be scoped to pass the assessment.
Three criteria decide, not the technology
The certification body for the research allowance (BSFZ) requires that all three criteria are met: novelty, technical and scientific risk, and systematic planning. In doing so, it follows the OECD's Frascati Manual.
The BSFZ checks novelty twice: the result must be new to the company and must not yet be state of the art in its industry, according to the assessment guide, as of 10/2025. A world first is not required. Even small changes can count if they involve genuine technical uncertainties.
When it comes to risk, only scientific and technical aspects count. Whether customers will accept a product is an economic risk and plays no role. Particularly important for AI projects: the guide makes clear that data protection concerns do not count as a risk. Nor is it enough to point out that more tests than planned may be needed.
Under Section 2(3) of the Research Allowance Act, systematic planning means a defined task with set objectives and specifications against which results can be measured. In practice, this means work packages, metrics, a budget and documented interim results.
The exclusion list covers many typical AI projects
The assessment guide contains a separate chapter on information and communication technology. Projects consisting exclusively of activities such as the following cannot be certified: introducing and configuring established software, porting to the cloud, data migration and the "modular assembly" of software solutions without technical risk. Routine work such as requirements analysis, testing or debugging does not count either. There is no separate official guideline for AI; this general distinction is decisive.
An illustrative example shows the dividing line. Introducing a commercial language assistant and connecting it to company documents with a standard retrieval component would not qualify, as long as no open technical question has to be solved. Potentially eligible, by contrast, would be the question of whether, and with which architecture, characteristic values can be reliably extracted from heterogeneous, company-specific test reports with a predefined error rate – provided this is not state of the art in the industry. What makes the difference is the open technical question, not the model used.
Incidentally, failure does not harm certification: according to the BSFZ FAQ, it is issued regardless of delay, termination or failure, as long as the criteria are met. A project with clear termination criteria is therefore not a disadvantage but an expression of systematic planning.
What changed in 2026
With the Act on an Immediate Tax Investment Programme (Federal Law Gazette 2025 I No. 161), three changes have applied since 1 January 2026. First, the maximum assessment base is 12 million euros for expenditure incurred after 31 December 2025; previously it was 10 million euros. Second, a 20 per cent flat rate for overheads and operating costs is added, but only for projects that started after 31 December 2025. An ongoing older project therefore benefits from the higher cap but not from the flat rate. Third, the rate for the personal work of sole proprietors and partners in partnerships rises to 100 euros per hour.
Unchanged under Section 4 of the Research Allowance Act: the allowance is 25 per cent, and small and medium-sized enterprises can apply for an additional ten percentage points. Contract research is counted at 70 per cent of the fee if the contractor is based in the EU or EEA. As an indication, by our own calculation: a small or medium-sized enterprise with 300,000 euros in personnel costs in a project started in 2026 would receive an allowance of 126,000 euros with the flat rate instead of 105,000 euros.
Two stages – and the first one decides
First, the BSFZ certifies free of charge whether research and development is involved; according to the FAQ, a decision can be expected no later than three months after confirmation of receipt. Only after the end of the financial year does the company apply for the allowance at the tax office. The BSFZ assesses only the information in the application form; it does not consider attachments.
The BSFZ statistics record a record 16,723 projects submitted in 2025, of which 13,404 were granted an entitlement. By our own calculation, that is around four out of five; the BSFZ does not publish an official approval rate. One in five projects therefore already fails at the first stage, often, presumably, because it is not sufficiently distinguished from routine work.
Whether a specific project meets the criteria and how costs are to be claimed should be clarified case by case with your tax adviser. In the preparatory work, capinori can help scope AI projects so that the research question, risk and metrics are properly documented from the outset.
Frequently asked questions about the research allowance for AI projects
Does every AI project qualify for Germany's research allowance?
No. The research allowance funds research and development, not the use of AI as such. The certification body for the research allowance requires novelty, technical and scientific risk, and systematic planning. According to the certification body's assessment guide, introducing or configuring established AI software cannot be certified if the project consists exclusively of this.
What changed in Germany's research allowance in 2026?
Since 1 January 2026, under the Research Allowance Act, a maximum assessment base of 12 million euros applies to expenditure from 2026. For projects starting after 31 December 2025, a 20 per cent flat rate for overheads and operating costs is added. The personal work of sole proprietors and partners in partnerships is counted at 100 euros per hour.
How high is the research allowance for small and medium-sized enterprises?
Under Section 4 of the Research Allowance Act, the research allowance is 25 per cent of eligible expenditure. Small and medium-sized enterprises as defined by the EU can apply for an increase of ten percentage points to 35 per cent. For contract research with contractors in the EU or EEA, 70 per cent of the fee is counted as expenditure.
Do data protection concerns count as a technical risk?
No. The assessment guide of the certification body for the research allowance, as of 10/2025, makes clear that data protection concerns are not regarded as an uncertainty or risk. Economic risks such as uncertain market demand do not count either. Only scientific and technical uncertainties in implementation are recognised.
How does the application for the research allowance work?
The procedure has two stages. First, the certification body for the research allowance certifies free of charge whether a project is research and development; according to the certification body's FAQ, within three months of confirmation of receipt at the latest. After the end of the financial year, the application to the tax office follows. Only the information in the form is assessed, not attachments.
Is a failed AI project still funded?
Yes, provided the project meets the criteria for research and development. According to the FAQ of the certification body for the research allowance, certification is issued regardless of delays, termination or failure. A technically open result is typical of research. What matters is that objectives, approach and results are systematically documented.
Sources (6)
- Federal Ministry of Justice: Research Allowance Act (FZulG), consolidated version, last amended 22 December 2025 (German)
- Federal Law Gazette: Act on an Immediate Tax Investment Programme, BGBl. 2025 I No. 161 (PDF via IHK Munich), 18 July 2025 (German)
- Certification body for the research allowance (BSFZ): assessment guide, as of 10/2025 (German)
- Certification body for the research allowance (BSFZ): FAQ (German)
- Certification body for the research allowance (BSFZ): statistics on the use of the research allowance, accessed 15 October 2026 (German)
- BTU Cottbus-Senftenberg: ZIM – temporary application freeze since 7 July 2026, 20 July 2026 (German)
Rudy Winklhofer is Owner and Director R&D of capinori GmbH.
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