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Germany To Provide Tax Breaks For R And D

Wednesday, June 5, 2019

On May 22, 2019, the German Cabinet approved a draft law providing a new tax subsidy for expenditure on research and development projects.

According to a Government announcement, the main points of the draft law include an allowance equal to 25 percent of the tax base, which is subject to a EUR2m (USD2.2m) ceiling. This means that the allowance is capped at EUR500,000 per assessment year.

Eligible expenditure includes costs for staff engaged in an R&D project, the definition of which is based on the OECD's 2015 Frascati Manual.

The tax allowance can be claimed by companies regardless of their size and legal form, although the Government said that it is intended to benefit small and medium-sized enterprises in particular.

The draft law will apply from January 1, 2020, subject to parliamentary approval.