Research allowance for SMEs35% instead of 25%, if you count as an SME.
Small and medium-sized enterprises receive ten percentage points more research allowance on application. Whether you qualify depends not only on headcount but on the EU definition including all shareholdings. Here is what matters.
research allowance for SMEs on application instead of the standard 25%
more allowance for the same expenses thanks to the SME increase
employees, plus limits on turnover or balance sheet total
SME definition under Annex I of the General Block Exemption Regulation
SME definition
Who counts as an SME for the research allowance
The Research Allowance Act refers to the EU SME definition. Headcount must stay below the limit and, in addition, either turnover or the balance sheet total.
| Category | Employees | Annual turnover | or balance sheet total |
|---|---|---|---|
| Medium-sized enterprise | under 250 | up to €50M | up to €43M |
| Small enterprise | under 50 | up to €10M | up to €10M |
| Micro enterprise | under 10 | up to €2M | up to €2M |
Being a medium-sized enterprise is enough for the research allowance. Legal basis: Section 4(1) FZulG and Annex I of Regulation (EU) No 651/2014, as of 12 November 2026.
Shareholdings
Which figures you have to add up
Especially in mid-sized companies with holdings, sister companies and family shareholders, this question decides about ten percentage points of funding.
Autonomous enterprise
No holding of 25% or more in other companies and no other company holding 25% or more in yours. Only your own figures count.
Partner enterprise
Holdings between 25% and 50% in either direction. The partner's figures are added to yours in proportion to the shareholding.
Linked enterprise
Majority of voting rights or dominant influence, including via holdings or shared shareholders. The figures are added in full. If you belong to a large group, you are usually no longer an SME.
What the status is worth
Same expenses, 40% more allowance
Fictional example: €300,000 of eligible expenses per year, for instance four developers with part of their working time in a certified project.
- Standard rate 25%
- €75,000
- SME 35%
- €105,000
- Extra from the SME increase
- €30,000
More worked cases with personnel costs, contract research and the flat rate are in our research allowance examples.
Pitfalls
Where SME status tips in practice
The group is overlooked
The most common mistake: a company with 80 employees is treated as an SME although the parent company or a majority shareholder holds further companies. The combined figures are what counts.
Public shareholders
If public bodies directly or indirectly hold 25% or more of the capital or voting rights, a company is generally not an SME. There are exceptions for some investors such as business angels and universities.
Thresholds briefly exceeded
Exceeding the limits in one year does not end SME status immediately. It only changes once the thresholds are exceeded in two consecutive financial years.
The increase must be applied for
The additional ten percentage points are not automatic. You declare in the application to the tax office that you meet the SME definition. Forget it and you receive only 25%.
How certification and application work is explained on our page about research allowance consulting.
Research allowance calculator
What could it be worth for you?
Move the sliders to see roughly how high your annual research allowance (Forschungszulage) could be. The basis is your R&D personnel cost.
Estimated research allowance
€60,480
per year
on about €172,800 of eligible R&D cost at a 35% rate
Rough, non-binding estimate based on personnel cost. The overhead flat rate (20%, for projects from 2026) and contract research are not included and can increase the amount. What counts is the certificate from the BSFZ and the tax office assessment.
FAQ
Common questions
The most important questions about the research allowance for small and medium-sized enterprises.
How high is the research allowance for SMEs?
Small and medium-sized enterprises can apply for an increase of ten percentage points on top of the standard 25%, reaching 35% of the assessment basis. With €300,000 of eligible expenses that is €105,000 instead of €75,000 per year.
Who counts as an SME for the research allowance?
The SME definition in Annex I of the EU General Block Exemption Regulation applies. A company is an SME if it has fewer than 250 employees and either annual turnover of no more than €50M or a balance sheet total of no more than €43M. Partner and linked enterprises are taken into account.
Do subsidiaries and sister companies count in the SME test?
Yes. Linked enterprises, i.e. with a majority holding or dominant influence, are included in full. Partner enterprises with holdings between 25% and 50% count proportionally. Links via shared shareholders can also be relevant.
How are employees counted?
In annual work units. Part-time and seasonal staff count proportionally. Apprentices and students in vocational training are not counted.
Is the SME increase available for earlier years?
The increase of ten percentage points was introduced with the Growth Opportunities Act of 2024. Earlier periods follow the rate that applied at the time. We check from when exactly it applies to your expenses case by case.
Is the research allowance worth it for small companies?
Often yes, because the allowance is paid out even if little or no tax is due. A single developer with a €70,000 gross salary who spends half their time on an eligible project already results in a five-figure allowance per year at 35%. The precondition is a project certified as research and development by the BSFZ.
First consultation
Let's check whether you
get the 35%.
Briefly describe your shareholder structure and your development projects. In a first consultation we check whether you count as an SME and what may be eligible. No obligation.