The Research Allowance Act governs the entitlement – the guidance letter of the Federal Ministry of Finance (BMF) governs how the tax office assesses it. In practice the second often matters more than the first: exactly how hours must be recorded, which evidence is demanded, how borderline cases are treated – none of that is in the statute. It is in a letter from 2023. And its long-announced revision keeps everyone waiting.
What applies today: the letter of 7 February 2023
The relevant document is the BMF letter of 7 February 2023 on granting the research allowance (German only). It replaced the first version of 11 November 2021 and remains the only version listed on the ministry’s website.
The letter is an administrative instruction. It binds the tax offices, not the fiscal courts. For your application that means: in practice it decides whether your expenses are accepted – legally, a court may later rule otherwise. That very distinction is on display right now in the question of when the increased SME rate applies (case III R 24/25 before the Federal Fiscal Court, see research allowance for SMEs).
What is meant to change: the draft of October 2025
On 16 October 2025 the BMF published a draft revision; comments were accepted until 11 November 2025. It is intended to replace the 2023 letter and align it with the legislative changes since the Growth Opportunities Act. EY’s article on the draft lists the following points:
| Paragraph | Topic | Content per the draft |
|---|---|---|
| Para. 72a | Combined R&D projects | Distinguishes in-house research from contract research, each with its own project start. |
| Para. 128 | Evidence of wage expenses | The burden of proof rests with the applicant; no documentation relief is granted. |
| Paras. 135–141a | Flat hourly rates | Raises the hourly rate for own work and aligns it with the increased SME rate. |
| Paras. 141b–141r | Depreciation of assets | New section on § 3 (3a) FZulG setting out the conditions of entitlement. |
| Para. 143 | Contract research | Raises the eligible share from 60 to 70 % – with additional timing restrictions. |
| Paras. 221a–221c | Legitimate expectations for old cases | Incorporates the assessment-deadline rules for 2020/2021 previously published only on the ministry website. |
| Para. 238a | Certification procedure | In case of doubt the tax office may prompt a direct review by the BSFZ. |
Source: EY on the draft revision (German). These points describe a draft – they are not yet applicable administrative law and may change in the final version.
The draft already lags behind the law
The draft dates from October 2025 and responds to the Growth Opportunities Act. On 1 January 2026, however, the tax investment programme came into force – bringing the 20% overhead flat rate, an assessment base raised to €12M and an hourly rate for own work raised to €100/h. The draft does not yet reflect any of this.
That does not affect their validity: they are in the statute and take effect regardless of whether the administrative guidance has caught up. For practitioners it does mean that for parts of the 2026 rules there is currently no published interpretation by the tax administration – all the more reason to document the relevant trigger points carefully. For the 20% surcharge that trigger is the start of the project, not the date the expenses arise.
So what now?
For applications in progress the answer is simple: the 2023 letter is the yardstick your tax office measures by. Anyone preparing an application today should follow it and additionally document the 2026 changes carefully. Once the final revision appears it will be noted here and in the ticker; the full history of legislative changes is kept in the changelog.
Frequently asked questions about the BMF guidance letter
Which BMF guidance letter on the research allowance currently applies?
The relevant document is the BMF letter of 7 February 2023 on granting the research allowance. It is the only version listed on the Federal Ministry of Finance website and replaced the earlier letter of 11 November 2021. A revision has existed in draft form since October 2025 but has not been published to date.
Is the guidance letter binding on me?
It binds the tax authorities, not the courts. For your application that makes it decisive in practice: the tax office assesses along these lines, and anyone departing from them should expect a reduction. A fiscal court, however, may read the law differently than the administration does – an administrative instruction and the statute are two different things.
What does the revision change?
The draft mainly aligns the 2023 letter with the Growth Opportunities Act: a higher eligible share for contract research, the increased SME rate and a raised hourly rate for own work. It adds a new section on the depreciation of assets and a legitimate-expectations rule for the 2020/2021 legacy cases. As long as the final version is missing, the 2023 letter continues to apply.
Does the draft already cover the 2026 changes?
No. The draft dates from October 2025 and responds to the Growth Opportunities Act. The changes brought by the tax investment programme – the 20% overhead flat rate, the higher assessment base and the raised hourly rate for own work – are not yet reflected in it. They apply nonetheless, because they are in the statute; it is only the administrative guidance that lags behind.