Research Allowance for AI Projects: 35 Percent Back, But Not for Every AI

The research allowance reimburses small and medium-sized enterprises 35 percent of their research and development costs as a tax credit, larger enterprises 25 percent. It is a statutory entitlement with no funding pool limit, can be claimed retroactively for up to four years, and since 01.01.2026 improved conditions apply: an assessment base of 12 million euros per year and an additional overhead flat rate of 20 percent for new projects. The catch for AI projects: development is funded, not adoption, and this boundary is often blurred in the sales pitches of many funding consultants.

What is the research allowance and what is new from 2026?

The basis is the Research Allowance Act: eligible are basic research, industrial research and experimental development. The SME rate of 35 percent has applied since the Growth Opportunities Act of March 2024. From 2026, the maximum assessment base rises to 12 million euros per year, and for projects starting after 31.12.2025 an additional 20 percent overhead flat rate may be applied, according to the IHK overview of the research allowance. Own contributions by sole proprietors and co-entrepreneurs can also be claimed. The procedure is two-stage: first the certification by the BSFZ, then the assessment by the tax office via ELSTER.

When is an AI project eligible research?

Decisive is technical uncertainty: the project must solve a problem whose solution is not obvious to skilled developers. Eligible, for example, is anyone who develops their own model for an unsolved recognition task, builds a novel process for processing industry-specific data, or combines AI components in a way where the outcome is genuinely uncertain. Routine development is explicitly excluded.

What does not count: the honest distinction

• Introducing standard software: Rolling out Microsoft Copilot, licensing an AI tool, configuring a chatbot from building blocks: no research, no allowance.
• Automating workflows: even sophisticated automation with n8n, Power Automate or UiPath is, as a rule, the application of established technology.
• Prompts and fine-tuning by the book: as long as established procedures are applied according to instructions, technical uncertainty is missing.

We state this distinction so clearly because it saves real money: a rejected or later reclaimed application costs more than the honest answer upfront. Most of the projects we build as AI agents for small and medium-sized businesses are adoption, not research, and therefore belong in grant pools such as the KI-Förderung MV rather than the research allowance. Where both come together, for example when a business carries out genuine in-house development around its automation, both instruments can be cleanly separated.

How does the application work in practice?

The first step is the application for certification with the Research Allowance Certification Body, with a description of the project along the criteria of novelty, technical uncertainty and systematic approach. With the certification, the tax office assesses the allowance, offsets it against the tax liability or pays it out. Because it can be claimed retroactively for up to four years, it is also worth looking at development projects that have already been completed.

Frequently asked questions about the research allowance for AI

How much is the research allowance for SMEs?

Small and medium-sized enterprises receive 35 percent of the eligible expenses as a tax credit, other enterprises 25 percent. From 2026, the assessment base is 12 million euros per year, and for new projects an overhead flat rate of 20 percent is added.

Is the adoption of AI software eligible for funding?

No. The research allowance funds research and development with technical uncertainty, not the adoption of existing software. Anyone who introduces Copilot, a ready-made chatbot or an AI tool uses grant programs such as the KI-Förderung MV or the state programs for this, not the research allowance.

Can I claim the research allowance retroactively?

Yes, the assessment is possible for up to four past years. So even completed development projects can still bring back money, provided the BSFZ certifies the project as research and development and the expenses are documented.

Are the research allowance and other funding mutually exclusive?

The same costs may only be funded once: whatever is billed in a grant project falls out of the assessment base of the allowance. However, different projects or cleanly separated cost shares can be combined, for example the allowance for in-house development and a state grant for adoption.