Germany does not offer tax incentives except in very limited circumstances, not usually of direct business relevance (e.g. special depreciation for buildings under a conservation order). Partly, this is a question of the state budget, and partly, it reflects the constitutional requirement for equal treatment of all taxpayers.
The German Research Allowance Act (Forschungszulagengesetz), introducing a federal R&D subsidy, was passed in 2019. According to this Act, a tax-free subsidy of 25% of salaries and wages for certain R&D purposes shall be guaranteed up to a limit of EUR 500,000 per annum.
In response to the COVID-19 pandemic, the assessment basis for the R&D allowance in Germany was increased with effect from 1 July 2020, for a limited period until 30 June 2026. During this period, the maximum amount of the R&D allowance is EUR 1 million per annum.
Local authorities may offer facilities on favourable terms, such as the provision of cheap land on industrial estates, as well as certain direct government aid.
Foreign tax credit
If foreign-source income is not exempt from German taxation, a credit will be given for the foreign tax actually paid and not otherwise recoverable. However, the credit is limited to the corporation tax (including the solidarity surcharge) on the net income after deducting the related expense (a per-country limitation applies). Unused credit is lost, as there are no provisions for carryforward or for offset against other taxes, such as trade tax. There are still a few cases of fictitious foreign tax credits under tax treaties with developing countries (to protect the treaty partner's investment incentives), but German treaty policy is to abandon such provisions at the first opportunity.