Unfavorable regulations in the financing of innovative R&D projects and technology transfer

Although the policy in Germany promotes research and technology transfer, the hitherto implemented political measures for optimal support, also and especially for the industrial biotechnology, are still not enough. Below some unfavorable or lacking regulations are listed.

  • The development of innovative technology is due to the inherent risks of research and development rather financed by private equity (venture or equity investors, business angels) than by credit capital (bank loans). However, private equity is treated worse than credit capital by German tax law. The payable interest on the borrowing of credit capital are in principle tax deductible as business expenses when financed through private equity, however, it is taxed twice: on the side of the company and on the side of investors.
  • Asymmetry in the treatment of gains and losses: While the state in the context of the tax system partakes of all profits, may the losses that occur regularly in innovation projects only partially be considered.
  • There is legal uncertainty as to whether private equity companies are classified as companies solely carrying out asset management activities or companies operating commercially. The respective classification means different tax consequences.
  • Although the law on the modernization of the framework for capital investments (in German: Gesetz zur Modernisierung der Rahmenbedingungen für Kapitalbeteiligungen, abbreviated MoRaKG or MORAGK) goes in the right direction, it is configured too restrictive to allow drastic improvements.
  • Unlike the vast majority of OECD and EU countries, there are no tax incentives for research in Germany. This means a considerable competitive disadvantage for Germany.
  • The funding practice is too slow, in part because the efficiency is affected by heterogeneous responsibilities of various federal and state ministries: From application to public funding of a R&D project to grant approval can pass many months, sometimes even years.
  • For the introduction of sustainable (bio-based) products, existing funding or measures (e.g. "Lead Market Initiative for Europe") are too small to overcome market barriers.
  • Similarly, the funding for the construction of pilot, demonstration and first reference facilities are too low (with at the same time very high-risk and low profit margins for the company), as a "marketability" of the plant is assumed.
  • The current European patent system is complex, fragmented and very expensive: The acquisition of a European patent may be up to ten times more expensive for SMEs than a U.S. patent. If an SME currently wants to acquire a patent or maintain it for all 27 Member States for 20 years, it must spend an estimated 200,000 euros in this period; with the bulk of these costs arise for translations and the necessary procedures with the national patent offices.For example, the existing regulation (since January 2008) of the loss carryforward decay (§ 8c KStG) often means that accrued loss carryforwards, e.g. through developmental start-up losses can fiscally expire partially or completely.