R&D Tax Credit time tracking: the hour record that survives an audit
The tax office only accepts time tracking that assigns every hour to a project certified by the BSFZ, recorded daily or weekly and clearly separated from routine work. It scrutinises retrospectively created hour records with particular care.
- Daily or weekly, no monthly estimate
- Every hour assigned to a certified project
- Retention, GoBD-compliant: accounting vouchers 8 years, other records 6 years (§ 147 AO)
Written by Max Nodes, Founder and Managing Director · 25 of 25 supported BSFZ applications certified (as of 09/2026) · Last updated: · Law as of:
From working day to project record
Figures and details
Sample week, not real project data.
Key facts in brief
Time tracking proves that personnel costs actually relate to a certified R&D project (Section 3(1) FZulG). Every hour must be assigned to a specific project, recorded daily or weekly, and clearly separated from routine work. Without this evidence, the tax office reduces the assessment basis (Bemessungsgrundlage) or rejects the application.
The essentials of time tracking
How does NOVARIS take over time tracking?
You supply payroll data and time shares, NOVARIS builds the audit-proof hour record per project from them.
Supply payroll data
You provide payroll data including employer on-costs for each employee.
YouSupply absences
You report holiday, sick and public-holiday days for each employee.
YouEstimate the R&D time share
You provide a first estimate of the R&D time share for each employee.
YouBuild the hour record
NOVARIS builds the hour record per project from it.
NOVARISAssign to work packages
NOVARIS assigns the hours to the work packages and prepares them audit-proof.
NOVARISSign off
The records are printed and signed. No hours are booked on holiday, sick or public-holiday days.
You, NOVARIS
What must the hour record contain?
An audit-proof record contains six items: date, project, activity, duration, separation from routine, and a confirmation.
| Field | Requirement |
|---|---|
| Date | Daily or per calendar week, recorded on the day the work happens, not retrospectively. |
| Project | Name identical to the project submitted to and certified by the BSFZ. |
| Activity | Short description that clearly distinguishes R&D from routine work. |
| Duration | Hours per project as figures, not a percentage estimate of working time. |
| Separation | A separate line for sales, administration and support, apart from R&D. |
| Confirmation | Signature or digital approval by the employee and the project lead. |
Which recording method works, and which does not?
Three methods are common in practice, but only one counts as the gold standard with the tax office.
| Method | Accuracy | Acceptance by the tax office | Effort |
|---|---|---|---|
| Project-based hour recording | yes high, every hour assigned to a project | yes very good, the gold standard | medium to high |
| Estimation with plausibility check | partly medium, a flat share per employee | partly acceptable with evidence such as milestone reports | low to medium |
| Retroactive reconstruction | partly depends on the available sources | partly possible, but scrutinised with particular care | high |
| A plain monthly figure with no project reference | no too imprecise | no considered insufficient | low |
- Project plans and milestone reports
- Email histories and calendar entries
- Git commits, Jira or Confluence tickets
- Travel expense reports for project appointments
- Sworn statements from the employees involved
These sources support a retroactive reconstruction, but they do not replace ongoing time tracking.
Which mistakes make time tracking worthless?
Four mistakes routinely cost recognition, in part or in full.
- No separation of R&D and routine work: recording total working time with no distinction provides no evidence. A developer working on a new algorithm and on bug fixes in ongoing operations must document both separately.
- Monthly recording only: “Around 80 hours on Project X in January” is considered too imprecise. The coarser the record, the more likely the tax office questions its plausibility.
- No assignment to a specific project: a blanket category such as “R&D” instead of the certified project name is not enough. Time tracking must break down to the individual projects certified by the BSFZ.
- Retrospectively created time record: an hour record adjusted after the fact can be treated by the tax office as tax evasion, with back payment, interest and criminal consequences.
Part-time employees, working students, apprentices and fixed-term staff are eligible on the same terms as full-time employees, as soon as they work on a certified project. Many companies forget to keep the same project-based time tracking for them.
Whose time counts, and how does it become evidence?
Time tracking secures two different claims: the time share of personnel costs and, for sole proprietors and co-entrepreneurs, own contributions.
| Person | Counts as | Legal basis |
|---|---|---|
| Employees on the project | Time share of personnel costs (employer gross) | Section 3(1) FZulG |
| Sole proprietors, co-entrepreneurs | EUR 100 per verified hour, at most 40 h/week | Section 3(3) FZulG |
| GmbH shareholders, managing directors | only via salary and employment contract as personnel costs | Section 3(1) FZulG |
The line runs along legal form, not salary. A GmbH managing director has no access to the own-contribution rule even without pay. Details: Own contributions under the R&D Tax Credit.
Which questions come up most often about time tracking?
How long and how must the records be retained?
Time tracking records must be retained GoBD-compliant: accounting vouchers for eight years, other records for six years (§ 147 AO). The retention period does not end while the assessment period for that year is still running (§ 147 (3) AO).
- Stored GoBD-compliant and tamper-proof: accounting vouchers 8 years, other records 6 years (§ 147 AO).
- The tax office can request the records within the assessment period (Section 169 AO).
Set up GoBD-compliant time tracking
In the first consultation we review your current time tracking, assign hours to the certified projects and close gaps before the next audit. Success-based, no upfront costs.
Book a first consultationRead on
- Own Contributions under the R&D Tax CreditEUR 100 per hour for sole proprietors and co-entrepreneurs, not for GmbH managing directors.
- Personnel Costs & R&D Tax CreditClaiming salaries and employer contributions correctly in the assessment basis.
- Contract Research70 % of the fee for external R&D contracts within the EEA.
- Applying for the R&D Tax CreditThe process from the BSFZ application to the tax office notice.
- Claiming the R&D Tax Credit RetroactivelyHow missing time tracking for past years can be reconstructed.
- R&D Tax Credit (FZulG): the guideRequirements, funding amount and the BSFZ application at a glance.
Max Nodes
Founder and Managing Director of NOVARIS Consulting. Specialised in the German R&D tax credit (FZulG) since 2021; 25 of 25 accompanied BSFZ applications approved (as of 09/2026). Max Nodes