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Tax deduction for construction services Exemption


If you provide a construction service in Germany to another entrepreneur within the meaning of § 2 of the Value Added Tax Act (UStG) or to a legal entity under public law, they are obliged to make a tax deduction of 15% for your account from the consideration, which usually consists of a cash payment. The tax deduction is to be paid directly to the tax office. The tax deductions paid will later be credited against taxes owed by you. You will only receive the invoice amount reduced by the tax deduction from the recipient of your service.

The recipient of the construction work must submit a tax return to the tax office by the tenth day after the end of the month in which the consideration is provided and pay the self-calculated deduction amount to the tax office for your account. The recipient of your service must settle accounts with you, stating your name and address, the invoice amount, the invoice date and the payment amount, the amount of the tax liability and the tax office with which the tax deduction has been registered. You will receive a corresponding proof of billing from them. The beneficiary is liable for a deduction that is not paid or is underpaid.

The beneficiary does not have to make the tax deduction if the consideration to be paid to you is not expected to exceed EUR 5,000 in the current calendar year. This exemption limit is EUR 15,000 for a recipient of the service who exclusively carries out tax-exempt transactions from renting and leasing (§ 4 No. 12 sentence 1 UStG). For the application of these exemption limits, all your construction work performed to this beneficiary in the current calendar year must be added together. If the beneficiary is a landlord of dwellings, the tax deduction is only to be made if he rents out more than two dwellings.

By submitting a certificate of exemption for tax deduction for construction work, the recipient of your construction work is exempted from the deduction obligation described above. In this case, he does not have to make the tax deduction for construction work and owes you the full amount of the invoice.

You can apply for the exemption certificate for tax deduction for construction services in accordance with Section 48b (1) sentence 1 of the Income Tax Act (EStG) at the tax office. As a rule, the tax office in whose district you have your place of residence or, in the absence of a place of residence, your habitual residence, is responsible.

The tax office can issue you with the certificate for a maximum period of three years.

By presenting a valid certificate to the recipient of your work, he is exempted from the obligation to make the tax deduction. The beneficiary has the opportunity to obtain certainty about any liability risk by checking the validity of the exemption certificate. This is done by an Internet query at the Federal Central Tax Office using the printed security number.

Process flow

As a performing entrepreneur, you can apply to the tax office for the issuance of the exemption certificate for tax deduction for construction work. The application is not bound to any form. The tax office checks whether the conditions for issuing the certificate are met. If the requirements are met, the tax office will issue the corresponding certificate. You will usually receive these in the mail. The certificate is used for submission to the recipient of the works and exempts them from the obligation to deduct tax when using works. Each exemption certificate for tax deduction for construction services is provided with a one-time security number. Using the security number, the client can check the validity of the certificate on the website of the Federal Central Tax Office (BZSt)

Who should I contact?

You can find the tax office responsible for you via the tax office search of the Federal Central Tax Office:

The tax office responsible for issuing the exemption certificate is usually your tax office of residence. In the case of corporations, for example GmbH or AG, the tax office in whose district the management of the corporation is located is responsible.

If you are domiciled abroad or if the company providing the service (corporation or association of persons) has its registered office or management abroad, there is central responsibility in Germany.

The centrally responsible tax office for foreign providers of construction services in Germany can be found in the following leaflet (link).

 

Requirements

You provide construction services in Germany, have appointed a domestic receiving agent and the tax claim does not appear to be at risk from the point of view of the tax office because you comply with your obligations to provide information in accordance with § 138 of the Tax Code (AO) and your obligation to provide information and cooperate in accordance with § 90 AO.

The determination of whether the aforementioned requirements are met is made by the responsible tax office.

Only construction companies with domicile, registered office, management or habitual abode outside Germany and outside the territory of the member states of the European Union require a domestic receiving agent.

What documents are required?

As a rule, no documents are required, as the tax office has the information to examine the application. Only in cases of the establishment of a new company is the submission of further documents necessary after being requested by the tax office.

In the case of construction companies with residence or registered office of management abroad, proof of tax residency is required by means of a certificate from the competent foreign tax authority.

Which documents are required?

As a rule, no documents are required, as the tax office has the information to examine the application. Only in cases of the establishment of a new company is the submission of further documents necessary after being requested by the tax office.

In the case of construction companies with residence or registered office of management abroad, proof of tax residency is required by means of a certificate from the competent foreign tax authority.

Legal basis

Section 48b (1) sentence 1 of the Income Tax Act

Applications / forms

Forms:

Application – no

Certificate - yes

Online procedure possible:

Application - no
Verification of the certificate - yes

Written form required:

Application - no
Certificate - yes

Personal appearance required: no

As a contractor, you apply to the tax office for the issuance of the exemption certificate for construction services. The application is not formally bound. The tax office checks whether the certification requirements are met and issues the requested certificate.

Further information is provided by the Federal Central Tax Office under the following link.

Further information from the BZSt

Author

The text was automatically translated based on the German content.

Source: Serviceportal Niedersachsen (Portalverbund des Bundes und der Länder)