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 must be paid directly to the tax office. The tax deductions paid will later be offset against taxes owed by you. You will only receive from the recipient of your service the invoice amount reduced by the tax deduction.

The recipient of the construction work must submit a tax declaration 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 to which the tax deduction was declared. You will receive a corresponding proof of billing from them. The beneficiary is liable for a deduction that has not been paid or has been paid too little.

The recipient of the service does not have to deduct the tax 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 services who exclusively carries out tax-exempt transactions from renting and leasing (§ 4 no. 12 sentence 1 UStG). For the purposes of applying these exemption limits, all the construction services you have provided to this recipient in the current calendar year must be added together. If the beneficiary is a landlord of apartments, the tax deduction is only payable if the beneficiary rents out more than two apartments.

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

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 domicile or, in the absence of a place of residence, your habitual residence, is responsible.

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

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