If you provide a construction work in Germany to another entrepreneur within the meaning of § 2 of the German Value Added Tax Act (UStG) or to a legal entity under public law, they are obliged to make a tax deduction of 15% on 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 deducted from 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 month 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 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 declared. You will receive a corresponding proof of billing from them. The recipient of the service is liable for a deduction amount that is not paid or is paid too low.

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

By presenting an exemption certificate for tax deduction in the case of construction work, the recipient of your construction work is released from the deduction obligation described above. He does not have to deduct the tax on construction work in this case and owes you the invoice amount in full.

You can apply for the exemption certificate for tax deduction for construction work in accordance with § 48b paragraph 1 sentence 1 of the Income Tax Act (EStG) at the tax office. The competent authority is the tax office in whose district you have your domicile or, in the absence of a place of residence, your habitual residence.

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, the latter is exempted from the obligation to deduct the tax. The beneficiary has the opportunity to obtain certainty about a possible 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.