Tax deduction for construction services Exemption
If you provide a construction service domestically to another entrepreneur within the meaning of Section 2 of the German Value Added Tax Act (UStG) or to a legal entity under public law, these are obliged to pay a tax deduction of 15% on your invoice from the consideration, which usually consists of a cash contribution. The tax deduction must be paid directly to the tax office. The tax deductions paid will be offset later on taxes owed by you. You will only receive from the recipient of your benefit the amount of the invoice 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 shall settle with you, stating your name and address, invoice amount, invoice date and payment amount, amount of tax liability and the tax office to which the tax deduction has been declared. You will receive a proof of billing from the latter. The beneficiary is liable for a deduction amount that has not been paid or is not paid too low. The beneficiary 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 allowance amounts to EUR 15,000 for a beneficiary who exclusively carries out tax-free transactions from rental and leasing (Section 4 no 12 sentence 1 UStG). For the application of these allowances, all your works performed to this recipient must be combined in the current calendar year. If the beneficiary is the landlord of apartments, the tax deduction must only be made if the beneficiary rents out more than two apartments. By presenting an exemption certificate for the tax deduction for construction work, the recipient of your construction work is exempted from the deduction obligation described above. In this case, he is not responsible for the tax deduction for construction work and owes you the invoice amount in full. You can apply to the tax office for the exemption certificate for tax deduction for construction works in accordance with Section 48b paragraph 1 sentence 1 of the Income Tax Act (EStG). The tax office in whose district you are domiciled or, in the absence of a residence, your habitual residence is responsible. The tax office can issue you with the certificate for a period of no more than three years. By presenting a valid certificate to the recipient of your construction work, this is exempted from the obligation to deduct the tax. The beneficiary has the possibility to obtain certainty about the validity of the exemption certificate of any liability risk by means of an examination. This is done by means of an Internet query with the Federal Central Tax Office using the printed security number.
As a rule, no documents are required, as the tax office has the information to examine the application. Only in cases of business start-up is further documents required if requested by the tax office.
Forms: Application - no Certificate - yes Online procedure possible: Application - no Examination of the certificate - yes Written form required: Application - no Certificate - yes personal appearance necessary: no
You provide construction services in Germany, have appointed a domestic receiving representative and the tax claim does not appear to be endangered from the point of view of the tax office, because you comply with your information obligations in accordance with Section 138 of the Tax Code (AO) and your duty to provide information and cooperate in accordance with Section 90 AO. The competent tax office shall determine whether the above conditions are met.
As a performing entrepreneur, you can apply to the tax office for the exemption certificate for tax deduction for construction services. The application is not bound by any form. The tax office checks whether the conditions for issuing the certificate are met. If the conditions are met, the tax office shall draw up the corresponding certificate. You will usually receive them by post. The certificate is intended for presentation to the recipient of the works and exempts them from the obligation to deduct the tax when using works. Each exemption certificate for the deduction of tax on works is provided with a unique safety number. On the basis of the security number, the client can check the validity of the certificate on the website of the Federal Central Tax Office (BZSt).