FAQ
- What services are subject to tax deduction?
Construction services within the meaning of Section 48, para. 1, clause 3 of the Income Tax Act (EStG). Essentially, this includes all services related to the construction, repair, maintenance, modification or removal of buildings.
- What amount of tax is deducted?
According to Section 48, para. 1, clause 1 of the Income Tax Act, 15% of the consideration is to be deducted. The consideration is the remuneration paid for the construction service plus the statutory VAT.
- Who is obliged to deduct tax?
All traders within the meaning of Section 2 of the VAT Act (UStG) and all legal persons governed by public law for whom construction services are provided by someone established in the Federal Republic of Germany (Section 48, para. 1, clause 1 of the Income Tax Act). The obligation also applies to small businesses pursuant to Section 19 of the VAT Act, farmers and foresters taxed at a flat rate (Section 24 of the VAT Act), and traders whose turnover is tax-exempt. This also includes renting and leasing of property, buildings and parts of buildings.
- Are construction services provided to the non-corporate sector or to private persons subject to tax deduction?
No. Tax is not deducted for construction services provided exclusively for the non-corporate part of a company. The same applies to construction services provided for private purposes to an owner-occupied property.
- Does a de minimis provision apply?
Yes. A minimum limit of €5,000 applies per calendar year and trader providing services. If there is no valid exemption certificate and if the consideration (remuneration) does not exceed the amount of €5,000 in the current calendar year, no tax needs to be deducted. The exemption limit of €5,000 is increased to €15,000 if the recipient of the service is only liable to deduction as a trader because all of his turnover is tax-exempt under Section 4, no. 12, clause 1 of the VAT Act (= tax-exempt rental turnover). If the recipient of the services generates only minimal turnover subject to VAT in addition to tax-free turnover pursuant to Section 4, no. 12, clause 1 of the VAT Act, a total tax-free limit of €5,000 applies.
- How and where do I apply for or extend an exemption certificate for payments for construction services?
N.B. Applications or extension requests cannot be submitted online! They must be made through your local tax office. In this regard, a distinction is drawn between:
- Traders and legal persons governed by public law resident in Germany within the meaning of Section 2 of the VAT Act:
Applications are made informally. Responsibility lies with the tax office in whose district the permanent establishment is domiciled or in whose district the headquarters is domiciled. - Traders resident abroad, and corporations or associations domiciled abroad:
Applications are made informally. Responsibility lies with the competent tax office in the respective country of residence. Please see page 3 of the “Information Leaflet Tax Withholding for Construction Work” for an overview of responsibilities. In some cases, the tax offices with overall responsibility for service providers domiciled abroad provide forms in different languages on their website. The tax office with overall responsibility for a country and its website can be found at http://gemfa.bzst.bund.de/gemfai.exe
The Federal Central Tax Office does not issue exemption certificates.
- Traders and legal persons governed by public law resident in Germany within the meaning of Section 2 of the VAT Act:
- How long is an exemption certificate valid?
- In the case of temporary activity in Germany, the exemption may be granted for a specific order or property (until the work is accepted or until the final payment has been made).
- The exemption certificate may be issued for a specific period not exceeding three years. The exemption certificate is valid from the date on which it is issued.
- Does the validity of the exemption certificate need to be checked before the service provider is paid?
Yes, for liability reasons. Liability on the part of the recipient of the service is excluded if he is in receipt of an exemption certificate which he was entitled to believe was legitimate at the time of providing consideration. This also involves an obligation to check the exemption certificate and to make sure that it carries an official seal and a security number. If a copy is provided, all information must be easily legible.
For documentation purposes, you can print out the result of the online confirmation and file it together with your invoice documents.
- How can the recipient of services check that the exemption certificate is valid?
As a basic principle, the Federal Central Tax Office does not review the validity of exemption certificates pursuant to Section 48b of the Income Tax Act. The Federal Central Tax Office does, however, offer you the possibility of checking that the exemption certificate you have received is valid on its website http://www.bzst.de/ under "Online services" -> Construction industry or at http://eibe.bff-online.de. You will need to register first, however. You can select any user name in compliance with the guidelines. When you have submitted your application, a user account will be set up with which you can check the validity of the exemption certificates. You will need to activate your account first, however. To do this, click on the link you are sent by e-mail. You will then receive another e-mail containing the required access data and can then check the validity of the certificates you have received. After logging in, you will be asked to provide the following information:
1.) Federal state (please select the federal state of the service provider) and
2.) the service provider’s tax number and
3.) the security number stated on the exemption certificate.
If the electronic query does not return any results, please contact the tax office that issued the exemption certificate. They will provide you with further information.
If you do not know the federal state or the competent tax office, you can search for the competent tax office at http://gemfa.bzst.bund.de/gemfai.exe. The respective federal state will also be listed in the search result.
- When does a deduction obligation arise for the recipient of services?
At the time of payment, if the de minimis provision does not apply, or if no valid exemption certificate has been received.
- How and by what date does the deducted withholding tax for construction work need to be reported and deducted?
The tax deduction must be reported to the tax office responsible for the service provider by the 10th day of the month following the payment for the account of the service provider using the official form (Section 48a, paragraph 1 of the Income Tax Act). The forms are available from the tax offices and online (e.g. Finanzverwaltung NRW).
- How is the deducted withholding tax for construction work credited to the service provider?
The service provider’s tax office credits the deducted amount to the tax to be paid by the service provider. If requested to do so, the service provider must submit the accounting documents issued by the recipient of the service within the meaning of Section 48a, paragraph 2 of the Income Tax Act to the tax office.
- When will the withholding tax for construction work be refunded?
Service providers who are resident abroad, or whose company is domiciled abroad (Section 48c, para. 2 of the Income Tax Act), may apply for a refund using the official form. Refunds are conditional upon the service provider not being obliged to submit wage income tax returns, and an assessment for income or corporation tax not coming into consideration.
- Is online confirmation possible with only a tax number or name?
No, this is not possible for reasons of data protection and due to tax secrecy requirements.
- Who can help me if I cannot check the validity of the exemption certificate online, or if the result does not match the certificate I have received?
Please contact the tax office that issued the exemption certificate.
- How can a public body with no tax number gain access to the EIBE portal?
Use our contact form to request further information.
- I am a service provider. What should I do if a client informs me that the validity of my exemption certificate cannot be checked online?
Inform your competent tax office and request that a new exemption certificate be issued and the data passed on to the Federal Central Tax Office.
- I am a recipient of services. What should I do if a service provider does not submit an exemption certificate?
The service provider is obliged to provide you with a legible copy of the exemption certificate. If he fails to meet this obligation, it must be assumed that he does not possess a valid exemption certificate. As a result, the recipient of services is obliged to deduct the withholding tax for construction work and to inform the service provider’s competent tax office (observing any de minimis provision).