Construction withholding tax for construction services and exemption certificate in accordance with § 48b EStG (Income Tax Act)
On this occasion we would like to use this e-mail to provide you with overview-like information on construction withholding tax and exemption certificates in accordance with § 48b EStG and, in particular, to point out in concrete terms the requirements for granting them.
According to § 48 EStG, entrepreneurial recipients of construction services carried out in Germany are obliged to withhold 15% of the invoice amount to be paid to the entrepreneur performing the service as a tax deduction and to pay it to the tax office responsible for the entrepreneur performing the service if this entrepreneur cannot submit a valid exemption certificate according to § 48b EStG. The exemption certificate thus exempts the service recipient from the obligation to withhold tax. The requirement for this is that the exemption certificate is available to the service recipient at the latest at the time of payment. This also applies to partial payments, set-offs and claim attachments.
Exceptions to the withholding obligation
The recipient may also refrain from withholding tax, independent of the existence of an exemption certificate, if
1. the beneficiary does not rent more than two flats and the construction services for these flats are obtained or,
2. the beneficiary exclusively carries out tax-free sales in accordance with § 4 No. 12 UStG (VAT Act) and the consideration in the current calendar year is not expected to exceed € 15,000.00 per contractor, or,
3. the beneficiary does not exclusively carry out tax-free sales in accordance with § 4 No. 12 UStG and the consideration in the current calendar year is not expected to exceed € 5,000.00 per contractor.
Requirements for the granting of an exemption certificate
The tax office must issue the exemption certificate if the following requirements are fulfilled:
1. a domestic receiving agent has been appointed (this may normally be dispensed with if the service provider is resident in Germany) and
2. the tax claim is not endangered because the service provider duly fulfils his tax obligations in Germany.
The tax authorities may refuse to issue an exemption certificate if
· there are sustainable tax arrears,
· incorrect information was given in the tax returns,
· tax returns have repeatedly not been submitted or have not been submitted in a timely manner.
The entrepreneur performing the service can apply for an exemption certificate from the tax office responsible for him. The application is form-free.
Validity of the exemption certificate
The exemption certificate is issued for a maximum period of 3 years. Under certain circumstances, it may be issued with a shorter validity period or for a specific order.
The exemption certificate is valid from the date of issue. The service provider can apply for a new exemption certificate six months before expiry, which is fully linked to the existing exemption certificate.
The duration of the exemption certificate is specified in the certificate.
If you have any comments, questions or difficulties with the implementation - please contact us!