German Withholding Taxes for Construction Services (Bauabzugsteuer)
In Germany there is a withholding tax for construction services which was introduced to curb illegal activity in the construction industry. Accordingly, a 15 % tax deduction of the contract value for construction services is withheld.
Construction services include all services which are used for the production, repair, modification or removal of buildings/structure and which have an effect on the substance of the construction. The employer must withhold 15 % of the subcontractor’s contract value when appointing German or foreign subcontractors for building on German ground.
Exemption from the tax deduction via a so-called notice of non-liability can be requested at the responsible German tax office. On applying for the notice of non-liability, the subcontractor must verify that he has no tax obligations in Germany. Additionally, the withholding tax for construction services can also be refunded in arrears under the same requirements from the tax office.
Summary of the most important points
- The so-called withholding tax for construction services applies to foreign construction companies irrespective of VAT.
- The withholding tax for construction services amounts to 15 % of the contract value for the subcontractor.
- Possible exemption or refund of the withholding tax for construction services.