Construction Withholding Tax
Liquidity in construction measures is important for both the client and the developer. Therefore, we would like to explain the most important aspects of construction withholding tax to you shortly and when an exemption is possible.
In order to secure the tax claim, the legislator makes use of various tax deductions. In the case of construction services, this is the so-called construction withholding tax. Entrepreneurs who commission construction services against payment are regularly obliged to subject the remuneration to withholding tax in the amount of 15 % of the payment.
Who is Obliged to Withhold Tax?
In principle, every builder-owner who is also an entrepreneur within the meaning of the Value Added Tax Act is obliged to withhold tax.
When is the Building Withholding Tax Due?
As a rule, the building withholding tax is due with the payment of the fee to the developer. The builder must register the withholding tax with the tax office by the 10th of the following month using a six-page form according to the official form and pay it to the tax office.
The client is obliged to settle the withholding tax with the developer. A copy of the tax return is sufficient.
Under What Conditions is an Exemption From Construction Withholding Tax Possible?
In the case of construction services for which the fee is less than € 5,000, the so-called minor regulation according to § 48 paragraph 2 of the Income Tax Act applies. The threshold of the minor regulation increases to € 15,000 if the client achieves exclusively turnover tax-free turnover from rental activities.
In addition, exemption from withholding tax is only permissible if the property developer can submit an exemption certificate in accordance with § 48b of the Income Tax Act.
Who Receives an Exemption Certificate According to § 48b Income Tax Act?
In principle, domestic or foreign property developers must apply for an exemption certificate, which they must present to the client. The issue is linked to conditions, the property developer,
- must appoint a domestic authorised recipient for the usual place of residence, domicile, registered office or place of management outside Germany and the tax substrate must not appear to be endangered and
- must not have any tax arrears, etc.
The exemption certificate is valid for a maximum of three years unless it is granted for a specific period.
Do you have any questions about building withholding tax, would you like to apply for an exemption certificate or would you like to be comprehensively looked after in your tax matters? We will be happy to help you - make an appointment for a consultation.