If your company carries out construction work in Germany, the client is required by law to withhold 15 % of every payment and pay it to the German tax office. It is not a penalty and not a sign of distrust — it is Bauabzugsteuer, a withholding tax introduced in 2002 to counter undeclared work on building sites.
The only thing that prevents it is a valid exemption certificate — the Freistellungsbescheinigung under §48b of the German Income Tax Act.
Who it applies to
It is not just bricklayers. Almost anything that alters a structure or part of it counts as construction work:
- shell construction, earthworks and demolition
- electrical, plumbing, heating and ventilation installations
- fitting windows, doors, floors and cladding
- insulation, façades, roofing
- installing equipment permanently attached to the building
It does not cover design work, site supervision, cleaning or the mere transport of materials.
How long it lasts and what about renewal
The certificate is normally issued for three years, and often for a shorter period on a first application. The tax office responsible is determined by the country in which the company is established.
What matters is that the payment date counts, not the invoice date. If the certificate expires in the meantime, the client will withhold 15 % even on an invoice for work carried out while you still held it. It is worth applying for an extension several weeks in advance.
What to do once tax has been withheld
Withheld tax is not lost — you can apply for a refund. That means a formal application, evidence of the amounts withheld by each client, and a wait measured in months. Obtaining the certificate before you start invoicing works out far cheaper.
The application is submitted in German, and for a first application the tax office usually asks for company registration documents, tax identification numbers and a description of the contracts. If you would rather not handle that, we will do it for you.
