The repair to the rented house has been completed and the invoice needs to be paid. Besides scope of work and due date, another question can arise: as the client, do you have to remit part of the invoice on behalf of the construction company to the tax office, instead of transferring the full amount to the company?
This article deals with the German withholding tax on construction services. It does not examine any specific invoice or personal tax liability. The VAT treatment of the invoice and the civil-law due date remain to be clarified separately. A withholding is also not a freely available price discount.
“I rent privately” does not answer the entrepreneur question
Section 48 EStG links, for domestic construction services among other things, to entrepreneurs within the meaning of Section 2 UStG as recipients of the service. The VAT-related concept of entrepreneur is based on an independent, sustained income-generating activity. [ABZUG] [UNTERNEHMER]
The BZSt explicitly explains that entrepreneurs with exclusively VAT-exempt rental revenues can also be affected. What matters is a construction service related to the business. [MERKBLATT] The absence of a trade name or the statement “I do not charge VAT on my residential rent” therefore does not resolve this assessment.
First determine who placed the order, for which property and usage the work was carried out, and who is the taxable recipient of the service. For work on common property, mixed owner-occupation or multiple parties involved, have the actual allocation examined. The article does not mean that every invoice to an apartment owner automatically becomes their personal withholding case.
Check three exceptions and limits before the transfer
Number of flats: If the recipient of the service rents out no more than two flats, Section 48(1) excludes construction services for those flats from the withholding obligation there. [ABZUG] This rule is not extended into a general exemption for any other construction contracts of the same person. Conversely, more than two flats does not mean that the other assessment steps can be omitted.
The certificate: A valid exemption certificate (Freistellungsbescheinigung) at the time of the consideration can make the withholding unnecessary. A merely announced document or a reminder of a previous certificate is not equivalent. [ABZUG]
The annual threshold: Section 48 names €15.000 if the recipient of the service exclusively performs VAT-exempt supplies under Section 4 No. 12 sentence 1 UStG, and €5,000 in other cases. [ABZUG] The BZSt explains the aggregation of construction services already provided and expected to be provided by the same contractor for the same recipient in the calendar year. [MERKBLATT] Looking only at the amount on the single invoice currently open can therefore be insufficient.
Record the applicable course of action so it can be followed. If prerequisites, annual totals or allocation of services are unclear, have them clarified for tax purposes before making the payment. The thresholds are not amounts that may simply be deducted from the calculation base where a withholding obligation exists.
Assign an exemption certificate concretely
Section 48b requires, among other things, identity of the service provider, period of validity, scope and the issuing tax office. A certificate limited to specific construction services must also match this contract. The statute provides for an electronic inquiry by the BZSt about stored certificates. [BESCHEINIGUNG]
Our editorial recommendation: link the presented version to the order, the company and the planned payment date. Use the prescribed verification route or clarify doubts with the competent tax office. The BZSt information sheet describes both the electronic check and an inquiry at the stated tax office. [MERKBLATT] A mere confirmation by the invoice issuer does not replace this check.
Keep the presented certificate and the result of the check together with the payment records. This article does not perform a validity query and does not confirm any document. For multiple payments, the validity must match the actual transactions.
Hypothetical case: €18.000 remains €18.000 in total
For the following learning example, only the following assumptions are already clarified: there is a recorded construction service for the rented property of an affected recipient of the service, the two-flats exception does not apply, no valid exemption certificate exists and the relevant annual threshold has been exceeded. The consideration including the VAT arising in the specific case amounts to €18.000.
The statutory withholding rate is 15 percent of the consideration. [ABZUG] In the example 18.000 × 15 % = 2.700 euro tax withholding and 18.000 − 2.700 = 15.300 euro remaining payment to the company. The 2.700 euro are remitted to the competent tax office on behalf of the company.
- To the construction company: 15.300 euro
- Tax withheld on behalf of the company: 2.700 euro
- Total model cash requirement: 18.000 euro
The payment is split, not 2.700 euro cheaper. If you earmarked the retained amount at the same time as a repair reserve, it would be missing for the remittance. Equally, “18.000 euro to the company plus another 2.700 euro as a regular payment plan” would not be a correct representation of this assumed case.
Registration, remittance and accounting are part of it
§ 48a provides for electronic registration up to the tenth day after the end of the payment month and for the due date of the withheld amount on the tenth day after the end of the registration period. The recipient of the remittance is the tax office responsible for the service provider. [VERFAHREN] Do not confuse it with your own residence tax office. You clarify the actual deadline and method of payment for your case; no personal deadline calendar is created here.
The BZSt information sheet explains that advance payments and instalments must also be taken into account. [MERKBLATT] Therefore do not postpone the tax question unchecked until the final invoice. Ask your tax adviser in good time who prepares and transmits the registration and monitors the remittance. No form is researched or completed here.
The withholding made must also be accounted for with the service provider. § 48a specifies, among other things, invoice and payment data, the amount withheld and the tax office. [VERFAHREN] A withholding recorded only in your internal spreadsheet does not close the matter.
If the full invoice has already been paid
§ 48a governs a liability of the recipient of services for amounts not remitted or remitted too low, as well as limited protection where a certificate exists on whose legitimacy reliance was permitted. [VERFAHREN] A full payment already made to the company therefore does not automatically prove that the tax matter is resolved.
Have the specific error case examined by an expert immediately, rather than independently reducing the next other invoice or transferring an arbitrary second amount. Provide the order, usage, invoices, all payments and any certificates in full. A clean conclusion explains why an amount was or was not withheld, which amounts actually went where and which documents support the result.