The German law determines that if you carry out construction works in the German territory, which means work on real estate, your client is obliged to deduct a withholding tax from your issued invoices unless you have registered at a German tax office and arranged exemption from the withholding tax (Freistellungsbescheinigung). This exemption should be effective no later than the day of invoice payment, so you can start your work and apply for the exemption at the same time.
Exemption from the withholding tax in the construction business – tradesmen
Do you carry out activities in the construction business in Germany?
After you submit the valid exemption, the client will pay out the whole amount, without deduction of a withholding tax from your invoice. In case the client has already deducted the withholding tax, you may apply for its refund, but not before the end of the given calendar year.
Every subject in the whole supply chain needs an exemption from the withholding tax. That means you as a tradesman, as well as all your subcontractors, if you have any, should register. If your subcontractors do not hold exemption from the withholding tax, the German law requires you to deduct a withholding tax from their invoices and transfer it to a German tax office.
If you hold exemption from the withholding tax, the client will pay the whole amount to you, without deduction of the withholding tax from your invoice.
You should apply for this exemption when you start conducting construction works in Germany. This exemption should be effective no later than the day of invoice payment, so you can start your work and apply for the exemption at the same time.
