In depth · Construction
Construction withholding tax: 15 per cent when the certificate is missing.
A business paying for construction work in Germany has to withhold and remit 15 per cent of the consideration — unless a valid exemption certificate is in place. It is the customer who is liable for the deduction, not the contractor.
The contractor does the work, the customer carries the liability.
The tax deduction on construction work has secured the tax claims against construction businesses since 2002 (§§ 48 bis 48d EStG). The duty falls not on the supplier but on the recipient: they withhold 15 per cent, file and remit.
The basis of assessment is the consideration, and that means the fee including VAT (§ 48 Abs. 3 EStG). The calculation therefore runs on the gross amount — a point at which too little is regularly withheld in practice.
The deduction falls away in two cases only: an exemption certificate under § 48b EStG is valid at the time of payment, or the payments to that contractor stay below the threshold for the calendar year.
For construction businesses based abroad there is a further point: a double taxation treaty does not exempt anyone from the deduction (§ 48d EStG). Without a certificate the tax is withheld — and the money comes back only through crediting or a refund claim.
The essentials at a glance
- 15 per cent of the gross amountThe basis is the fee including VAT. No solidarity surcharge is levied on the amount deducted.
- The certificate decidesIt has to be valid at the time of payment and runs for three years at most. Produced afterwards, it no longer helps.
- Liability sits with the customerAnyone who remits nothing or too little is liable for the shortfall — § 48a Abs. 3 EStG.
Who is caught, and what counts
Obliged to deduct
- Every business within the meaning of § 2 UStG for whom someone carries out construction work in Germany
- Including small businesses under § 19 UStG, flat-rate taxed farmers and foresters, and businesses making only exempt supplies
- Legal persons governed by public law
- The main contractor towards their own subcontractors
- Not caught: anyone letting no more than two dwellings — for construction work on those dwellings
What counts as construction work
- Any work serving the creation, repair, maintenance, alteration or removal of structures
- The concept of a structure is to be read widely: not only buildings but any installation of building materials joined to the ground
- Contracts for work and materials, not only contracts for work
- Also a one-off piece of construction work by a business that otherwise has nothing to do with construction
- Ancillary supplies follow the treatment of the main supply
In short: the deduction turns not on what you do but on what you pay for — and on whether a valid certificate is in place at the moment of payment.
How the deduction runs
- 1CheckIs there a valid exemption certificate? The recipient checks that it is legible and carries an official seal and a security number — and can have its validity confirmed by the Bundeszentralamt für Steuern or by the issuing Finanzamt.
- 2WithholdWithout a certificate and above the threshold, 15 per cent of every payment is withheld — including instalments and payments on account, not only the final invoice.
- 3File and remitBy the tenth day after the end of the month in which payment was made — electronically through ELSTER since 1 January 2025, to the Finanzamt competent for the supplier.
- 4Account to the supplierThe recipient accounts to the supplier in writing: name and address, invoice date and amount, date of payment, the amount deducted and the Finanzamt. The document is not a tax certificate.
- 5CreditAt the supplier the amount is credited in order against wage tax, prepayments, the annual tax and their own deducted amounts. Whatever remains is refunded.
Amounts and deadlines
| Item | Value | Source |
|---|---|---|
| Tax deduction | 15 per cent of the consideration — the fee including VAT | § 48 Abs. 1 and Abs. 3 EStG |
| Solidarity surcharge | not levied on the amount deducted | Ministry guidance on the tax deduction for construction work |
| Threshold, standard case | 5,000 euros per contractor and calendar year | § 48 Abs. 2 Satz 1 Nr. 2 EStG |
| Threshold where only exempt letting supplies are made | 15,000 euros per contractor and calendar year | § 48 Abs. 2 Satz 1 Nr. 1 EStG |
| Filing and remittance | by the tenth day after the end of the month of payment, electronically through ELSTER since 1 January 2025 | § 48a Abs. 1 EStG |
| Validity of the exemption certificate | three years at most, shorter where the Finanzamt so determines | § 48b Abs. 2 EStG |
| Supplier's refund claim | by the end of the second calendar year following the year of filing | § 48c Abs. 2 EStG |
What applies on top for construction businesses based abroad
For businesses whose seat or place of management is abroad, one office has central local competence — and that extends to the wage tax deduction procedure for the employees working there.
| Question | Answer | Source |
|---|---|---|
| Which Finanzamt is competent? | The one competent for VAT purposes — for businesses from France and Monaco the Finanzamt Offenburg | § 20a Abs. 1 AO, § 1 Nr. 6 UStZustV |
| Does a double taxation treaty exempt from the deduction? | No. Withholding, remittance and filing apply notwithstanding the treaty; the supplier's refund claim is unaffected | § 48d Abs. 1 EStG |
| What else does the Finanzamt require for the exemption? | An agent for service in Germany and evidence of tax residence by certificate of the foreign tax authority | § 48b Abs. 1 EStG |
| How does the amount withheld come back? | Through crediting; any remainder is refunded on application by the Finanzamt competent under § 20a AO | § 48c EStG |
Working together
What FRADECO takes on.
- Obtaining the exemptionThe application for an exemption certificate under § 48b EStG including the residence certificate and deadline monitoring for the follow-on certificate. For businesses based abroad we act as the agent for service in Germany.
- CheckingCertificates produced to you, against the official seal and the security number, with an electronic query to the Bundeszentralamt für Steuern. The exclusion of liability turns on that check.
- RemittingFiling and remittance through ELSTER by the tenth day, the written account to the supplier under § 48a Abs. 2 EStG, and the crediting and refund claim under § 48c EStG.
The release of payment of course remains with you. So that it can be made with nothing left open, we check the exemption certificate before the invoice falls due.
Two deadlines that belong together. Filing and remittance are due by the tenth day after the end of the month in which payment was made (§ 48a Abs. 1 EStG) — electronically through ELSTER since 1 January 2025. The exemption certificate in turn has to be valid at the time of payment (§ 48 Abs. 2 EStG): a certificate produced later does not cure a deduction that was not made.
- Legislation: § 48 EStG · § 48a EStG · § 48b EStG · § 48c EStG · § 48d EStG · § 20a AO · § 1 UStZustV
- Ministry circular of 19 July 2022, GZ IV C 8 - S 2272/19/10003 :002 — revised guidance on the tax deduction for construction work; it replaces the circular of 27 December 2002, GZ IV A 5 - S 2272 - 1/02, BStBl 2002 I S. 1399
- Checking exemption certificates: Bundeszentralamt für Steuern — Bauabzugsteuer
- Case law on the wide reading of “structure”: BAG vom 21.01.1976, 4 AZR 71/75 · BFH vom 07.11.2019, I R 46/17
As at 22 August 2026. This page reflects the law as at that date and does not replace a review of the individual case.
Frequently asked
About the deduction and the exemption.
We are not a construction business. Does this still affect us?
Yes, as soon as you receive construction work for your business as a business within the meaning of § 2 UStG. Your own sector makes no difference.
It expressly covers small businesses under § 19 UStG, flat-rate taxed farmers and foresters, and businesses that make only exempt supplies.
How much is deducted, and on what basis?
15 per cent of the consideration. The consideration is the fee including VAT (§ 48 Abs. 3 EStG) — so the calculation runs on the gross amount, not the net.
No solidarity surcharge is levied on the amount deducted.
When does the deduction fall away?
In two cases: an exemption certificate under § 48b EStG is valid at the time of payment — or the consideration to that contractor is not expected to exceed 5,000 euros in the current calendar year.
The threshold is 15,000 euros where the recipient makes only exempt letting supplies under § 4 Nr. 12 Satz 1 UStG.
We make the application for the exemption certificate for you — including the residence certificate and the deadline monitoring for the follow-on certificate.
When does the exemption certificate have to be in place?
At the time of the consideration, that is, of payment — not when the contract is signed and not when the invoice is issued.
That is the most common mistake in practice: anyone who pays first and files the certificate afterwards has already missed the deduction. A certificate produced later does not cure it.
How do we check whether a certificate is valid?
First the certificate itself: it has to be legible, carry an official seal and show a security number.
The Bundeszentralamt für Steuern confirms the validity through an electronic query; for that you need the federal state, the supplier's tax number and the security number. Alternatively you ask the issuing Finanzamt. The check is the reason liability falls away: it protects only those entitled to rely on the certificate being lawful.
We carry out that check and document it — so that the exclusion of liability can be evidenced if it comes to it.
Our subcontractor is based abroad. Does the double taxation treaty help?
No, not for the deduction. § 48d Abs. 1 EStG expressly provides that withholding, remittance and filing apply notwithstanding the treaty.
The supplier's refund claim is unaffected; it is made by an application under § 48c Abs. 2 EStG. The better route in practice is the exemption certificate obtained in advance.
For businesses based abroad we also act as the agent for service in Germany that the Finanzamt requires for the exemption.
What happens if we forget the deduction?
The recipient is liable for the amount not remitted or remitted short (§ 48a Abs. 3 EStG). Liability is excluded where an exemption certificate was in place at the time of the consideration and its lawfulness could be relied on.
Conversely, a proper deduction also has a relieving side: where the recipient has filed and remitted the amount, § 160 Abs. 1 Satz 1 AO and § 42d Abs. 6 and 8 EStG and § 50a Abs. 7 EStG do not apply (§ 48 Abs. 4 EStG).
We handle the filing and remittance through ELSTER, on time by the tenth day — together with the written account to the supplier.
How does the contractor get the money back?
Crediting runs in order: against the wage tax filed, against prepayments of income or corporate tax, against the annual tax of the year the work was done, and finally against their own deducted amounts (§ 48c Abs. 1 EStG).
Where the seat is abroad, the Finanzamt competent under § 20a AO refunds on application. The application has to be made by the end of the second calendar year following the year of filing.
We handle the crediting and the refund claim; more on support for construction and installation projects under Advisory & Cross-border.
Goes with this
What has to be settled alongside the deduction on a building site.
A construction project in Germany?
Sort the exemption out before the first payment goes.
We apply for the exemption certificate with the competent Finanzamt and provide the agent for service and the residence certificate — and conversely we handle the filing and the account to the supplier where you have to deduct yourself.
- FRADECO GmbH · Bonn
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Simrockstr. 92 · 53619 Rheinbreitbach
+49 2224 123 14 83 - FRADECO SAS · Paris
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50, Rue Chapon · 75003 Paris
+33 1 40 09 13 77