We help compile documents for a Freistellungsbescheinigung and for assessment of whether withheld construction tax can be credited or refunded. Optima Prime organises documents, communication and administrative support. Individual tax advice, preparation of German tax returns and representation in tax matters are provided by appropriately authorised partners.
What is Bauabzugsteuer?
Bauabzugsteuer, the German construction tax, derives from the German Income Tax Act (Einkommensteuergesetz - EStG). Under § 48 EStG, this tax amounts to 15% of the gross value of the remuneration and is mandatorily withheld by the German client (Finanzamt - the German tax office) from the sum due to the contractor for construction services performed, and then remitted to the account of the competent tax office.
The mechanism is intended to limit undeclared activity and support tax compliance in construction. We prepare withholding and exemption records for assessment by an authorised partner.
Exemption from withholding - Freistellungsbescheinigung
If the contractor - as a foreign business - presents a valid Freistellungsbescheinigung (certificate of exemption from the obligation to withhold tax at source), the German client may pay out the remuneration in full, without withholding the 15%.
In the absence of such a certificate, the client is legally obliged to withhold 15% tax at source and remit it to the tax office, in accordance with § 48d EStG. This results in only 85% of the invoice value being paid out, which directly affects the contractor's cash flow.
Application to the competent Finanzamt
An application for a Freistellungsbescheinigung is made to the competent Finanzamt. The BZSt provides information and a facility for checking certificates.
We help assemble documents and coordinate the process. Tax assessment, advice and representation are provided by an authorised tax partner. The authority decides whether to issue the certificate.
Refund of withheld Bauabzugsteuer — how to recover the 15%
If your German client has already withheld the 15% Bauabzugsteuer, that amount is not lost. Under § 48c EStG the withheld tax is credited against the contractor's tax liabilities in Germany, and any surplus can — upon application — be refunded by the German tax office.
Get in touch — we will prepare documents for an authorised tax partner to assess the available credit or refund procedure.
The scope of our service
- Compiling construction services for an authorised partner to assess withholding obligations
- Assembling documents for a Freistellungsbescheinigung application
- Coordinating the application to the competent Finanzamt
- Organising correspondence and passing on issued certificates
- Preparing documents for assessment of a possible tax credit or refund
Describe your construction work and the documents received. We will discuss support with the certificate or withheld tax.