Solar installation subcontractor in Germany: registration, SOKA-BAU, tax and the subcontract

What must a foreign company do before its first day of installation work in Germany?

An employer based outside Germany must register its workers with the customs authorities, in German, before each contract begins (sec. 16(1) sentence 1 of the Minimum Wage Act, Mindestlohngesetz, MiLoG, in conjunction with sec. 2a(1) no. 1 of the Act to Combat Undeclared Work, Schwarzarbeitsbekämpfungsgesetz, SchwarzArbG). It must also pay at least the minimum wage, record working time and make sure its workers carry identity documents.

Registration is filed through the customs portal Meldeportal-Mindestlohn (sec. 1(1) of the Minimum Wage Reporting Regulation, Mindestlohnmeldeverordnung, MiLoMeldV). It includes the workers’ details, the start and expected duration of the work, the place of work, where documents are kept in Germany, an authorised recipient with a German address and the client (sec. 16(1) sentence 2 MiLoG). Changes must be reported without delay (sec. 16(1) sentence 3 MiLoG).

Where crews work before 6 a.m. or after 10 p.m., in shifts or at several sites on the same day, a deployment plan (Einsatzplanung) covering up to three months replaces the standard registration (sec. 2(1) and (2) MiLoMeldV).

Since 1 January 2026 the minimum wage has been EUR 13.90 gross per hour, rising to EUR 14.60 on 1 January 2027 (sec. 1 of the Fifth Minimum Wage Adjustment Regulation, MiLoV5). It applies equally to employers based abroad (sec. 20 MiLoG). Example: a fitter who works 180 hours on a solar farm in a month must receive at least EUR 2,502 gross.

The start, end and duration of daily work must be recorded by the end of the seventh calendar day after the work and kept for at least two years (sec. 17(1) sentence 1 MiLoG). Documents for checking the minimum wage must be kept in Germany, in German, for the whole contract and, on request, at the place of work (sec. 17(2) MiLoG).

Each worker must carry an identity card or passport, and the employer must give written notice of this beforehand and keep that notice (sec. 2a(1) no. 1 and (2) SchwarzArbG). An A1 certificate, issued in Poland by ZUS, only confirms that the worker stays in the home social security system if the posting is not expected to exceed 24 months and does not replace another posted person (Article 12(1) of Regulation (EC) No 883/2004). See our guide to posting workers to Germany.

Failing to register can cost up to EUR 30,000, failing to record working time up to EUR 50,000 and not paying the minimum wage up to EUR 500,000 (sec. 21(1) nos. 6, 8 and 13 and (3) MiLoG). A worker without identity documents risks a fine of up to EUR 5,000 (sec. 8(2) no. 1 and (5) SchwarzArbG).

Does solar installation fall under SOKA-BAU?

Not automatically. What matters is which work takes up most of the working time in the business and, for solar installation, who directs and supervises it. In its judgment of 27 April 2022 – 10 AZR 263/19 the Federal Labour Court (Bundesarbeitsgericht, BAG) treated a business installing PV systems under master electricians as an electrical installation business and dismissed SOKA-BAU’s appeal on points of law concerning EUR 102,423.13 in contributions.

The collective agreement on the social fund procedure in construction (Tarifvertrag über das Sozialkassenverfahren im Baugewerbe, known as VTV) covers businesses that mainly carry out construction work (sec. 1(2) Abschnitt II and VI VTV). It excludes electrical installation businesses, among others, unless they perform work listed in Abschnitt IV or V, such as drywall and prefabricated assembly (sec. 1(2) Abschnitt VII no. 12 and Abschnitt V no. 37 VTV).

In the BAG case, substructures took about 22 % of working time, modules 45 %, DC cabling 9 % and inverters, AC cabling and grid connection 13 %. The court classed this work as both construction and electrical installation. At most the substructures could count as prefabricated assembly, because the modules were mounted together with the cabling under DIN VDE 0100 and uniform tasks may not be artificially split.

„Die Abgrenzung richtet sich insbesondere danach, ob die ‚Sowohl-als-auch-Tätigkeiten’ von Fachleuten des ausgenommenen Gewerks angeleitet oder verrichtet werden. Werden sie von Fachleuten eines Baugewerbes oder von ungelernten Arbeitskräften angeleitet bzw. durchgeführt, ist regelmäßig eine Ausnahme vom Geltungsbereich der VTV abzulehnen.”

“The distinction depends in particular on whether the dual-character activities are directed or carried out by specialists of the excluded trade. If they are directed or carried out by construction specialists or unskilled workers, an exception from the scope of the VTV is as a rule to be rejected.”

BAG, judgment of 27 April 2022 – 10 AZR 263/19, para. 34 – our translation

For an installation company, the qualifications of foremen and supervisors, the allocation of tasks in the contract and the time records therefore matter. A crew that mainly drives piles and assembles racking without electrical supervision has weaker arguments for exclusion than electricians mounting modules together with the cabling. See who falls under SOKA-BAU.

If the business falls under the VTV, an employer based abroad pays contributions to SOKA-BAU as the joint institution of the parties (sec. 8(1) of the Posted Workers Act, Arbeitnehmer-Entsendegesetz, AEntG). According to SOKA-BAU, the holiday fund contribution has been 14.7 % of gross wages since 1 July 2026, down from 15.1 % (sec. 15(1) sentence 2 VTV as amended on 22 May 2026). Example: on monthly gross wages of EUR 40,000 that is EUR 5,880.

What is the general contractor liable for, and what does it mean for the subcontractor?

A general contractor that passes installation work to a subcontractor is liable, like a guarantor without the defence of prior enforcement, for the net minimum wage of the workers down the subcontracting chain and for their SOKA-BAU contributions (sec. 14 sentences 1 and 2 of the Posted Workers Act, Arbeitnehmer-Entsendegesetz, AEntG, and sec. 13 of the Minimum Wage Act, MiLoG). That is why it asks subcontractors for declarations, documents and security.

Not every client is liable. In its judgment of 16 October 2019 – 5 AZR 241/18 the BAG read the term “contractor” narrowly: liability applies to a business that has itself undertaken to perform the work and passes that obligation on to a subcontractor.

„Die in § 14 AEntG angeordnete Bürgenhaftung verlangt eine besondere Verantwortungsbeziehung zwischen Auftraggeber und Nachunternehmer. Eine solche liegt nicht vor, wenn ein Bauherr den Auftrag zur Errichtung eines Gebäudes an einen Generalunternehmer vergibt, um das zu errichtende Gebäude zu vermieten und zu verwalten.”

“The guarantor liability imposed by sec. 14 AEntG requires a special relationship of responsibility between the client and the subcontractor. There is no such relationship where a building owner awards a general contractor the contract to erect a building in order to let and manage that building.”

BAG, judgment of 16 October 2019 – 5 AZR 241/18, headnote – our translation

On a solar farm this typically means the EPC contractor who passes installation on. An investor building a farm for its own operation resembles the building owner in that case, but that constellation was not decided.

In construction there is also liability for social security contributions. A construction business that commissions construction work is liable as a guarantor for the subcontractor’s contributions, including those owed to foreign social security institutions (sec. 28e(3a) sentences 1 and 2 of Social Code Book IV, SGB IV). This applies from an estimated total value of EUR 275,000 for all construction work commissioned for one structure (sec. 28e(3d) SGB IV) and covers accident insurance contributions (sec. 150(3) of Social Code Book VII, SGB VII).

The general contractor escapes this liability if it proves that, without fault, it could assume the subcontractor was paying (sec. 28e(3b) sentence 1 SGB IV). Fault is excluded by a pre-qualification of the subcontractor or an uninterrupted series of clearance certificates (Unbedenklichkeitsbescheinigungen) for the contract period (sec. 28e(3b) sentence 2 and (3f) SGB IV). Hence the document lists, deadlines and payment retention clauses in subcontracts.

The client also risks a fine of up to EUR 500,000 if it has substantial work done by a subcontractor that it knows, or negligently does not know, fails to pay the minimum wage (sec. 21(2) and (3) MiLoG). For the subcontractor, complete paperwork is therefore a practical condition of being paid on time.

Do solar installers need a Freistellungsbescheinigung in Germany?

Yes, unless the subcontractor accepts that the general contractor withholds 15 % from every payment. A business client must withhold tax from payments for construction work in Germany unless it holds an exemption certificate (Freistellungsbescheinigung) valid at the time of payment or annual payments will, as a rule, not exceed EUR 5,000 (sec. 48(1) sentence 1 and (2) of the Income Tax Act, Einkommensteuergesetz, EStG).

Construction work covers all services that serve the creation, repair, maintenance, alteration or removal of structures (sec. 48(1) sentence 3 EStG). In its judgment of 7 November 2019 – I R 46/17 the Federal Fiscal Court (Bundesfinanzhof, BFH) held that the withholding can also apply to building a ground-mounted solar farm, because “structure” is read broadly for this provision.

The Federal Ministry of Finance treats installing a PV system on a building as construction work (BMF letter of 19 July 2022 – IV C 8 – S 2272/19/10003 :002, para. 4). The letter does not deal separately with partial works on a farm, such as pile driving, mounting tables and modules, or cabling, but the statutory wording “serve the creation” supports including them. For instalments the certificate must be in place before each payment (para. 42).

The withholding is calculated on the price plus VAT, even where the customer accounts for the VAT (sec. 48(3) EStG, BMF letter of 19 July 2022, para. 79). Example: a Polish subcontractor invoices module installation at EUR 400,000 net without VAT. Without a certificate the general contractor pays EUR 71,400 to the tax office (15 % of EUR 476,000) and transfers EUR 328,600. The amount is credited against German taxes or refunded on application (sec. 48c(1) and (2) EStG).

A Polish company applies to the tax office set by the first letter of its name: A–G Finanzamt Hameln-Holzminden, H–Ł Oranienburg, M–R Cottbus, S–Ż Nördlingen (sec. 20a(1) of the Fiscal Code, Abgabenordnung, AO, with sec. 1(1) no. 20 UStZustV). An authorised recipient in Germany is not required of EU companies (BMF letter of 19 July 2022, para. 28), although sec. 48b(1) sentence 1 EStG mentions one. More on the German construction withholding tax.

Who accounts for VAT on solar installation work in Germany?

For installation work for a general contractor, the customer usually accounts for VAT, not the subcontractor. Services connected with land, including construction work, are supplied where the land is located (sec. 3a(3) no. 1(c) of the VAT Act, Umsatzsteuergesetz, UStG), so installation on a German solar farm is taxable in Germany even if a Polish company invoices it.

Where the subcontractor is established abroad, the customer owes the VAT if it is a business or a legal person (sec. 13b(2) no. 1 and (5) sentence 1 UStG), whether or not it performs construction work itself. A company is established abroad if it has no registered office, management or permanent establishment (Betriebsstätte) in Germany, and a German establishment not involved in the supply does not change this (sec. 13b(7) sentences 1 and 3 UStG).

A subcontractor established in Germany invoices without VAT only if the customer itself regularly performs construction work (sec. 13b(2) no. 4 sentence 1 and (5) sentence 2 UStG). Evidence is a tax office certificate (form USt 1 TG) valid for up to three years, and the authorities apply a threshold of 10 % of worldwide turnover (UStAE para. 13b.3(2) sentence 1). They treat PV systems on buildings and farms permanently fixed to the ground as construction work (UStAE para. 13b.2(5) no. 11).

A reverse-charge invoice must state “Steuerschuldnerschaft des Leistungsempfängers” and show no VAT (sec. 14a(5) UStG). The 0 % rate under sec. 12(3) UStG concerns supplies and installation for operators of systems on or near residential and public-interest buildings, so a ground-mounted farm needs a separate assessment. These are general principles, and registration, refunds and filings in a specific case require a tax adviser (Steuerberater).

What should a solar installation subcontract include?

A subcontract should define scope and interfaces, measurement and payment, flowed-down obligations, compliance documents, security and contractual penalties (Vertragsstrafen). Most disputes come from gaps at the interfaces and from clauses that shift the general contractor’s risks onto the subcontractor.

Describe the scope by farm element: piles, racking, modules, DC cabling, inverters, cable routes, earthing, testing and documentation. For unit prices, define the unit (table, module, metre of cable, kWp), joint measurement (Aufmaß) and who provides materials, equipment and access. Accept flow-down obligations only as far as you know them from attached extracts of the main contract.

The German Civil Code (Bürgerliches Gesetzbuch, BGB) protects the subcontractor on payment: remuneration for work the general contractor has promised to the owner falls due at the latest when the general contractor has been paid for it or the owner has accepted it (sec. 641(2) sentence 1 nos. 1 and 2 BGB). A pay-when-paid clause reverses this mechanism and shifts the owner’s insolvency risk onto the subcontractor.

In standard terms prepared for multiple contracts (sec. 305(1) BGB), such a clause is subject to review under sec. 307(1) and (2) no. 1 BGB. A payment period of more than 60 days after receipt of the work or the invoice is effective only if expressly agreed and not grossly unfair to the creditor (sec. 271a(1) BGB). Renegotiating the clause before signing is better than relying on its invalidity later.

Under a construction contract (Bauvertrag, sec. 650a(1) BGB) the subcontractor may demand security for unpaid remuneration plus 10 % for ancillary claims, and the contract cannot exclude this right (sec. 650f(1) sentence 1 and (7) BGB). If no security is provided within a reasonable period, the subcontractor may stop work or terminate (sec. 650f(5) sentence 1 BGB).

Whether a solar farm is a structure (Bauwerk) must be assessed for each project. The Federal Court of Justice (Bundesgerichtshof, BGH) treats technical installations as structures if they are firmly connected to the ground, even by their own weight, and intended for permanent use (judgment of 2 June 2016 – VII ZR 348/13, para. 29). For a farm on driven piles, these criteria point towards that classification.

In a construction contract, a delay penalty in the client’s standard terms is invalid if its cap exceeds 5 % of the contract sum (BGH, default judgment, Versäumnisurteil, of 23 January 2003 – VII ZR 210/01, headnote b). Under unit prices the cap is measured against the correct final account sum (Abrechnungssumme), not the sum in the letter of award (BGH, judgment of 15 February 2024 – VII ZR 42/22, paras. 40–41).

Example: contract sum EUR 500,000, final account EUR 300,000. A 5 % penalty on the contract sum is EUR 25,000, about 8.3 % of the actual price. A merchant (Kaufmann) cannot ask the court to reduce a penalty (sec. 348 of the Commercial Code, Handelsgesetzbuch, HGB), and an individually negotiated clause is not a standard term (sec. 305(1) sentence 3 BGB), so the cap must be negotiated. We review subcontracts as part of our legal services for solar farm contractors.

How should you prepare for a customs inspection on a solar farm site?

An inspection by the Financial Control of Undeclared Work (Finanzkontrolle Schwarzarbeit, FKS) can come unannounced, so preparation has to be permanent. Every worker should carry identification, the site manager should know the registration number and where documents are kept, and time records and payroll should be available in German.

Customs checks, among other things, compliance with the minimum wage and posted-worker conditions (sec. 2(1) sentence 1 no. 6 of the Act to Combat Undeclared Work, Schwarzarbeitsbekämpfungsgesetz, SchwarzArbG). During working hours officers may enter the land and business premises of employers and clients, except homes, question the people working there and inspect documents (sec. 3(1) SchwarzArbG). They may check identity (sec. 3(3) SchwarzArbG) and take copies of documents without consent (sec. 4(1a) no. 2 SchwarzArbG).

Employers, workers and clients must tolerate the inspection and cooperate, in particular by giving relevant information and producing documents (sec. 5(1) sentence 1 no. 1 SchwarzArbG). Answers that would expose the person or a close relative to prosecution for a criminal or administrative offence may be refused (sec. 5(1) SchwarzArbG). Failing to tolerate the inspection or to cooperate can cost up to EUR 30,000 (sec. 8(2) no. 3(a) and (5) SchwarzArbG).

In practice, appoint a German-speaking contact person on site and keep a daily attendance list that matches the registration. Answer factual questions calmly, refer contract and invoicing questions to the documents and the responsible person in the company, and note afterwards who was questioned and which copies were taken. If proceedings are opened, speak to a lawyer before giving written statements.

Frequently asked questions

Is an A1 certificate enough for a Polish company to install solar panels in Germany?
No. The A1 only confirms that the workers remain in the home social security system for postings of up to 24 months (Article 12(1) of Regulation (EC) No 883/2004). Workers must still be registered with customs, paid the German minimum wage and have their working time recorded (secs. 16, 17 and 20 MiLoG).

Do I have to pay SOKA-BAU contributions as a solar installation subcontractor?
It depends on which work dominates working time and who directs it. The BAG excluded a business installing PV under master electricians (judgment of 27 April 2022 – 10 AZR 263/19). If the VTV applies, the holiday fund contribution is 14.7 % of gross wages from 1 July 2026 (sec. 15(1) VTV).

How much does the general contractor withhold without a Freistellungsbescheinigung?
15 % of the price plus VAT, even under the reverse charge (sec. 48(1) and (3) EStG, BMF letter of 19 July 2022, para. 79). The amount is credited against German taxes or refunded on application (sec. 48c EStG).

Can the general contractor hold back payment until the owner pays?
Only if this has been validly agreed. The statute works the other way round: the subcontractor’s remuneration falls due at the latest when the general contractor has been paid for that work or the owner has accepted it (sec. 641(2) BGB). A clause in standard terms is subject to review under sec. 307 BGB.

Is a contractual penalty of up to 10 % in a subcontract valid?
If it comes from the general contractor’s standard terms, a cap above 5 % of the contract sum is invalid (BGH VII ZR 210/01). Under unit prices the cap is measured against the final account sum (BGH VII ZR 42/22). An individually negotiated penalty is not subject to this review (sec. 305(1) sentence 3 BGB).

What happens if workers are not registered before installation starts?
A fine of up to EUR 30,000 (sec. 21(1) no. 6 and (3) MiLoG). Missing time records can cost up to EUR 50,000 (sec. 21(1) no. 8 and (3) MiLoG), and a worker without identity documents up to EUR 5,000 (sec. 8(2) no. 1 and (5) SchwarzArbG).

Basis of this article: BAG, judgments of 27 April 2022 – 10 AZR 263/19 and 16 October 2019 – 5 AZR 241/18. BGH, default judgment (Versäumnisurteil) of 23 January 2003 – VII ZR 210/01, judgments of 15 February 2024 – VII ZR 42/22 and 2 June 2016 – VII ZR 348/13. BFH, judgment of 7 November 2019 – I R 46/17. BMF letter of 19 July 2022 – IV C 8 – S 2272/19/10003 :002, UStAE (as of 2 June 2026) paras. 13b.2 and 13b.3. Provisions: secs. 13, 16, 17, 20, 21 MiLoG, sec. 1 MiLoV5, secs. 1 and 2 MiLoMeldV, secs. 2, 2a, 3, 4, 5, 8 SchwarzArbG, secs. 8, 14 AEntG, sec. 28e SGB IV, sec. 150 SGB VII, secs. 48–48c EStG, sec. 20a AO, sec. 1 UStZustV, secs. 3a, 12, 13b, 14a UStG, secs. 271a, 305, 307, 641, 650a, 650f BGB, sec. 348 HGB, secs. 1 and 15 VTV, Article 12 of Regulation (EC) No 883/2004. Legal position: September 2026. This article is for general information and does not replace legal or tax advice in an individual case.

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