{"id":5120,"date":"2026-07-25T02:05:11","date_gmt":"2026-07-25T00:05:11","guid":{"rendered":"https:\/\/bwlaw.de\/knowledge-base\/german-construction-withholding-tax\/"},"modified":"2026-10-22T17:28:41","modified_gmt":"2026-10-22T15:28:41","slug":"german-construction-withholding-tax","status":"publish","type":"page","link":"https:\/\/bwlaw.de\/en\/knowledge-base\/german-construction-withholding-tax\/","title":{"rendered":"German construction withholding tax: how the Freistellungsbescheinigung saves you 15% (\u00a7 48b EStG)"},"content":{"rendered":"\r\n<div id=\"progress\" aria-hidden=\"true\"><\/div>\r\n\r\n<header>\r\n  <div class=\"wrap\">\r\n    <a href=\"\/en\/\" class=\"brand\" aria-label=\"BWLAW\"><img loading=\"lazy\" decoding=\"async\" src=\"\/wp-content\/themes\/bwlaw-child-1\/assets\/img\/logo-bw.png\" alt=\"BWLAW \u2013 law firm in Germany\" width=\"42\" height=\"28\"><\/a>\r\n    <nav aria-label=\"Main navigation\">\r\n      <a href=\"https:\/\/bwlaw.de\/en\/practice-areas\/construction-law\/\">Construction law<\/a>\r\n      <a href=\"https:\/\/bwlaw.de\/en\/practice-areas\/debt-collection\/\">Debt collection<\/a>\r\n      <a href=\"https:\/\/bwlaw.de\/en\/practice-areas\/company-formation\/\">Corporate law<\/a>\r\n      <a href=\"https:\/\/bwlaw.de\/en\/practice-areas\/employment-law\/\">Employment law<\/a>\r\n      <a href=\"https:\/\/bwlaw.de\/en\/knowledge-base\/\" class=\"active\">Knowledge base<\/a>\r\n      <a href=\"\/en\/#zespol\">Team<\/a>\r\n    <\/nav>\r\n    <a href=\"https:\/\/bwlaw.de\/en\/practice-areas\/construction-law\/#kontakt\" class=\"btn\">Contact us <span class=\"arr\">\u2192<\/span><\/a>\r\n    <button class=\"burger\" aria-label=\"Menu\">\u2630<\/button>\r\n  <\/div>\r\n<\/header>\r\n\r\n<section class=\"shero\" style=\"padding-bottom:3.5rem\">\r\n  <div class=\"glow\"><\/div>\r\n  <div class=\"wrap\" style=\"grid-template-columns:1fr\">\r\n    <div>\r\n      <nav class=\"crumbs\" aria-label=\"Breadcrumbs\"><a href=\"\/en\/\">Home<\/a><span>\/<\/span><a href=\"https:\/\/bwlaw.de\/en\/knowledge-base\/\">Knowledge base<\/a><span>\/<\/span><b>Construction<\/b><\/nav>\r\n      <span class=\"eyebrow\">Construction<\/span>\r\n      <h1 style=\"max-width:30ch\">German construction withholding tax: how the Freistellungsbescheinigung saves you 15% (\u00a7 48b EStG)<\/h1>\r\n      <p class=\"lead\">Any business that buys construction work in Germany must by law withhold 15% of the contractor&#8217;s invoice and pay it to the German tax office. This is the construction withholding tax (Bauabzugsteuer, \u00a7 48 of the German Income Tax Act \u2014 EStG). One document prevents the deduction: the Freistellungsbescheinigung, an exemption certificate issued by the German tax office (\u00a7 48b EStG). For foreign construction companies working in Germany it is as essential as the A1 certificate \u2014 without it, 15% disappears from every payment, and a double taxation treaty changes nothing. Here is how the mechanism works, how to obtain the certificate and how to recover amounts already withheld.<\/p>\r\n      <div class=\"art-meta\">\r\n        <img decoding=\"async\" src=\"\/wp-content\/themes\/bwlaw-child-1\/assets\/img\/dr-artur-barczewski.webp\" alt=\"Dr. Artur Barczewski\" loading=\"lazy\">\r\n        <div><b>Dr. Artur Barczewski<\/b>niedergelassener europ\u00e4ischer Rechtsanwalt \/ Radca prawny<\/div>\r\n        <div style=\"margin-left:1rem;border-left:1px solid rgba(255,255,255,.25);padding-left:1rem\">\u2248 8 min read<br>updated: July 2026<\/div>\r\n      <\/div>\r\n    <\/div>\r\n  <\/div>\r\n<\/section>\r\n\r\n<article class=\"sec\">\r\n  <div class=\"wrap\">\r\n    <div class=\"prose rv\" style=\"font-size:1.02rem\">\r\n      <style>\r\n.prose .bwsum{margin:2.4rem 0 2.8rem;border:1px solid var(--line,#E5DED6);border-radius:22px;background:var(--ivory,#FAF7F3);padding:clamp(1.1rem,3vw,1.7rem);color:var(--ink,#161513);font-family:var(--font-body)}.prose 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.bwprob__rule{margin:1rem 0 0;font-size:.84rem;color:rgba(255,255,255,.72);position:relative;z-index:1;line-height:1.5}.prose .bwprob__rule b{color:#fff}\r\n@media (max-width:640px){.prose .bwprob__cols,.prose .bwsum__steps{flex-direction:column}.prose .bwprob__cols li,.prose .bwsum__steps li{flex-direction:column}.prose .bwprob__cols li+li:before,.prose .bwsum__steps li+li:before{flex:0 0 18px;width:14px;height:18px;margin:4px auto;clip-path:polygon(35% 0,65% 0,65% 55%,100% 55%,50% 100%,0 55%,35% 55%)}}\r\n@media (max-width:560px){.prose .bwsum__grid,.prose .bwsum__grid--2,.prose .bwsum__cmp{grid-template-columns:1fr}.prose .bwsum__row{grid-template-columns:1fr}.prose .bwsum__bar{font-size:.66rem}.prose .bwprob__key{flex-direction:column;align-items:flex-start;gap:.4rem}.prose .bwsum__tbl thead{display:none}.prose .bwsum__tbl,.prose .bwsum__tbl tbody,.prose .bwsum__tbl tr,.prose .bwsum__tbl td{display:block;width:auto}.prose .bwsum__tbl tr{border-top:1px solid var(--line,#E5DED6);padding:.55rem .75rem}.prose .bwsum__tbl tr:first-child{border-top:0}.prose .bwsum__tbl td{border:0;padding:.08rem 0}.prose .bwsum__tbl td[data-l]:before{content:attr(data-l) \": \";font-weight:600;color:var(--ink-soft,#4A4642)}}\r\n<\/style>\r\n<figure class=\"bwprob\" aria-label=\"Without the certificate, 15% vanishes from every construction payment\" style=\"margin-left:0;margin-right:0\"><p class=\"bwprob__eye\">The problem in one picture<\/p><p class=\"bwprob__t\">Without the certificate, 15% vanishes from every construction payment<\/p><p class=\"bwprob__lead\">Any business buying construction work in Germany must by law withhold 15% of the contractor\u2019s invoice and pay it to the tax office. A double taxation treaty changes nothing.<\/p><div class=\"bwprob__key\"><strong>15%<\/strong><span>The share the client withholds from every payment, as a rule calculated on the invoice amount including VAT, and pays to the German tax office.<\/span><\/div><ol class=\"bwprob__cols\"><li><div class=\"bwprob__c\"><svg viewBox=\"0 0 24 24\" fill=\"none\" stroke=\"#E8946B\" stroke-width=\"1.8\" stroke-linecap=\"round\" stroke-linejoin=\"round\" aria-hidden=\"true\"><path d=\"M12 3 2.5 20h19z\"\/><path d=\"M12 10v4.5\"\/><circle cx=\"12\" cy=\"17.2\" r=\".6\" fill=\"#E8946B\"\/><\/svg><b>The risk<\/b><span>Without a valid certificate at the time of payment the client must withhold. This applies even to foreign contractors without a permanent establishment.<\/span><\/div><\/li><li><div class=\"bwprob__c\"><svg viewBox=\"0 0 24 24\" fill=\"none\" stroke=\"#E8946B\" stroke-width=\"1.8\" stroke-linecap=\"round\" stroke-linejoin=\"round\" aria-hidden=\"true\"><circle cx=\"12\" cy=\"12\" r=\"9\"\/><path d=\"M15.5 8.6a4.2 4.2 0 1 0 0 6.8\"\/><path d=\"M7 10.8h6M7 13.2h6\"\/><\/svg><b>What it costs<\/b><span>15% of every payment, often more than the entire margin of the contract. Miss the refund deadline and the money is gone for good.<\/span><\/div><\/li><li><div class=\"bwprob__c bwprob__c--act\"><svg viewBox=\"0 0 24 24\" fill=\"none\" stroke=\"#fff\" stroke-width=\"1.9\" stroke-linecap=\"round\" stroke-linejoin=\"round\" aria-hidden=\"true\"><circle cx=\"12\" cy=\"12\" r=\"9\"\/><path d=\"m7.8 12.3 2.8 2.8 5.6-5.8\"\/><\/svg><b>What to do<\/b><span>Apply before your first contract and for the follow-up certificate six months before expiry. Have withheld amounts credited or refunded in time.<\/span><\/div><\/li><\/ol><p class=\"bwprob__rule\"><b>Rule of thumb:<\/b> certificate first, building site second. It takes effect on the day of issue and has no retroactive effect.<\/p><\/figure>\r\n<h3 style=\"font-size:1.35rem;margin-top:2.2rem\">The 15% deduction on every construction invoice (\u00a7 48 EStG)<\/h3>\r\n      <p>Where construction work (Bauleistung) is performed in Germany for a business within the meaning of \u00a7 2 of the German VAT Act or for a legal entity under public law, the recipient of the work must <strong>withhold 15% of the consideration<\/strong> \u2014 as a rule the invoice amount including VAT (\u00a7 48 (3) EStG) \u2014 and pay it to the tax office responsible for the contractor. The term construction work is broad: it covers all services relating to the construction, repair, maintenance, alteration or demolition of buildings and structures.<\/p>\r\n      <p>The boundaries of the term matter in practice. Purely planning services by structural engineers, architects and surveyors, laboratory testing, mere site supervision and the checking of construction invoices are not construction work, and neither is pure maintenance where no parts are altered, worked on or replaced (German Federal Ministry of Finance circular of 19 July 2022, margin nos. 6 and 10). The mere supply of building materials is not covered either. Where such services are combined with construction work in one contract, the ancillary service follows the main service of the contract. And if your contracts are based on the VOB\/B standard terms, our separate <a href=\"https:\/\/bwlaw.de\/en\/knowledge-base\/vob-b-german-construction-contract\/\">guide to the VOB\/B<\/a> covers the billing rules.<\/p>\r\n      <p>The withholding is not an additional tax but a <strong>security mechanism<\/strong>: the amount withheld is later credited against the contractor&#8217;s German taxes or refunded. For cash flow, however, the effect is that 15% vanishes from every payment \u2014 often more than the entire margin of the contract. The duty does not arise for small orders: withholding may be dispensed with if the payments to one contractor are not expected to exceed 5,000 euros in the calendar year, or 15,000 euros where the client exclusively carries out VAT-exempt letting. Private homeowners are not affected at all, and landlords letting no more than two flats do not withhold on work for those flats.<\/p>\r\n\r\n      <figure class=\"bwsum\" aria-label=\"What counts as construction work, and when is tax withheld?\" style=\"margin-left:0;margin-right:0\"><p class=\"bwsum__eye\">At a glance<\/p><p class=\"bwsum__t\">What counts as construction work, and when is tax withheld?<\/p><table class=\"bwsum__tbl\"><thead><tr><th>Service<\/th><th>Construction work?<\/th><th>Consequence<\/th><\/tr><\/thead><tbody><tr><td>Construction, repair, maintenance, alteration or demolition of buildings and structures<\/td><td data-l=\"Construction work?\">Yes<\/td><td class=\"bwsum__yes\" data-l=\"Consequence\">15% withheld<\/td><\/tr><tr><td>Planning (structural engineers, architects, surveyors), mere site supervision, laboratory testing<\/td><td data-l=\"Construction work?\">No<\/td><td data-l=\"Consequence\">Nothing withheld<\/td><\/tr><tr><td>Pure maintenance where no parts are altered, worked on or replaced<\/td><td data-l=\"Construction work?\">No<\/td><td data-l=\"Consequence\">Nothing withheld<\/td><\/tr><tr><td>Mere supply of building materials<\/td><td data-l=\"Construction work?\">No<\/td><td data-l=\"Consequence\">Nothing withheld<\/td><\/tr><tr><td>Such services combined with construction work in one contract<\/td><td data-l=\"Construction work?\">Follows the main service<\/td><td data-l=\"Consequence\">Follows the main service<\/td><\/tr><\/tbody><\/table><div class=\"bwsum__warn\"><b>Basis:<\/b> 15% of the consideration, as a rule including VAT (\u00a7 48 (3) EStG). Not an additional tax, but for cash flow often more than the entire margin.<\/div><p class=\"bwsum__note\">No withholding up to 5,000 euros per contractor in the calendar year (15,000 euros for clients with exclusively VAT-exempt letting). Private homeowners are not affected. Source: circular of 19 July 2022, margin nos. 6 and 10.<\/p><\/figure>\r\n<h3 style=\"font-size:1.35rem;margin-top:2.2rem\">A double taxation treaty does not protect you (\u00a7 48d EStG)<\/h3>\r\n      <p>Many foreign contractors assume that without a permanent establishment in Germany the deduction does not concern them. That is wrong. Under \u00a7 48d EStG the rules on withholding, payment and filing apply <strong>regardless of any double taxation treaty<\/strong>. The client must withhold the 15% even where the contractor&#8217;s income is not taxable in Germany at all. The contractor is left with a refund claim. The treaty protects against final taxation, not against the deduction itself.<\/p>\r\n\r\n      <figure class=\"bwsum\" aria-label=\"The treaty protects against the tax, not against the deduction\" style=\"margin-left:0;margin-right:0\"><p class=\"bwsum__eye\">At a glance<\/p><p class=\"bwsum__t\">The treaty protects against the tax, not against the deduction<\/p><div class=\"bwsum__cmp\"><div class=\"bwsum__col bwsum__col--bad\"><b>The assumption<\/b><ul><li>No permanent establishment in Germany<\/li><li>Income not taxable in Germany under the treaty<\/li><li>So the deduction does not concern us<\/li><\/ul><\/div><div class=\"bwsum__col bwsum__col--neutral\"><b>The legal position<\/b><ul><li>The client withholds the 15% regardless (\u00a7 48d EStG)<\/li><li>The treaty only protects against final taxation<\/li><li>The contractor is left with a refund claim<\/li><\/ul><\/div><\/div><\/figure>\r\n<h3 style=\"font-size:1.35rem;margin-top:2.2rem\">The exemption certificate: one document instead of a 15% deduction (\u00a7 48b EStG)<\/h3>\r\n      <p>Only a valid exemption certificate presented to the client prevents the deduction. If the client holds the certificate at the time of payment and could rely on its legitimacy, nothing is withheld and the client is not liable (\u00a7 48a (3) EStG). In practice German general contractors and developers demand the certificate before signing the contract \u2014 alongside the A1 certificate it belongs to the standard document package without which many clients will not start working with you at all. The certificate states the contractor&#8217;s name, address and tax number, its period of validity, the scope of the exemption and the issuing tax office. It is issued for a limited period \u2014 in practice for no longer than three years \u2014 or for a specific project. For a period-based certificate a copy or electronic transmission to the client is sufficient, while a certificate limited to a specific project must be handed to the named client in the original (official BZSt guidance on the construction withholding tax).<\/p>\r\n\r\n      <figure class=\"bwsum\" aria-label=\"One document that prevents the deduction\" style=\"margin-left:0;margin-right:0\"><p class=\"bwsum__eye\">At a glance<\/p><p class=\"bwsum__t\">One document that prevents the deduction<\/p><div class=\"bwsum__grid bwsum__grid--2\"><div class=\"bwsum__c\"><b>Effect<\/b><span>If the client holds a valid certificate at the time of payment, nothing is withheld and the client is not liable.<\/span><span class=\"bwsum__p\">\u00a7 48a (3) EStG<\/span><\/div><div class=\"bwsum__c\"><b>Validity<\/b><span>Issued for a limited period, in practice no longer than three years, or for a specific project.<\/span><\/div><div class=\"bwsum__c\"><b>Handing over<\/b><span>Period-based: a copy or electronic transmission is sufficient. Project-specific: the original goes to the named client.<\/span><\/div><div class=\"bwsum__c\"><b>Practice<\/b><span>German general contractors and developers demand it before signing, alongside the A1 certificate.<\/span><\/div><\/div><p class=\"bwsum__note\">Contents: the contractor\u2019s name, address and tax number, period of validity, scope of the exemption and the issuing tax office.<\/p><\/figure>\r\n<h3 style=\"font-size:1.35rem;margin-top:2.2rem\">How foreign companies obtain the certificate<\/h3>\r\n      <p>The application is filed with the tax office responsible for the contractor and requires no particular form. For companies based in Poland, centrally designated tax offices are responsible, determined by the first letter of the surname or company name (\u00a7 20a of the German Fiscal Code in conjunction with \u00a7 1 (1) no. 20 UStZustV): A\u2013G Hameln-Holzminden, H\u2013\u0141 Oranienburg, M\u2013R Cottbus, S\u2013\u017b N\u00f6rdlingen. The office issues the certificate if the tax claim to be secured does not appear endangered (\u00a7 48b EStG). The statute also mentions appointing an authorised recipient for correspondence in Germany, but under the Federal Ministry of Finance circular of 19 July 2022 (margin no. 28) this requirement <strong>does not apply to companies based in the EU or the EEA<\/strong>. Endangerment is assumed in particular where the contractor fails to meet notification duties (\u00a7 138 of the Fiscal Code), does not cooperate with the tax office (\u00a7 90 of the Fiscal Code) or does not prove tax residence by a certificate of the foreign tax authority. Persistent tax arrears and incorrect or repeatedly late filings can also justify refusal. The certificate should also be issued where the contractor credibly shows that no tax claims requiring security exist.<\/p>\r\n      <p>The certificate <strong>takes effect on the day of issue and has no retroactive effect<\/strong> \u2014 payments received before issuance remain subject to withholding. A company appearing in the German system for the first time will usually receive a shorter or project-specific certificate until its filing and payment record can first be assessed, and the tax office may ask to see the construction contract (circular of 19 July 2022, margin nos. 35 and 37). Apply before your first contract. A follow-up certificate can be requested as early as six months before expiry, with its validity attaching to the current one, so no gap arises in which the client must withhold again (margin no. 36).<\/p>\r\n\r\n      <figure class=\"bwsum\" aria-label=\"Apply early: the certificate only works from the day of issue\" style=\"margin-left:0;margin-right:0\"><p class=\"bwsum__eye\">At a glance<\/p><p class=\"bwsum__t\">Apply early: the certificate only works from the day of issue<\/p><ol class=\"bwsum__tl\"><li><b>Before your first contract<\/b> \u00b7 Application to the responsible tax office, no particular form. Companies based in the EU or the EEA need no authorised recipient in Germany (margin no. 28).<\/li><li><b>Review<\/b> \u00b7 Issued if the tax claim does not appear endangered. A certificate of residence and cooperation with the tax office matter.<\/li><li><b>From the day of issue<\/b> \u00b7 Effect only from that day. A company new to the German system usually first receives a shorter or project-specific certificate (margin nos. 35 and 37).<\/li><li class=\"bwsum__end\"><b>Six months before expiry<\/b> \u00b7 Request the follow-up certificate. Its validity attaches to the current one, so no gap arises (margin no. 36).<\/li><\/ol><div class=\"bwsum__warn\"><b>No retroactive effect:<\/b> payments received before issuance remain subject to withholding.<\/div><p class=\"bwsum__note\">Responsible for companies based in Poland, by first letter of the surname or company name: A\u2013G Hameln-Holzminden, H\u2013\u0141 Oranienburg, M\u2013R Cottbus, S\u2013\u017b N\u00f6rdlingen.<\/p><\/figure>\r\n<h3 style=\"font-size:1.35rem;margin-top:2.2rem\">Hiring subcontractors? Then you must withhold as well<\/h3>\r\n      <p>This is the point companies most often learn about too late. The withholding duty applies to every business buying construction work \u2014 including a foreign company using subcontractors on a German site. Whoever pays a subcontractor who has no valid exemption certificate must withhold 15%, file the deduction electronically by the 10th day of the month following the month of payment and pay it to the tax office responsible for the subcontractor (\u00a7 48a EStG). The client is <strong>personally liable<\/strong> for amounts not withheld. Liability only falls away if a certificate the client could rely on was available at the time of payment. Its validity can be checked free of charge in the EIBE portal of the Federal Central Tax Office using the federal state, the tax number and the security number printed on the certificate. Document that check for every major payment. If you work with posted or Polish subcontractors, two related topics are worth a look: <a href=\"https:\/\/bwlaw.de\/en\/knowledge-base\/soka-bau-posting-workers\/\">SOKA-BAU contributions when posting workers<\/a> and <a href=\"https:\/\/bwlaw.de\/en\/knowledge-base\/false-self-employment-germany\/\">false self-employment on site<\/a>.<\/p>\r\n\r\n      <figure class=\"bwsum\" aria-label=\"Your own subcontractors: check, withhold, file\" style=\"margin-left:0;margin-right:0\"><p class=\"bwsum__eye\">At a glance<\/p><p class=\"bwsum__t\">Your own subcontractors: check, withhold, file<\/p><ol class=\"bwsum__steps\"><li><div class=\"bwsum__c\"><span class=\"bwsum__n\">1<\/span><b>Check the certificate<\/b><span>Free of charge in the EIBE portal of the Federal Central Tax Office. You need the federal state, tax number and security number. Document the check.<\/span><span class=\"bwsum__p\">every major payment<\/span><\/div><\/li><li><div class=\"bwsum__c\"><span class=\"bwsum__n\">2<\/span><b>Withhold 15%<\/b><span>If the subcontractor has no valid exemption certificate, 15% of the payment must be withheld.<\/span><span class=\"bwsum__p\">\u00a7 48a EStG<\/span><\/div><\/li><li><div class=\"bwsum__c\"><span class=\"bwsum__n\">3<\/span><b>File and pay<\/b><span>File electronically by the 10th day of the month following the month of payment. Pay to the tax office responsible for the subcontractor.<\/span><\/div><\/li><\/ol><div class=\"bwsum__warn\"><b>Liability:<\/b> the client is personally liable for amounts not withheld. This includes a foreign company using subcontractors on a German site.<\/div><p class=\"bwsum__note\">With posted or Polish subcontractors, also look at SOKA-BAU contributions and false self-employment on site.<\/p><\/figure>\r\n<h3 style=\"font-size:1.35rem;margin-top:2.2rem\">Client paid the withheld 15% to the tax office? You recover it from the tax office, not the client<\/h3>\r\n      <p>The withholding also has a civil-law consequence that surprises many contractors. Where the client withholds 15% and pays it to the contractor&#8217;s tax office, the client thereby <strong>discharges its duty to pay the contract price<\/strong> to that extent (\u00a7 362 (1) of the German Civil Code). The contractor cannot successfully sue the client for the missing 15% \u2014 so the Federal Court of Justice in its judgment of 12 May 2005, VII ZR 97\/04. It is different only where it was clearly recognisable to the client that no withholding duty existed.<\/p>\r\n      <p>The discharging effect even covers amounts paid to the tax office <strong>beyond the statutory 15%<\/strong> where the client paid on the basis of a liability notice of the tax office that was not obviously wrong. Any excess is then settled exclusively between the contractor and the tax authorities \u2014 so the Higher Regional Court of Oldenburg in its final judgment of 28 March 2023, 2 U 178\/22. As long as the client has not paid the withheld amount to the tax office, the contractor may claim the full contract price.<\/p>\r\n      <p>A note on assigned receivables (for example factoring): only an exemption certificate of the performing contractor releases the client. A certificate of the purchaser of the receivable is not sufficient.<\/p>\r\n\r\n      <figure class=\"bwsum\" aria-label=\"Paid to the tax office counts as paid: recover it from the tax office\" style=\"margin-left:0;margin-right:0\"><p class=\"bwsum__eye\">At a glance<\/p><p class=\"bwsum__t\">Paid to the tax office counts as paid: recover it from the tax office<\/p><ul class=\"bwsum__amp\"><li class=\"r\"><i><\/i><div><b>15% paid to the tax office<\/b><span>The contract price is discharged to that extent (\u00a7 362 (1) Civil Code). Suing for the rest fails (Federal Court of Justice, VII ZR 97\/04).<\/span><\/div><\/li><li class=\"r\"><i><\/i><div><b>More than 15% paid on a liability notice<\/b><span>Also discharged if the notice was not obviously wrong. Any excess is settled with the tax authorities only (Higher Regional Court of Oldenburg, 2 U 178\/22).<\/span><\/div><\/li><li class=\"y\"><i><\/i><div><b>Clearly no withholding duty<\/b><span>Exception: it is different where it was clearly recognisable to the client that no withholding duty existed.<\/span><\/div><\/li><li class=\"g\"><i><\/i><div><b>Not yet paid to the tax office<\/b><span>As long as the withheld amount has not been paid over, the contractor may claim the full contract price.<\/span><\/div><\/li><\/ul><p class=\"bwsum__note\">Factoring: only the certificate of the performing contractor releases the client. A certificate of the purchaser of the receivable is not sufficient.<\/p><\/figure>\r\n<h3 style=\"font-size:1.35rem;margin-top:2.2rem\">Already withheld? Crediting or refund (\u00a7 48c EStG)<\/h3>\r\n      <p>Withheld amounts are not lost. The tax office credits them in a statutory order: first against the wage tax withheld and filed for employees, then against advance payments of income or corporation tax, then against the tax of the assessment period (\u00a7 48c (1) EStG). For companies posting workers to Germany the wage tax credit is often the fastest route. If the contractor files no German wage tax returns and no assessment is expected, or credibly shows that no tax claims requiring security will arise \u2014 the typical case of a foreign company without a permanent establishment \u2014 a refund can be claimed (\u00a7 48c (2) EStG). The deadline is strict: the application must be filed <strong>by the end of the second calendar year<\/strong> following the year in which the deduction was reported. For a treaty-based refund, a certificate of residence issued by the foreign tax authority must be added (\u00a7 48d EStG). Miss the deadline and 15% of the contract value is gone for good.<\/p>\r\n\r\n      <figure class=\"bwsum\" aria-label=\"Withheld does not mean lost: crediting or refund\" style=\"margin-left:0;margin-right:0\"><p class=\"bwsum__eye\">At a glance<\/p><p class=\"bwsum__t\">Withheld does not mean lost: crediting or refund<\/p><div class=\"bwsum__grid bwsum__grid--2\"><div class=\"bwsum__c\"><span class=\"bwsum__n\">1<\/span><b>Wage tax<\/b><span>First credited against wage tax withheld and filed for employees. For companies posting workers often the fastest route.<\/span><\/div><div class=\"bwsum__c\"><span class=\"bwsum__n\">2<\/span><b>Advance payments<\/b><span>Then against advance payments of income or corporation tax.<\/span><\/div><div class=\"bwsum__c\"><span class=\"bwsum__n\">3<\/span><b>Annual tax<\/b><span>Then against the tax of the assessment period.<\/span><span class=\"bwsum__p\">\u00a7 48c (1) EStG<\/span><\/div><div class=\"bwsum__c\"><span class=\"bwsum__n\">4<\/span><b>Refund<\/b><span>The typical case of a foreign company without a permanent establishment. For a treaty-based refund add a certificate of residence (\u00a7 48d EStG).<\/span><span class=\"bwsum__p\">\u00a7 48c (2) EStG<\/span><\/div><\/div><div class=\"bwsum__warn\"><b>Strict deadline:<\/b> apply by the end of the second calendar year following the year in which the deduction was reported. Miss it and 15% of the contract value is gone for good.<\/div><\/figure>\r\n<h3 style=\"font-size:1.35rem;margin-top:2.2rem\">Tax office refused the certificate? Objection within one month<\/h3>\r\n      <p>A refusal is issued as a reasoned rejection notice. It can be challenged by an <strong>objection (Einspruch, \u00a7 347 of the Fiscal Code)<\/strong> filed within one month of notification, followed if necessary by an action before the fiscal court. Often quicker than a dispute is agreeing on a shorter or project-specific certificate \u2014 an approach envisaged by the Ministry of Finance itself (circular of 19 July 2022, margin no. 34).<\/p>\r\n      <p>For foreign companies, refusals are typically based on a possible German right of taxation \u2014 for instance where contract durations approach the threshold at which a building site becomes a permanent establishment (twelve months under the German-Polish tax treaty), where several sites may have to be aggregated, or where the company maintains an office or a dependent agent in Germany. Well-prepared documents and complete answers to queries are the best prevention.<\/p>\r\n    <figure class=\"bwsum\" aria-label=\"Refusal: know the reasons, act within one month\" style=\"margin-left:0;margin-right:0\"><p class=\"bwsum__eye\">At a glance<\/p><p class=\"bwsum__t\">Refusal: know the reasons, act within one month<\/p><div class=\"bwsum__cmp\"><div class=\"bwsum__col bwsum__col--bad\"><b>Typical reasons for refusal<\/b><ul><li>Contract durations approach the threshold for a permanent establishment (German-Polish tax treaty: twelve months)<\/li><li>Several sites may have to be aggregated<\/li><li>An office or a dependent agent in Germany<\/li><\/ul><\/div><div class=\"bwsum__col bwsum__col--good\"><b>What to do<\/b><ul><li>Objection (Einspruch) within one month of notification (\u00a7 347 Fiscal Code)<\/li><li>If necessary: action before the fiscal court<\/li><li>Often quicker: a shorter or project-specific certificate (margin no. 34)<\/li><\/ul><\/div><\/div><p class=\"bwsum__note\">Prevention: well-prepared documents and complete answers to queries.<\/p><\/figure>\r\n<\/div>\r\n\r\n    <div class=\"hl rv\" style=\"max-width:760px\">\r\n      <span class=\"eyebrow\">Checklist<\/span>\r\n      <h3>The exemption certificate without pitfalls<\/h3>\r\n      <p>Apply for the certificate before your first German contract, not after the first invoice. Identify the competent tax office by the first letter of the company name: A\u2013G Hameln-Holzminden, H\u2013\u0141 Oranienburg, M\u2013R Cottbus, S\u2013\u017b N\u00f6rdlingen. Obtain a certificate of tax residence from your home tax authority \u2014 EU companies do not need to appoint an authorised recipient in Germany. Answer the tax office&#8217;s queries completely and on time, as lack of cooperation is the typical reason for refusal. Monitor the validity period, and remember that the follow-up certificate can be requested as early as six months before expiry. Hand a copy of the certificate to every client before the first payment, and the original where the certificate is project-specific. Demand certificates from your own subcontractors and verify them in the EIBE portal, otherwise withhold 15%. After any deduction, note the refund deadline: the end of the second year following the year of filing.<\/p>\r\n    <\/div>\r\n\r\n    <div class=\"prose rv\" style=\"font-size:1.02rem\">\r\n      <h3 style=\"font-size:1.35rem;margin-top:2.2rem\">Frequently asked questions<\/h3>\r\n      <p><strong>What is a Freistellungsbescheinigung?<\/strong><br>An exemption certificate of the German tax office (\u00a7 48b EStG) that frees payments for construction work from the 15% withholding tax (Bauabzugsteuer). The contractor presents it to the client, who then pays invoices in full.<\/p>\r\n      <p><strong>Does a double taxation treaty protect against the deduction?<\/strong><br>No. Under \u00a7 48d EStG the deduction must be made regardless of the treaty. The treaty only becomes relevant for the refund.<\/p>\r\n      <p><strong>How long is the certificate valid?<\/strong><br>It is issued for a limited period, in practice for no longer than three years, or for a specific project. The follow-up certificate can be requested as early as six months before expiry.<\/p>\r\n      <p><strong>Which tax office is responsible for Polish companies?<\/strong><br>The first letter of the surname or company name decides: A\u2013G Hameln-Holzminden, H\u2013\u0141 Oranienburg, M\u2013R Cottbus, S\u2013\u017b N\u00f6rdlingen.<\/p>\r\n      <p><strong>The client withheld 15% \u2014 what now?<\/strong><br>The amount is credited against German taxes or refunded on application (\u00a7 48c EStG). The refund application must be filed by the end of the second calendar year following the year of filing of the deduction.<\/p>\r\n      <p><strong>The client withheld 15% and paid it to the tax office. Can I sue the client for the rest?<\/strong><br>No. The payment to the tax office discharges the contract price claim to that extent (Federal Court of Justice, judgment of 12 May 2005, VII ZR 97\/04). Withheld amounts are recovered through crediting or refund under \u00a7 48c EStG.<\/p>\r\n      <p><strong>The tax office refused the exemption certificate. What can I do?<\/strong><br>The rejection notice can be challenged by an objection within one month, followed by an action before the fiscal court. Applying for a project-specific or shorter certificate often leads to the goal as well.<\/p>\r\n      <p><strong>Must I demand a certificate from my subcontractors?<\/strong><br>Yes. As a buyer of construction work you are yourself obliged to withhold. Without a valid certificate from the subcontractor you must deduct 15%, otherwise you are liable for someone else&#8217;s tax.<\/p>\r\n\r\n      <p style=\"font-size:.85rem;color:var(--ink-soft)\">Basis: \u00a7\u00a7 48, 48a, 48b, 48c and 48d EStG, \u00a7 20a and \u00a7 21 of the German Fiscal Code and \u00a7 1 (1) no. 20 UStZustV. Case law: Federal Court of Justice, judgment of 12 May 2005, VII ZR 97\/04, and Higher Regional Court of Oldenburg, judgment of 28 March 2023, 2 U 178\/22 (final). Administrative practice: Federal Ministry of Finance circular of 19 July 2022 (Federal Tax Gazette I p. 1229) and the BZSt guidance on the construction withholding tax (as of April 2025). Legal status: July 2026. This article is for general information and does not replace legal advice in an individual case.<\/p>\r\n    <\/div>\r\n\r\n    <div class=\"mini-cta rv\"><b>The tax office refused your certificate, or a client withheld 15% of your invoice?<\/b><span style=\"color:var(--ink-soft);font-size:.92rem\">Send us the notice, the contract and the statements \u2014 we will assess whether an objection, a \u00a7 48c refund or the full contract price is the right route. In English, German and Polish.<\/span><a href=\"https:\/\/bwlaw.de\/en\/practice-areas\/construction-law\/#kontakt\" class=\"btn\">Describe your case <span class=\"arr\">\u2192<\/span><\/a><\/div>\r\n    <div class=\"prose rv\" style=\"margin-top:1.5rem\">\r\n      <h3 style=\"font-size:1.1rem\">Related topics<\/h3>\r\n      <div class=\"chips\" style=\"margin-top:.8rem\">\r\n        <a href=\"https:\/\/bwlaw.de\/en\/knowledge-base\/soka-bau-posting-workers\/\">SOKA-BAU when posting workers \u2192<\/a>\r\n        <a href=\"https:\/\/bwlaw.de\/en\/knowledge-base\/construction-timesheets-germany\/\">Construction timesheets and the site manager&#8217;s signature \u2192<\/a>\r\n        <a href=\"https:\/\/bwlaw.de\/en\/knowledge-base\/vob-b-german-construction-contract\/\">The VOB\/B explained \u2192<\/a>\r\n      <\/div>\r\n    <\/div>\r\n  <\/div>\r\n<\/article>\r\n\r\n<section class=\"sec alt\">\r\n  <div class=\"wrap\">\r\n    <div class=\"lawyer rv\">\r\n      <img decoding=\"async\" src=\"\/wp-content\/themes\/bwlaw-child-1\/assets\/img\/dr-artur-barczewski.webp\" alt=\"Dr. Artur Barczewski \u2013 author\" loading=\"lazy\">\r\n      <div>\r\n        <b>Dr. Artur Barczewski<\/b>\r\n        <div class=\"role\">niedergelassener europ\u00e4ischer Rechtsanwalt \/ Radca prawny<\/div>\r\n        <p>Author of this article. Handles construction disputes for foreign companies across Germany. <a href=\"https:\/\/bwlaw.de\/en\/team\/artur-barczewski\/\">View profile \u2192<\/a><\/p>\r\n      <\/div>\r\n    <\/div>\r\n  <\/div>\r\n<\/section>\r\n\r\n<section class=\"cta-end\">\r\n  <div class=\"glow\"><\/div>\r\n  <div class=\"wrap\">\r\n    <span class=\"eyebrow rv\">Contact<\/span>\r\n    <h2 class=\"rv d1\">Does your situation look similar?<\/h2>\r\n    <p class=\"rv d2\">Every case has details that change the outcome. Describe yours \u2014 you will receive a concrete answer and a fee estimate.<\/p>\r\n    <div class=\"row rv d3\">\r\n      <a href=\"https:\/\/bwlaw.de\/en\/practice-areas\/construction-law\/#kontakt\" class=\"btn\">Describe your case <span class=\"arr\">\u2192<\/span><\/a>\r\n      <a href=\"tel:+4933555310969\" class=\"phone\">\u260e +49 335 553 10969<\/a>\r\n    <\/div>\r\n  <\/div>\r\n<\/section>\r\n\r\n<footer>\r\n  <div class=\"wrap\">\r\n    <div class=\"foot-grid\">\r\n      <div>\r\n        <div class=\"foot-brand\"><img loading=\"lazy\" decoding=\"async\" src=\"\/wp-content\/themes\/bwlaw-child-1\/assets\/img\/logo-bw.png\" alt=\"Logo BWLAW\" width=\"38\" height=\"26\"><\/div>\r\n        <p>Kanzlei Dr. Barczewski &amp; Dr. Wr\u00f3blewska GbR<br>Rudolf-Breitscheid-Stra\u00dfe 10<br>15230 Frankfurt (Oder), Germany<br><a href=\"tel:+4933555310969\">+49 335 553 10969<\/a> \u00b7 <a href=\"mailto:info@bwlaw.de\">info@bwlaw.de<\/a><\/p>\r\n      <\/div>\r\n      <div>\r\n        <div class=\"foot-h\">Practice areas<\/div>\r\n        <ul>\r\n          <li><a href=\"https:\/\/bwlaw.de\/en\/practice-areas\/construction-law\/\">Construction law and VOB\/B<\/a><\/li>\r\n          <li><a href=\"https:\/\/bwlaw.de\/en\/practice-areas\/employment-law\/\">Employment law<\/a><\/li>\r\n          <li><a href=\"https:\/\/bwlaw.de\/en\/practice-areas\/debt-collection\/\">Debt collection in Germany<\/a><\/li>\r\n          <li><a href=\"https:\/\/bwlaw.de\/en\/practice-areas\/company-formation\/\">Corporate law and company formation<\/a><\/li>\r\n        <\/ul>\r\n      <\/div>\r\n      <div>\r\n        <div class=\"foot-h\">Information<\/div>\r\n        <ul>\r\n          <li><a href=\"\/en\/\">Home<\/a><\/li>\r\n          <li><a href=\"https:\/\/bwlaw.de\/en\/knowledge-base\/\">Knowledge base<\/a><\/li>\r\n          <li><a href=\"\/en\/contact\/\">Contact &amp; directions<\/a><\/li>\r\n          <li><a href=\"https:\/\/bwlaw.de\/en\/impressum\/\">Imprint<\/a><\/li>\r\n          <li><a href=\"https:\/\/bwlaw.de\/en\/privacy-policy\/\">Privacy policy<\/a><\/li>\r\n          <li><a href=\"#\" class=\"borlabs-cookie-preference\">Cookie settings<\/a><\/li>\r\n        <\/ul>\r\n      <\/div>\r\n    <\/div>\r\n    <div class=\"foot-bottom\">\r\n      <span>\u00a9 2026 BWLAW \u00b7 Kanzlei Dr. Barczewski &amp; Dr. Wr\u00f3blewska GbR<\/span>\r\n      <span>niedergelassene europ\u00e4ische Rechtsanw\u00e4lte \/ Radcowie prawni \u00b7 Frankfurt (Oder)<\/span>\r\n    <\/div>\r\n  <\/div>\r\n<\/footer>\r\n\r\n<div class=\"sticky-cta\">\r\n  <a href=\"tel:+4933555310969\" class=\"call\">\u260e Call us<\/a>\r\n  <a href=\"https:\/\/bwlaw.de\/en\/practice-areas\/construction-law\/#kontakt\" class=\"book\">Describe your case<\/a>\r\n<\/div>\r\n\r\n<script type=\"application\/ld+json\">\r\n{\r\n  \"@context\": \"https:\/\/schema.org\",\r\n  \"@graph\": [\r\n    {\r\n      \"@type\": \"Article\",\r\n      \"headline\": \"German construction withholding tax: how the Freistellungsbescheinigung saves you 15% (\u00a7 48b EStG)\",\r\n      \"description\": \"German clients withhold 15% of construction invoices unless the contractor holds a Freistellungsbescheinigung (\u00a7 48b EStG). How to get it and claim a refund.\",\r\n      \"inLanguage\": \"en\",\r\n      \"author\": { \"@type\": \"Person\", \"name\": \"Dr. Artur Barczewski\", \"url\": \"https:\/\/bwlaw.de\/en\/team\/artur-barczewski\/\" },\r\n      \"publisher\": { \"@type\": \"LegalService\", \"address\": { \"@type\": \"PostalAddress\", \"streetAddress\": \"Rudolf-Breitscheid-Stra\u00dfe 10\", \"postalCode\": \"15230\", \"addressLocality\": \"Frankfurt (Oder)\", \"addressRegion\": \"Brandenburg\", \"addressCountry\": \"DE\" }, \"name\": \"BWLAW \u2013 Kanzlei Dr. Barczewski & Dr. Wr\u00f3blewska GbR\", \"url\": \"https:\/\/bwlaw.de\/\" },\r\n      \"datePublished\": \"2026-07-25\",\r\n      \"dateModified\": \"2026-07-25\",\r\n      \"mainEntityOfPage\": \"https:\/\/bwlaw.de\/en\/knowledge-base\/german-construction-withholding-tax\/\"\r\n    },\r\n    {\r\n      \"@type\": \"FAQPage\",\r\n      \"mainEntity\": [\r\n        {\r\n          \"@type\": \"Question\",\r\n          \"name\": \"What is a Freistellungsbescheinigung?\",\r\n          \"acceptedAnswer\": { \"@type\": \"Answer\", \"text\": \"An exemption certificate of the German tax office (sec. 48b EStG) that frees payments for construction work from the 15% withholding tax (Bauabzugsteuer). The contractor presents it to the client, who then pays invoices in full.\" }\r\n        },\r\n        {\r\n          \"@type\": \"Question\",\r\n          \"name\": \"Does a double taxation treaty protect against the deduction?\",\r\n          \"acceptedAnswer\": { \"@type\": \"Answer\", \"text\": \"No. Under sec. 48d EStG the deduction must be made regardless of the treaty. The treaty only becomes relevant for the refund.\" }\r\n        },\r\n        {\r\n          \"@type\": \"Question\",\r\n          \"name\": \"How long is the certificate valid?\",\r\n          \"acceptedAnswer\": { \"@type\": \"Answer\", \"text\": \"It is issued for a limited period, in practice for no longer than three years, or for a specific project. The follow-up certificate can be requested as early as six months before expiry.\" }\r\n        },\r\n        {\r\n          \"@type\": \"Question\",\r\n          \"name\": \"Which tax office is responsible for Polish companies?\",\r\n          \"acceptedAnswer\": { \"@type\": \"Answer\", \"text\": \"The first letter of the surname or company name decides: A-G Hameln-Holzminden, H-L Oranienburg, M-R Cottbus, S-Z N\u00f6rdlingen.\" }\r\n        },\r\n        {\r\n          \"@type\": \"Question\",\r\n          \"name\": \"The client withheld 15% \u2014 what now?\",\r\n          \"acceptedAnswer\": { \"@type\": \"Answer\", \"text\": \"The amount is credited against German taxes or refunded on application (sec. 48c EStG). The refund application must be filed by the end of the second calendar year following the year of filing of the deduction.\" }\r\n        },\r\n        {\r\n          \"@type\": \"Question\",\r\n          \"name\": \"The client withheld 15% and paid it to the tax office. Can I sue the client for the rest?\",\r\n          \"acceptedAnswer\": { \"@type\": \"Answer\", \"text\": \"No. The payment to the tax office discharges the contract price claim to that extent (Federal Court of Justice, judgment of 12 May 2005, VII ZR 97\/04). Withheld amounts are recovered through crediting or refund under sec. 48c EStG.\" }\r\n        },\r\n        {\r\n          \"@type\": \"Question\",\r\n          \"name\": \"The tax office refused the exemption certificate. What can I do?\",\r\n          \"acceptedAnswer\": { \"@type\": \"Answer\", \"text\": \"The rejection notice can be challenged by an objection within one month, followed by an action before the fiscal court. Applying for a project-specific or shorter certificate often leads to the goal as well.\" }\r\n        },\r\n        {\r\n          \"@type\": \"Question\",\r\n          \"name\": \"Must I demand a certificate from my subcontractors?\",\r\n          \"acceptedAnswer\": { \"@type\": \"Answer\", \"text\": \"Yes. As a buyer of construction work you are yourself obliged to withhold. Without a valid certificate from the subcontractor you must deduct 15%, otherwise you are liable for someone else's tax.\" }\r\n        }\r\n      ]\r\n    }\r\n  ]\r\n}\r\n<\/script>\r\n","protected":false},"excerpt":{"rendered":"<p>Construction law Debt collection Corporate law Employment law Knowledge base Team Contact us \u2192 \u2630 Home\/Knowledge base\/Construction Construction German construction withholding tax: how the Freistellungsbescheinigung saves you 15% (\u00a7 48b EStG) Any business that buys construction work in Germany must by law withhold 15% of the contractor&#8217;s invoice and pay it to the German tax [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":0,"parent":4417,"menu_order":0,"comment_status":"closed","ping_status":"closed","template":"template-bwlaw-page.php","meta":{"footnotes":"","rank_math_title":"German construction withholding tax (\u00a7 48b EStG) | BWLAW","rank_math_description":"German clients withhold 15% of construction invoices unless the contractor holds a Freistellungsbescheinigung (\u00a7 48b EStG). 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