Under certain circumstances, the recipient of a construction service (all services that serve the construction, repair, maintenance, alteration or removal of structures) must withhold a 15% deduction from the consideration.Excluded are planning services, e.g. of architects, structural engineers, civil engineers and surveyors, as well as pure services for the supervision of construction, for the examination of construction accounts and for the execution of tenders and awards. The hiring out of employees, the mere cleaning of premises or areas and maintenance work are also not subject to the construction deduction tax.
The basis of assessment is the remuneration plus VAT (gross amount). If the reverse charge procedure is applied, the gross amount must also be used as the basis of assessment. The tax deduction must also be made for partial payments, down payments or advance payments.
The construction withholding tax is credited against the wage tax, income tax or corporation tax of the performing construction company.
The recipient of the service must withhold the construction withholding tax if he is an entrepreneur within the meaning of the VAT Act. It does not matter that the entrepreneur also owes turnover tax amounts. This means that entrepreneurs who only carry out tax-exempt transactions (e.g. doctors, landlords, small entrepreneurs) must also withhold the construction withholding tax.
If the entrepreneur receives a construction service for his private use, the construction withholding tax should not be withheld.
Exceptions to the obligation to withhold construction withholding tax
1. Submission of an exemption certificate
This exemption certificate is issued to the contractor if the tax deduction to be secured does not appear to be at risk and a domestic receiving agent has been appointed.
2. De minimis limits
If a building contractor is expected to perform services for a service recipient for no more than EUR 5,000 in a calendar year, no building withholding tax must be withheld. If the service recipient is an entrepreneur who exclusively performs tax-exempt transactions, a limit of EUR 15,000 applies.
Insofar as the service recipient must withhold construction withholding tax, this must be reported to the tax office responsible for the service provider by the 10th day after the end of the month in which the consideration was rendered and must also be paid to this tax office by this time.
Consequences of failure to withhold
If the service recipient does not declare and pay the construction withholding tax, although he is obliged to do so, he is liable for the tax not paid or not paid in full. It may also be possible that a tax offence has been committed.