If you are carrying out construction work in Germany and are facing local bureaucracy, this article is for you. You will learn how withholding tax works in Germany and how to get your money back.

You are working on a construction site in Germany and suddenly you get an unpleasant surprise. Withholding tax has been deducted from your invoice without warning! Don’t panic, the amount may not be gone forever.

15% percent down

The client of your work in Germany is obliged to deduct withholding tax from you if you do not have an exemption, the so-called Freistellungsbescheinigung. But if you do have one, you must be careful that it is valid not only during the construction work itself, but especially at the moment when the client plans to pay you the invoices issued. This is not a small amount of money – the withholding tax itself is 15% of the invoiced amount. However, it is calculated on the amount including VAT, so the withholding tax can climb to almost 18%.

If this is your case, fortunately, nothing is lost yet. You can apply for a tax refund. Our experts will advise you on how to do this.

Watch out for problems

To get a tax refund, you need a written confirmation from the customer that he has deducted and paid the withholding tax. And be careful, the confirmation must be in the form prescribed by law! In practice, we also encounter cases where the withholding tax was deducted from invoices, but the customer did not pay it to the German tax office. He kept it. In such a case, the German tax office would not refund you any amount. Of course, such a case also needs to be addressed.

Watch out for deadlines

The withholding tax will not be refunded to you until after the end of the calendar year in which the withholding tax was deducted. This means that you may wait for your money for months. In addition, you must be registered, have a German tax number and cannot have any debts to the German tax office. The authorities check all of this in detail.

Also, do not delay in applying for a refund of withholding tax. If you miss the legal deadline, you will not see a cent of the money.

We provide a complete consulting service for clients who work or do business in Germany. We will issue a Freistellungsbescheinigung, prepare the necessary applications and documentation and safely guide you through the maze of German bureaucracy. ProfiDeCon experts have been helping entrepreneurs for over 10 years.