Tax deduction for construction work
The tax deduction for construction work (also known as building withholding tax ) is a special form of income tax or corporation tax in Germany. The building withholding tax is regulated in Sections 48 to 48d of the Income Tax Act (EStG). The building withholding tax levied is offset against the wage tax to be paid by the service provider, advance payments against income tax or corporation tax. The building withholding tax must not be confused with the sales tax levied in the deduction process.
Legal basis
The building withholding tax was introduced by the law to curb illegal activity in the building trade of August 30, 2001. Through this article law , corresponding provisions have been inserted into the tax code and the income tax law. The tax deduction is to be made for the first time for construction work performed after December 31, 2001.
target
Curbing illegal activity has previously been the subject of legislative proposals. The projects related, among other things, to obtaining information at an early stage by expanding the reporting requirements and securing tax revenue through a tax deduction at the source.
With the Tax Relief Act 1999/2000/2002, a withholding tax was introduced on April 1, 1999 on remuneration to foreign service providers ( Section 50a (7 ) EStG ). According to this, a German client was obliged to make a deduction of 25 per cent from remuneration paid to a contractor based abroad and to pay it to the tax office . According to the EU Commission, this regulation contradicted the principle of proportionality and restricted the freedom to provide services in the EU. The regulation has therefore been repealed by the Tax Adjustment Act 1999.
With the disappearance of the EU's internal borders and the greater permeability of the EU's external borders, illegal activity has also increased. It has been shown that the existing legal regulations to secure the tax claim, especially against dubious service contract companies and service contract workers, are not sufficient.
Tax claims can arise due to the wage tax or income tax liability of the illegally employed employees as well as due to the income tax / corporation tax liability of the domestic (sub) company itself. Concealment and evasion models for highly mobile companies are offered on the market. The complex legal matter, which mostly also has international dimensions, is exploited. The tax administration's dilemma is that it is often not aware of the illegal activities of dubious companies or is too late. Even if it becomes aware, the necessary steps often cannot be taken immediately. In addition, the type and scope of the activity can often no longer be determined in retrospect, those responsible are no longer tangible, and attempts to investigate and enforce them remain unsuccessful.
Concept of construction work
According to Section 48 (1) sentence 3 of the Income Tax Act, the term construction work is understood to mean all services that are used for the manufacture, repair, maintenance, modification or removal of structures.
Tax deduction by the recipient of the service
If someone in Germany provides construction work (supplier) to an entrepreneur within the meaning of the Value Added Tax Act or to a legal entity under public law (service recipient ), the service recipient is obliged to deduct a tax of 15 percent from the consideration for the account of the service provider (= Building deduction tax) and to be paid to the tax office.
The tax does not have to be deducted if the supplier presents the recipient of the service with a certificate of exemption valid at the time of the consideration . In addition, the legislature has created de minimis limits: the building withholding tax is not to be levied if the consideration in the current calendar year is not expected to exceed € 5,000. This exemption limit increases to € 15,000 if the recipient of the service only provides VAT-free rental sales.
If the recipient of the service does not rent out more than two apartments, he is exempt from tax deduction in relation to these two apartments.
The recipient of the service must register the withholding tax withheld by the 10th day of the following month at the tax office responsible for the service provider and pay it there. The recipient of the service must settle the tax deduction with the service provider and state the name and address of the service provider, the invoice amount, the invoice date, the date of payment and the amount of the tax deduction and the tax office at which the deduction amount was registered.
Web links
Individual evidence
bibliography
- Zenthöfer / Schulz zur Wiesche: income tax (blue row). , Schäffer-Poeschel-Verlag, Stuttgart 2009, ISBN 978-3-7910-2826-2 .