Construction tax refund - reclaim Bauabzugsteuer from Germany

Construction services tax refund in Germany

Many Polish companies operate in Germany, providing construction and renovation services there. When such services are provided to another entrepreneur, a necessary element is having Freistellungsbescheinigung, meaning an exemption from construction services tax. Otherwise, the client is required to withhold 15% of the remuneration for this construction services tax. How can you apply for exemption from paying the tax? If 15% of the amount has been withheld, can you apply to recover it? And importantly, why is it worth entrusting this task to our company?

Application for a construction services tax refund - can the withheld construction tax be recovered?

Yes, this is possible. A Polish construction company may apply for a tax refund. This is possible on the basis of a tax residence certificate, which should be issued by the Polish tax office. The Polish company is obliged to inform the German authority that it is a tax resident in Poland. In this entire process, it is important that such a company has not worked for longer than 12 months on one construction site, because otherwise it will be treated as a Polish branch in Germany. A tax refund may be requested for up to two years back. When submitting an application for a tax refund, it is necessary to attach, among other things, a copy of the declaration that the client sent to the German authority when paying the due construction services tax, which contains information including the amount of tax withheld. The tax office in Germany reviews the application and, if all necessary tax obligations have been met, returns the construction services tax previously withheld by the client. It is also very important that, when applying for a tax refund, tax residence with respect to the German tax office is up to date for all years in which services were provided in Germany. Otherwise, the construction services tax refund will not be paid out.

Freistellungsbescheinigung - exemption from construction services tax

Is every entrepreneur required to withhold construction services tax? Yes, if a company from Poland does not have exemption from paying construction services tax, meaning Freistellungsbescheinigung. Both Polish and German companies operating in this country are required to collect tax from subcontractors who are not exempt from paying it, which is why arranging all these formalities before starting construction work in Germany is such a key element. The Finanzamt issues the exemption for a fixed period of up to 3 years.

This form of tax exists to prevent illegal construction work in Germany. This type of tax forces companies to contact the German tax office, which means there is no possibility of performing work without a contract.

Who can recover Bauabzugsteuer?

A construction services tax refund in Germany is available to companies that meet specific formal and tax conditions. In practice, this means that not every company will automatically recover the withheld 15% - the way the business is conducted and the correctness of the documentation are crucial.

A Bauabzugsteuer refund may be requested primarily by entrepreneurs who:

• provided construction services to other companies in Germany,
• did not have a valid Freistellungsbescheinigung at the time the order was carried out,
• have a tax residence certificate,
• did not exceed the limit of 12 months of work on one construction site,
• are able to document the tax withholding by the client.

We analyze each case individually, checking whether all requirements of the German tax office are met. This allows us to minimize the risk of rejection of the application and speed up the entire refund process.