Construction services in Germany in 2026: VAT, §13b and 15% tax
A single construction project can trigger two independent mechanisms. Determine separately who settles VAT and whether the client should deduct the Building Tax.
§13b UStG and Bauabzugsteuer answer other questions
Both mechanisms may work with the same invoice, but they result from different laws and produce different effects.
Reverse charge
§13b UStG decides whether German VAT is declared by the contractor or the recipient.
Who settles VAT?Bauabzugsteuer
§§48–48d EStG decide whether the customer retains part of the payment.
Should I deduct 15%?The customer can simultaneously settle the VAT under §13b and transfer the 15% Building Tax to the Finanzamt. First, perform the VAT test, then a separate payment test.
German property usually means German VAT place
A service that has a sufficiently direct connection with a specific property is generally taxed at its location – in accordance with §3a paragraph 3 point 1 UStG.
Where is the property located?
Does the work concern her directly?
Does it operate as a foreign entrepreneur?
Company, legal entity or consumer?
Who reports German VAT?
Works interfering with the facility
Construction, renovation, repair, installations permanently attached to the building, roof, facade, finishing or demolition.
Design and supervision
They are excluded from the definition used in §13b section 2 point 4, but in the case of a foreign contractor point 1 may still be relevant.
The qualification is determined by the actual content of the service and the impact of the work on the substance of the object, not the name of the item on the invoice.
§13b in the case of a foreign contractor and in the domestic construction industry
The analysis usually starts with §13b paragraph 2 point 1. In the case of a business recipient, VAT is often settled by the customer.
The DE USt-IdNr. does not prove a German headquarters or the participation of the Betriebsstätte in the service.
The consumer generally does not bear the VAT. The contractor may need to register and charge VAT.
The threshold concerns the status of the entity permanently performing Bauleistungen in the model from point 4.
According to the UStAE, it primarily serves to assess whether the recipient permanently executes Bauleistungen for the special rule of §13b paragraph 2 point 4.
Reverse charge in Germany
See the full mechanism, invoice and tax moment: reverse charge in Germany.
Steuernummer, USt-IdNr. and W-IdNr.
The functions of German numbers are explained in the guide VAT Number in Germany.
USt 1 TG is not a Freistellungsbescheinigung
USt 1 TG
Confirms the recipient's as an entity permanently performing Bauleistungen.
- concerns reverse charge,
- validity maximum 3 years,
- does not protect payments from 15%.
Freistellungsbescheinigung
The contractor presents it to the client to avoid offsetting within the period and scope of validity.
- regarding payments,
- must be valid for transfer,
- does not determine who reports VAT.
The client may have a USt 1 TG, but the contractor may not have a valid Freistellungsbescheinigung. The documents are not interchangeable.
When does the customer deduct 15% of the Bauabzugsteuer?
The works are intended to construct, repair, maintain, alter or remove a structure.
Entrepreneur or legal person under public law; see residential exception.
Add up completed and planned work for the same client in a year.
The document must include the contractor, payment and the appropriate scope of work.
Total for all Bauleistungen of this contractor for one client.
Only if the recipient engages exclusively in certain exempt lease transactions.
A separate exception applies to works relating to apartments where the recipient rents no more than two apartments.
The thresholds add up the work performed and planned for the same recipient throughout the calendar year.
15% is calculated on the salary including VAT
Reverse charge invoice: EUR 100,000 net
The VAT is declared by the recipient, but §48 paragraph 3 EStG still requires it to be included in the basis of the Bauabzugsteuer.
Second example: EUR 50,000 net
The deduction does not reduce the value of the service. It only changes the amount paid directly to the contractor.
Note: 15% does not always mean 15% of the net amount shown on the reverse charge invoice.
How does Freistellungsbescheinigung work?
The certificate is issued by the relevant Finanzamt (Finance Office) at the contractor's request. It may be general or time-limited, for a specific client or project.
Jurisdiction depends on the seat and the rules of the UStZustV.
Prepare company details, contract, construction, residence and representative for acceptance.
Check the period, scope, customer, Steuernummer and Sicherheitsnummer.
The document must be valid for each advance payment and installment.
Check the document on the day of the first payment.
Each installment requires a separate validity check.
The invoice date does not replace the date of actual transfer.
An invoice dated September 20 is not protected if the customer pays on October 15 and the certificate expires on September 30.
EIBE before payment, Anmeldung after deduction
Control at EIBE
Customers can confirm the validity of their documents free of charge. They need the state, Steuernummer, and security number, among other things.
By the 10th of the following month
The customer reports the deduction electronically, pays it to the relevant Finanzamt and forwards the settlement with the payment details to the contractor.
It should indicate the contractor, invoice, payment date, tax amount, and Finanzamt (Tax Office). Without it, subsequent settlement or refund will be more difficult.
Which Finanzamt is the right one?
As of September 16, 2026 - UStZustV divides jurisdiction according to the first letter of the entrepreneur's surname or company name.
First letter of name or surname from A to G.
First letter from H to Ł.
First letter from M to R.
First letter from S to Z.
Before submitting, please check the current UStZustV, name spelling, and procedural exceptions. For some OSS procedures, Cottbus may be applicable regardless of the letter.
Bauabzugsteuer can be credited or recovered
Passing
The amount may cover, among other things, German payroll tax, advance payments and income tax or deductions from own subcontractors.
Return
If there are no obligations requiring security, the contractor may apply to the relevant Finanzamt for reimbursement.
20282026 notification.
From 2026, the application will be electronic as standard
The form is available from ELSTER. The deadline generally expires at the end of the second year following the year the offset was reported; longer contractual deadlines remain unaffected.
Application in ELSTER ↗The same contract can produce different results
| Model | VAT | Bauabzugsteuer |
|---|---|---|
| Foreign contractor → German entrepreneur | The client often settles §13b | 15% if §48 applies and there is no valid exemption |
| Contractor → private homeowner | VAT is usually settled by the contractor | An ordinary consumer generally does not deduct |
| Contractor → landlord | Depends on status and §13b | Check the number of apartments, the limit and the nature of the business |
| Contractor with valid Freistellungsbescheinigung | VAT analysis unchanged | No deduction in scope and validity period |
VAT registration possible
If the recipient does not accept VAT, the contractor may need to register locally. See VAT registration in Germany.
Unmarked 0%
The full requirements of the document are discussed in the German VAT invoice. The deduction does not reduce the sales value.
What most often disrupts construction settlement?
Reverse charge does not automatically exclude the 15% deduction.
The 10% test does not apply to every transaction by a foreign contractor.
What counts is the moment of payment, not the date of invoice issuance.
When reverse charging, the recipient's VAT must also be taken into account.
Construction Contract Checklist
- Determine the location of the property and the direct connection of the service with the facility.
- Describe the actual scope of work and the involvement of any Betriebsstätte.
- Verify the recipient's status: company, legal entity, landlord or consumer.
- Resolve §13b and the possible need for VAT registration.
- Check §48 EStG separately and sum up the work for the client in the year.
- Apply the appropriate threshold of €5,000 or the specific threshold of €15,000.
- Get Freistellungsbescheinigung before your first payment.
- Check the document with EIBE for each advance payment and partial payment.
- Determine the appropriate Finanzamt, residence certificate and Empfangsbevollmächtigter.
- In case of deduction, collect the settlement and determine the credit or refund §48c.
Local settlements are described in the guide to VAT declarations in Germany.
Secure VAT and payment before the first advance payment
We will analyze Section 13b, the risk of a 15% withholding, the relevant Finanzamt (Tax Office), and the documents required for the Freistellungsbescheinigung (Tax Deduction). We will also assist with settling any Building Tax (Bauabzugsteuer) that has already been collected.
Adrian Andrzejewski · CEO TaxenlightConsult the contractConstruction Services in Germany - Questions and Answers
Does reverse charge exclude Bauabzugsteuer?
No. The customer can settle the VAT in accordance with §13b and simultaneously deduct the 15% Building Tax. These are two independent mechanisms.
What is Freistellungsbescheinigung?
This is a certificate from the relevant Finanzamt (Tax Office) that exempts the customer from the Building Tax Deduction (Bauabzugsteuer) for the period and scope of validity. It must be valid at the time of payment.
Does USt 1 TG replace Freistellungsbescheinigung?
No. USt 1 TG concerns the status of the recipient for §13b UStG, and the Freistellungsbescheinigung protects the contractor's payment against offsetting under §48 EStG.
How much is the Bauabzugsteuer?
15% Gegenleistung, i.e., remuneration including VAT. Reverse charge also takes into account the VAT settled by the recipient.
What are the Bauabzugsteuer thresholds?
The standard threshold is €5,000 per year for work performed for the same client. A specific threshold of €15,000 applies to a client performing only certain exempt rental activities.
Does the certificate have to be valid on the invoice date?
The timing of payment is decisive. Validity on the invoice date is not sufficient if the document expires before the transfer.
Does the Bauabzugsteuer include advance payments?
Yes. Advance payments, milestone payments, partial payments, and final payments are analyzed separately.
Until when can I claim a refund of the 2026 deduction?
The standard deadline is 31 December 2028. Longer deadlines resulting from double taxation treaties remain unaffected.
Four elements that cannot be combined
The outcome depends on the transaction and the status of the parties.
This is a separate test for payments.
What counts is the scope and validity at the time of transfer.
USt 1 TG is for VAT, not for Bauabzugsteuer.
