Doing business in Germany represents a huge opportunity for construction companies. However, the local bureaucracy is uncompromising and penalises every mistake. To ensure you do not face devastating fines instead of profits, you must meet all obligations 100% from day one.
If you plan to post employees to construction projects in Germany, consult experts in advance regarding your obligations towards German institutions. Otherwise, you risk getting lost in the maze of German bureaucracy and seriously endangering your business plans.
This blog provides an overview of the individual obligations you must fulfil to avoid unexpected fines in Germany and focus fully on your contract.
A Stop Sign from the HWK Chamber of Crafts
Many companies mistakenly believe that if they hold an unregulated trade licence at home, they can start building in Germany immediately. This is a mistake! If your work falls under German regulated trades (Zulassungspflichtige Handwerke), you must notify the German Chamber of Crafts (HWK) before starting the project. You are not allowed to begin work without a confirmation approving your notification of activity. German clients frequently request this confirmation and will block the start of cooperation if you do not have it.
Customs Registration and the Minimum Wage
It is also necessary to register your employees with the German Customs Office before work begins. The notification must include the exact address of the construction site, the project schedule, and the details of a designated responsible representative. Pay attention to detail—the German Customs Office imposes fines of up to €30,000 not only for failing to register, but also for providing incomplete information!
Wages are closely linked to this registration. As an employer, you must comply with the relevant sector-specific wage in Germany and keep precise records of hours worked.
Mandatory Contributions to SOKA-BAU
The German holiday fund, SOKA-BAU, is a major concern for many businesses. If you carry out construction work in Germany, registration and monthly reporting are mandatory. You must contribute 15.1% of your employees’ gross wages. If you bypass this fund, you risk retrospective calculations of contributions going back for years, which could bankrupt your company.
Save 15% of Your Invoices
If you do not want your German client to automatically deduct 15% from every invoice you issue, you need an exemption from the construction withholding tax—known as Freistellungsbescheinigung.
However, this obligation applies throughout the entire subcontracting chain. If you hire other companies or self-employed contractors, you must request this exemption from them as well. Otherwise, you are the one required to deduct 15% from their payments and transfer it to the German Tax Office.
This is linked to the obligation to file German VAT returns. When posting employees, you also face the duty to file payroll tax returns. A single delayed filing is enough for the authority to refuse to issue a new exemption until all obligations are met. Your money will then remain blocked in Germany, and the recovery process takes months.
If you plan to expand into Germany, do not take risks. Before leaving, check the validity of your A1 forms, translate employment contracts into German, and prepare for on-site inspections.
Are you planning a project in Germany and want to avoid wasting time on bureaucracy? We will gladly handle the entire registration process and all communication with the authorities. ProfiDeCon has been helping companies do business in Germany for over 15 years.