Construction Withholding Tax
What Is Construction Withholding Tax
Construction Withholding Tax (Bauabzugsteuer)is a German tax requirement under which businesses in the construction sector must withhold 15% from payments made to contractors and remit that amount to the German Tax Office (Finanzamt). This applies when the payment is for construction services.
Zoho Spend lets you track CWT on your transactions so that the withholding is recorded correctly.
Enable Construction Withholding Tax
Prerequisite: VAT must be configured in your organisation before you can set up Construction Withholding Tax. See VAT Settings.
To enable CWT in your organisation:
- Go to Settings on the left sidebar.
- Click VAT under Taxes & Compliance.
- In the VAT pane, click Construction Withholding Tax.
- Click Let’s Get Started if you are setting this up for the first time.
- Set Do you want to track CWT on transactions? to Yes.
- Under CWT Role, select Contractor.
- Click Save.
Set Up CWT Tracking for a Vendor
Once CWT is enabled in your organisation, you can mark individual vendors as subcontractors subject to CWT. This adds a Covered by CWT? checkbox to bills you create for that vendor.
To enable CWT tracking for a vendor:
- Go to Vendors on the left sidebar.
- Open the vendor record and click Edit.
- Under the Other Details tab, locate the CWT Preference field.
- Check Enable CWT tracking for this Subcontractor.
- Enter the vendor’s Verification Number if applicable.
- Select the CWT Deduction Rate either CWT @ 0 or CWT @ 15.
- Click Save.
| Field | Description |
|---|---|
| Enable CWT tracking for this Subcontractor | Check this to activate CWT withholding for the vendor. Once checked, the CWT Deduction Rate becomes a required field. |
| Verification Number | The vendor’s tax identification or verification number. |
| CWT Deduction Rate | The withholding rate to apply: CWT @ 0 (exempt) or CWT @ 15 (15% withholding). |
CWT in Bills
When you create a bill for a vendor that has CWT tracking enabled, the item table includes a Covered by CWT? column. Check this checkbox for each line item that is subject to CWT withholding.
To create a bill and apply CWT:
- Go to Payables on the left sidebar and select Bills.
- Click + New in the top right corner.
- Select the vendor with CWT tracking enabled.
- Add line items as needed.
- In the item table, check Covered by CWT? for each item subject to construction withholding.
- Click Save as Draft or Save as Open.