Whether you’re establishing a business, working in construction, or purchasing real estate, the tax clearance certificate verifies that you’ve met all legal and financial obligations, boosting trust and legal assurance.

In this article, we’ll explain what a tax clearance certificate is, when you need one, and how you can apply for it. We’ll also outline the anticipated costs and what information is included on a tax clearance certificate issued by the tax office.

What’s in this article?

• What is a tax clearance certificate?
  
• When is a tax clearance certificate required?
  
• How do I apply for a tax clearance certificate?
  
• What information is included on a tax clearance certificate from the tax office?
  
• What does a tax clearance certificate cost?
  

What is a tax clearance certificate?

A tax clearance certificate (“Unbedenklichkeitsbescheinigung”) is an official document that private individuals and businesses can apply for from the tax office. Also called a certificate in tax matters (“Bescheinigung in Steuersachen”), it shows that tax issues and payment behaviour are in good standing.

Essentially, it shows that owners are always up-to-date on taxes and any other obligations, or if there are any tax arrears. A clearance certificate from the tax office guarantees to banks, municipal authorities, and public clients that they can trust the financial reliability of individuals and businesses.

In addition to the tax clearance certificate, which is issued solely by the relevant tax office, there are other clearance certificates. These can be obtained from health insurance companies, employers’ liability insurance associations, or local municipalities and cities.

When is a tax clearance certificate required?

A tax clearance certificate is required in different scenarios involving business operations or financial responsibilities. Among other things, it is required:

• When buying real estate
  
• When disbursing a loan
  
• When registering a business
  
• For building projects
  
• For new company names
  

Tax clearance certificates for real estate purchases

A tax clearance certificate from the tax office is necessary for individuals or companies wishing to purchase land or property. This requirement exists because ownership in the land register requires individuals or companies to be listed as the property owner. However, this entry is only processed once the corresponding land transfer tax has been paid. Therefore, the tax clearance certificate serves as proof that the land transfer tax has been paid, allowing subsequent entry into the land register.

According to Section 22 of the Real Estate Transfer Tax Act, “the tax office will issue the certificate once the real estate transfer tax has been paid, secured, deferred, or if tax exemption applies. The certificate may also be issued in other cases where, at its discretion, the tax claim is not at risk.” The tax office must issue the certificate in writing. This means that the certificate may not be transmitted electronically. In practice, tax clearance certificates are usually requested from the tax office by the relevant notaries.

However, there are cases in which property buyers do not need a tax clearance certificate. For example, this exemption applies if the purchase price is less than €2,500. In this case, no land transfer tax is due. As a result, the property can be registered without the need for a tax clearance certificate. In addition, the certificate can be waived if the owners of a property sell it to direct relatives, such as children, grandchildren, parents, or grandparents.

Clearance certificates for loan disbursement

Banks usually approve loans for property purchases only after the new owners have been registered in the land registry. Therefore, a tax clearance certificate from the tax office is mandatory for such loans.

In addition, banks often require tax clearance certificates from health insurance companies when individuals or companies subject to taxation apply for a loan. These certificates show the number of employees covered by the company and whether there are any outstanding contributions. If employees are registered with different health insurance companies, or if the employer is a member of more than one health insurance company, certificates must be obtained from each health insurance company. These certificates serve as proof to banks of the company’s reliability in making payments.

Clearance certificates for business registration

When registering certain businesses, it is necessary to obtain a tax clearance certificate from the relevant city or municipality. This is to ensure that there are no outstanding claims for taxes, fees, or property levies directly related to the business activity.

The relevant Chamber of Commerce and Industry has information on which businesses need a tax clearance certificate. These include companies offering security services, passenger or goods transportation, real estate agents, financial services providers, as well as operators of restaurants, cafés, bars, and other catering establishments. The business will only be approved once the tax clearance certificate has been issued.

Clearance certificates for construction projects

To bid on public tenders for construction projects, companies must acquire multiple clearance certificates. This ensures that public contracts are awarded only to companies that are reliable and financially sound.

The tax clearance certificate from the tax office serves as confirmation that the company has settled all of its tax obligations. An additional certificate is needed from the employers’ liability insurance association. This certificate confirms that all employees of the company are registered and insured with the employers’ liability insurance association. It also certifies that there are no outstanding contributions to statutory accident insurance.

The third required clearance certificate must be issued by the health insurance companies with which the company or its employees are insured. Construction companies can use this to demonstrate that they have no outstanding payments for social security contributions. This is particularly important for potential clients because they are responsible for the contractor’s insurance contributions, similar to a guarantor (see Section 28e of the Social Code, Book IV). They may therefore be liable for any unpaid social security contributions.

For public construction contracts, clearance certificates must be part of the bidding documents. For private construction projects, they must be available at the time the contract is signed.

Clearance certificate for new company names

Choosing a company name is the responsibility of the respective company, but companies should check its chosen name carefully: it could already be in use, be too similar to an existing name, or potentially violate applicable laws. Therefore, the competent local courts check whether new company names are permissible. If the company name is legally compliant and not already registered by another entity in the Commercial Register, the competent authority issues a clearance certificate for the company name.

Overview: Scope of application and competent authorities

How do I apply for a tax clearance certificate?

You can request a tax clearance certificate from the tax office informally: in writing, by phone, or electronically via ELSTER. The information and documents required may vary from state to state. You must provide your name, often along with a copy of a valid form of identification. Generally, you will also need to provide your tax identification number and/or taxpayer identification number. You should also state why you need the certificate and how many copies you need. Anyone who has paid their tax debts to the tax office and is considered financially reliable is entitled to a tax clearance certificate.

You can also request a certificate of good standing informally from health insurance companies. This can be done by phone or email. Some health insurance companies also offer this service through a web portal. The only requirement is that the company must have an account with the relevant health insurance fund.

Employers’ liability insurance associations and city or town governments are usually happy to accept informal applications. However, you might need to submit various documents for approval. Municipalities may require additional documents, such as a copy of the registration with the trade office or an extract from the Commercial Register.

In principle, third parties with power of attorney can also apply for tax clearance certificates. These include tax advisors and notaries.

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What information is included on a tax clearance certificate from the tax office?

A tax clearance certificate from the tax office includes details about the individual or company and their tax status in previous years. They state solely facts, not opinions. A tax clearance certificate from the tax office includes, among other things:

• Name and address
  
• Date of birth or date of foundation of the company
  
• Tax number and tax identification number
  
• Types of taxes imposed, including income tax, corporate income tax, value-added tax (VAT), and wage tax
  
• Amount of tax debt
  
• Timeliness of payments
  
• Timeliness in the filing of tax returns
  
• Information on tax crimes or tax violations
  

The tax clearance certificate from the tax office has no expiry date, since it is just a representation of the tax history. It is up to the recipients requesting the certificate to determine if it is sufficiently up-to-date. The clearance certificate must remain unaltered and in its original form. It must also bear an authorised signature and official stamp of the issuing tax office.

What does a tax clearance certificate cost?

The fees for a tax clearance certificate can vary widely based on the issuing authority, the federal state, and the specific context in which it is needed. For example, as of 2024, applying for a tax clearance certificate from the tax office in Berlin incurs a one-off fee of €17.90. However, if the certificate is issued for predominantly public interest purposes, such as when applying for public contracts, the fee may be waived.

To qualify for the fee waiver, a statement specifying the purpose of the certificate is required. In North Rhine-Westphalia, tax clearance certificates issued by the tax office are generally provided free of charge. Typically, fees at tax offices across Germany range from €0 to €20.

The costs are similar for social security agencies and other institutions. The fee varies depending on the institution and the specific situation. In real estate transactions, the fees for tax clearance certificates are usually included in the notary fees, since notaries handle the application process.