The Tax Relief Act for the Years 1999, 2000, and 2002 introduced a new income tax withholding provision for payments made to foreign contractors. The new rules came into effect on April 1 1999 and require domestic and foreign persons to withhold 25% of the gross amount of payments made from this date to foreign contractors for a wide range of work performed in Germany or perhaps simply used there. While the problem which provoked the new withholding rules involved non-compliance by foreign construction firms with their German tax obligations, the withholding provision actually enacted applies to all sectors of the economy and can include purely intellectual work such as that of architects, engineers, or attorneys as well.
August 31 1999