In Construction Agreements in return for land, there are two types of delivery:
- Delivery of land by the land owner to the contractor
- Delivery of residence or workplace in return of land by the contractor to the land owner
The VAT situation in these deliveries in Turkish Law is;
- If the land delivered to the contractor is part of a commercial enterprise or the owner who delivered the land frequently deals in real estate trades, the delivery of land in return of residence or workplaces are subject to VAT applications. But if the land owner in situations where is not a real taxation obligatory, as an incidental process the delivery of land to the contractor in return for residence or workplace is not subject to taxation.
- VAT is applied in; deliveries made by the contractor for land in return for residences or workplaces over precedent value.
What are the changes made through Article 1 of the Code Numbered 7104?
- The delivery made by the land owner does not contain the whole of the land but only the percentage of land which is considered the share of the Contractors residence or workplace once the construction is complete.
- The delivery made by the Contractor to the land owner contains the delivery of residence or workplace in return for percentage of the land.
Due to these new applications, especially the partial delivery method, the land owners shall now invoice (with VAT) only the land that falls to its own share of residence or workplace.
Also, with the changes made through Article 7 of Code Numbered 7104 and Article 27 of the VAT Code, in the determination of worth in construction jobs for land, for the residence or workplace delivered to the land owner by the contractor, the cost price procedure under Article 267 of the Tax Procedure Law shall be used.
In conclusion, this proportional taxation shall be much more advantageous for land owners, developers and contractors. Certain concerns over the taxation uncertainty in construction jobs in return for land, in return for flats and respective deliveries are cleared through the changes made in the regulations.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.