Buying an office from a farmer

Buying an office from a farmer

 

Question:
Hello,

I am registered as an agricultural producer. I want to buy a studio that will be used as an office of the company for administrative purposes. At the moment it is only with a building permit. In about a month I will sign a preliminary contract with the investor. Payment will be in 3 stages.
My question is what goes to the cost of the company during construction and beyond?

Registered for VAT and taxable under Article 29a. I guess I will be able to use VAT on the three installments.

And can I use corporate tax under Article 189b?

Thanks in advance!

 

Answer:

Hello,

If you are a natural person registered as a farmer, then you do not recognize any costs. Your taxable income at the end of the year is determined after deducting from your income 40% / 60% of the value of income, statutory costs, depending on whether you produce processed or unprocessed agricultural products. Ie it doesn't matter what expenses you make during the year. For tax purposes, the income you have earned is reduced by a fixed amount - 40% or 60%.

If you are a legal entity registered as a farmer, then your taxable income at the end of the year is formed on the basis of profit (income minus expenses). In this case, the costs you will incur in connection with the purchase of your office already matter. If the premises you will buy will actually be used for administrative purposes - as an office from which you will carry out real activities for organization and management, then there is no problem for the purchase value to be recognized as an expense of the Company. Keep in mind, however, that this value will be recognized proportionately for 20 years. Ie if, for example, you buy an office worth BGN 200,000, then the annual rate of expenses that will be recognized to you amounts to BGN 10,000.00 (this is the so-called depreciation - depreciation of fixed assets). However, you will start reporting and recognizing expenses from the moment you start using the office.

Since you mentioned that the property you will buy will be used for administrative purposes, our opinion is that you could take advantage of the tax relief described in Art. 189b of CITA. Paragraph 2 clearly states that this relief relates to the purchase of buildings and equipment necessary to carry out the activities referred to in paragraph 1, namely the production of unprocessed plant and animal products. Ie you could take advantage of this relief if you use the property you are buying for production purposes and not for administrative ones.

We hope we have been helpful.

Greetings!