Purchase of a plot of land and construction of a building from EOOD

Purchase of a plot of land and construction of a building from EOOD

Question:
Hello!

I am the owner of EOOD, whose activity is grain trade. Is it possible for the company to buy a plot of land and build a house that will actually be an asset of the company? What would be the procedure? Will we be able to use DC from the issued invoices for construction materials? How should these costs be reflected in account 602, 601 or 609 as other costs?

Thanks in advance!

Answer:

Hello,

In principle, there is no obstacle for an EOOD to buy a plot of land and build a building on it (of course it has to be done through a company that has the right to build for the respective category of building you intend to build. You cannot build directly, because I guess the company you manage does not have the necessary license from the Chamber of Construction, personnel and technical potential required to perform construction and installation work.)

Construction costs are reported through a group of accounts 60 depending on their nature, but calculatively after the closure of costs in groups 60 are accumulated in a separate account - costs for acquisition of fixed assets. When the building is completed and you receive Act 16 (Act for completion and commissioning), with the value of all accumulated costs collected in the account for costs for acquisition of fixed assets, the building is recorded in the company's assets as a separate fixed assets - building.

You should keep in mind that in order to use the depreciation of the building you will build as a cost, its operation must be directly related to the company's activities. Moreover, if the building assumes its partial or full use for personal needs, it will have to reimburse in full or in part the tax credit used by the company for the construction of the building through the methods provided by the regulations.

We hope we have been helpful to you.

Greetings!