VAT when buying a building with Act 14 for rough construction

VAT when buying a building with Act 14 for rough construction

 

Question:
Hello!

A company that buys a building with issued act 14 for completed rough construction, built in 2015 with a announced price without VAT, must pay VAT upon purchase or after the purchase of the building. Is this building under construction recognized as an expense for tax purposes.

Thanks in advance!

 

Answer:

Hello,

The short answer to the first question is - yes, for the purchased building with issued act 14 for "rough construction" from 2015 must be charged by the seller and paid by your company VAT. The reasons for this are:

- The acquired building of "rough construction" in your case is "new" according to §1, item 5, letter a) of the VAT Act, because you already have act 14 (completed rough construction), and according to point b) you do not have act 16 for acceptance of a ready-to-use building, after the date on which the period of 60 months begins to run, after which the buildings are no longer "new".

- Even if the building was not new, if the person from whom you buy the building decides that the transaction will be taxable and includes VAT in the invoice (according to Article 45, paragraph 7 has the right to choose what the transaction should be) then you will have to pay VAT .

To the second question:

The purchase of a fixed asset (or the acquisition of a right to a fixed asset under construction) is an expense of cash (cash flow) but not an expense for the company. The costs for fixed assets are reported through the accrued depreciation in the process of using the buildings put into operation with Act 16. In your case, the costs incurred for the acquisition of a building under construction will be added to the costs until the completion of the building until the issuance of Act 16 for commissioning and only then will you be able to record it as a fixed asset for which you will start. to recognize for tax purposes expenses for the company in the amount of accrued depreciation of 4% per annum.

We hope we have been helpful.

Greetings!