Building of construction projects means erection of structures with bricks, armored concrete and other construction materials. The construction of infrastructure for passenger and freight transportation includes work processes related to roads, bridges, airports, ports, etc. All types of construction apply similar construction methods therefore the following elements should be ensured before the audit:
The landowner or buyer of land upon which the infrastructure project will be constructed should have details of estimates and implementation projects presented for doing the work.
Data on landowners’ shares – land can be property of several families and there can be an agreement to pay for the land which allows for ownership of one or more apartments for each family as a means of payment for the land.
Specific details about the work to be done should be prepared before signing the contract, including costs.
Tax personal number with the address of the building project.
Safety rules and employment contracts as well as collective employment contracts
Data about subcontractors to be used and the agreements specifying their responsibilities.
A budget accompanying the data about how the project is financed.
The term subcontractor implies that the process of work is done through a contract signed with the supplier providing the workers. The subcontractor has all the responsibilities related to the employment of individuals, e.g. payment of social and health insurance contributions and income tax, etc. These payments should form part of the total calculations of the construction project, based on the percentage of work the subcontractor will do. The subcontractor should be paid the entire sum for the work done and he should also have data in the form invoices, prepared by different parties.
What about VAT issues?
VAT should be paid on the amount of work done during the particular month. Invoices between owner/constructor and subcontractor should be standard invoices given by tax administration approval and they should be issued every month. All invoices from other suppliers should be obtained at the moment of supply, e.g. when the cement, iron, bricks, etc. are sent. Other accounting data such as purchase and sale registers should be presented together with the stock inventory and materials already being used in the work process. The data should be presented in the common way the bookkeeping is kept, although accounts may regard a particular construction project.
When a construction contractor is engaged in more than one construction project, the accounts should separately reflect costs for each construction project, in order to determine the final total cost.
At the end of the construction project, a crosscheck is done to verify the amount paid for VAT every month and the VAT to be paid in the final sale. The seller is not required to pay VAT on eventual sales for surface areas, assuming that this is a block of construction projects.
Below are some important issues related to construction taxable revenues:
Preparing a list of subcontractors to be used for this construction project and if possible make a simultaneous audit of each subcontractor.
Each construction project is accompanied with a construction plan with number of floors, rooms, etc.
Asking the technical director of the construction project about the system used against theft and the type of safety in the construction site (private guards, etc.).
After the construction project has finished, matching the total number of windows, shower units and similar things with the respective invoices and send periodic references to the respective tax office administering the suppliers in order to be able to compare the data during the next audit of suppliers.
If there is an agreement allowing the transfer of property of some apartments to different individuals, for example, because they owned the land, it is necessary to examine the content of each agreement in order to determine the compensation value received by the landowners. This will serve as one of the orientations to refer to when re-characterizing the sale price.
In addition to a detailed audit of monthly declarations on the progress of work done during the month, the two main following audits should be randomly conducted.
Since it is now a common practice to employ workers without any kind of documentation, it might be necessary, on a case basis, to surround construction sites with fences and interview the employees found in the site at the moment and afterward comparing them with employment contracts.
– Each individual inside the Electrician Apprentice Salary site territory should be identifiable, with names, numbers, etc. This should match the data made available by principal contractors and subcontractors.
– The information from the state labor inspectorate as regards safety measures and site to be audited will be necessary to produce maximum effect.
– After the inspectorate and auditors to be engaged in the audit are informed, they should immediately be sent to the construction site in order to prevent different individuals from sending the information to the sites to be audited and the time of the audit.
– Only a minimum number of staff should be engaged in this plan and no data should be provided as to when and where the audits will take place.
The second exercise includes only the types of common investigation. After the Building Contractor Jobs project has finished, the contractor transfers the property to the investor financing the construction project or to those who will either use or sell the apartments.
– Determining the market price for apartment sales and calculate the total possible sales through: – an investigator from tax office which shows his interest to buy an apartment block would find it pretty easy to determine the real sale price – the value received as compensation percentage of the total construction project (landowner/project surface area in m² = sale price); – the value applied by domestic and international institutions and organization with good reputation (banks, institutes, organizations, public institutions, etc.).
– Considering the value of the construction project at the moment it is finalized, calculate the profit level and make sure that the profit is reflected in company’s accounts or individual sales of apartments by year.
A tax official must be suspicious when is noticed that sale prices for surface area of construction projects are massively in the thresholds established by VAT Law. According to this law, if the amounts of surface areas sold at this minimum price level are constructor’s own product or part of the asset inventory of a taxable person’s economic activity, they should not exceed the limit of private use, which includes normal family consumption, other employed persons, relatives and friend of taxable person.
Construction