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How is the sale of land on the balance sheet of legal entities subject to tax?
How is the sale of land on the balance sheet of legal entities subject to tax?
According to Article 108.1 of the Tax Code, all expenses related to the generation of income, except for expenses not deductible from income, as well as mandatory payments stipulated by law, are deducted from income. Expenses deducted from income must be formalized in accordance with the procedure established by law, otherwise, deduction of unformalized expenses from income is not allowed. So how should legal entities calculate and pay tax when selling land on their balance sheet? Expert Mahmud Abasguliyev clarifies the question on the subject:
When individual entrepreneurs sell their land on their balance sheet, they calculate in accordance with the purpose and size of the land (sq. m. or ha) based on Article 218.4.5 of the Tax Code and pay simplified tax. Legal entities, when selling land on their balance sheet, pay profit tax after deducting expenses from income in their profit tax declaration.
Example: The company "XX" sold 7 ha of land worth 100,000 manats on its balance sheet to another taxpayer for 170,000 manats. In this case, the company will pay 14,000 manats in profit tax:
170,000 -100,000 = 70,000 manats;
70,000 x 20% = 14,000 manats.
In addition, since, according to Article 13.2.8 of the Tax Code, the sale of land is not considered goods for VAT purposes, after making a corresponding entry in the VAT-exempt box in the electronic invoice, the enterprise will declare 170,000 manats in the VAT return in box 336 of the VAT-exempt operations section of Appendix 3 to this article and submit it to the State Tax Service.
Let us also remind you that the sale of land, regardless of whether it is to individuals or legal entities, must be carried out through a notarial process.
According to Article 108.1 of the Tax Code, all expenses related to the generation of income, except for expenses not deductible from income, as well as mandatory payments stipulated by law, are deducted from income. Expenses deducted from income must be formalized in accordance with the procedure established by law, otherwise, deduction of unformalized expenses from income is not allowed. So how should legal entities calculate and pay tax when selling land on their balance sheet? Expert Mahmud Abasguliyev clarifies the question on the subject:
When individual entrepreneurs sell their land on their balance sheet, they calculate in accordance with the purpose and size of the land (sq. m. or ha) based on Article 218.4.5 of the Tax Code and pay simplified tax. Legal entities, when selling land on their balance sheet, pay profit tax after deducting expenses from income in their profit tax declaration.
Example: The company "XX" sold 7 ha of land worth 100,000 manats on its balance sheet to another taxpayer for 170,000 manats. In this case, the company will pay 14,000 manats in profit tax:
170,000 -100,000 = 70,000 manats;
70,000 x 20% = 14,000 manats.
In addition, since, according to Article 13.2.8 of the Tax Code, the sale of land is not considered goods for VAT purposes, after making a corresponding entry in the VAT-exempt box in the electronic invoice, the enterprise will declare 170,000 manats in the VAT return in box 336 of the VAT-exempt operations section of Appendix 3 to this article and submit it to the State Tax Service.
Let us also remind you that the sale of land, regardless of whether it is to individuals or legal entities, must be carried out through a notarial process.