Construction works

Tax on multi-year construction works

In construction, what makes tax difficult is timing rather than rates. Where a job spans more than one calendar year, income is declared in the year it finishes, not annually. Without knowing that rule, returns go wrong for years.

The basic rule

Is the job multi-year?

If the contractual start and end dates fall in different calendar years and the work rests on an undertaking, it is a multi-year construction and repair work.

Multi-year

Income declared on completion

No annual profit and loss is struck. Costs and progress payments accumulate per job; profit or loss is declared in the year of provisional acceptance.

Not multi-year

General rules

For work starting and finishing in the same year, the income belongs to that year and is declared under general provisions.

Mixed

Several jobs running

Each job is tracked separately. Shared costs are allocated between jobs on the basis set out in the law.

Progress payments

Withheld tax is not lost

Withholding on multi-year construction works5%

The rate applied to progress payments was raised from 3% to 5% by the Presidential Decision of 4 February 2021 and has applied since 1 March 2021.

Step	What happens
Progress payment issued	The employer withholds 5% of the amount
Declaration	The withholding agent reports it on a withholding return
During the years	The withheld amounts accumulate; income is not yet declared
On completion	Income is declared and all withholding across the years is offset against the tax calculated
Excess	Any excess is refunded or set against other liabilities

Costs

Allocating shared costs

A contractor running several jobs allocates costs not attributable to a single job between them on the basis set out in the law. General administration, off-site staff and shared plant costs fall here. Setting the allocation key at the outset and applying it consistently is the point most often challenged on audit.

A separate cost account is opened for each job and tracked per site.
Subcontracted work enters the relevant job's costs together with the subcontractor's progress payments.
Material despatched to site is matched to the cost entry through despatch documents.
Provisional and final acceptance dates determine the year of declaration and are kept on file.

Subcontracting

Points to watch

In construction works supplied to designated buyers, VAT withholding arises. Its scope and rate depend on the type of work and the buyer, are set out in the VAT General Application Communiqué, and change over time. Confirm the rate in force for your own work before signing.

Whether the subcontractor's work is itself multi-year is assessed separately; the withholding obligation follows from that.
Social security obligations in principal-employer and subcontractor relationships are tracked separately.
Progress payments, the works programme and acceptance records must be consistent with each other.

Frequently asked

My job spans two years — do I file every year?

In multi-year construction and repair works the income is declared in the year the work finishes. No income from that job is declared in the intervening years, though obligations for your other activities continue and the job's income is left out of advance tax.

Can I recover the tax withheld from my progress payments?

Yes. The 5% withholding is offset against the tax calculated on the return filed for the year the job finishes, and any excess can be refunded. Keep progress payment and withholding documents per job.

How is the completion date determined?

Where provisional and final acceptance apply, the date of provisional acceptance governs; otherwise the date the work was actually completed or abandoned. Because it determines the year of declaration, it should be documented.

I work as a subcontractor — is tax withheld from me too?

If the work you carry out is itself a multi-year construction and repair work, withholding applies to progress payments made to you. The character of the work follows from the contract and its duration, and each contract should be assessed separately.

This page is general information based on the legislation in force at the time of writing. Rates and amounts change. Talk to us before applying it to your own situation.

Other guides

Foreign income

Let us talk about your own position

The guides give the general framework. Let us work out which rule applies to your specific facts.

Request a meeting