According to Article 42 of the Income Tax Law, in construction and repair projects that span more than one calendar year, the profit or loss is definitively determined in the year the project is completed, and the entire amount is considered income for that year and must be declared in the tax return for that year. Article 44 of the same law states that for construction and repair projects subject to provisional and final acceptance procedures, the date on which the provisional acceptance report is approved by the relevant authority is considered the completion date. In other cases, the date on which the project is actually completed or abandoned is accepted as the completion date.
Whether a construction contract is considered long-term depends on whether the start and completion of the project occur in different calendar years. If the parties have stipulated in the contract that the project will be completed in the following calendar year, taxation will be based on progress payments accordingly. The completion date is crucial in determining whether a project is long-term; however, even if the contractor promises to complete the project earlier than planned, this does not require a change in the taxation regime. Therefore, tax withholding should be applied to payments made to contractors for such projects.
Source: GİB
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