What is multi-year construction and repair work?

Multi-year construction and repair work (yıllara sari inşaat ve onarım işi) is construction or repair work that doesn’t finish in the calendar year it starts and runs into the next year or beyond. Article 42 of Turkey’s Income Tax Law (Gelir Vergisi Kanunu, GVK) covers it under the heading “construction and repair work spanning more than one calendar year.” In practice, it’s known as yıllara sari or yıllara yaygın construction.

For tax purposes, profit on this work isn’t calculated year by year. It’s calculated once, when the work is finished, much like the completed-contract method.

When is profit or loss determined?

Under Article 42, for construction and repair work spanning more than one calendar year, profit or loss is determined definitively in the year the work is completed. The full amount counts as that year’s income and is reported on that year’s tax return. Overburden stripping (dekapaj) also counts as construction work.

The taxpayer must show the revenue and expenses of each construction and repair job in a separate ledger, or on separate pages of the ledgers it keeps. That’s why progress billings (hakediş) received and costs incurred while the work is underway are tracked in each job’s own account, and profit is calculated when the job is finished.

If several jobs run in the same year, Article 43 sets out how shared overhead and depreciation are allocated. Shared overhead is allocated in proportion to each job’s expenditures. Depreciation on shared installations, machinery, and vehicles is allocated by the number of days each was used on each job.

How is the completion date determined?

Under Article 44, for work subject to provisional and final acceptance, the completion date is the date the contracting authority approves the report confirming provisional acceptance. For other work, it’s the date the work was actually completed or actually abandoned.

Expenses incurred and revenue earned on the work after the completion date go into the profit or loss of the year in which they arise. On public works, the approval date of the provisional acceptance report therefore matters for tax, too.

Withholding tax on progress billings

Under Article 94(3) of the Law, tax is withheld (tevkifat) from amounts paid to those carrying out work covered by Article 42, corporations included. The withholding also covers advance payments. The public administrations, trading companies, and other payers listed in the article withhold the tax when they pay.

The same article authorizes the President of Turkey to reset the withholding rate. Because the rate can change, check the presidential decision in force on the payment date to confirm which rate applies.

Multi-year construction in IWB

In IWB, multi-year work is tracked across Contracts, Accounting, and Projects. In Contracts, withholding for multi-year construction and repair work comes built in among the progress billing deductions. The rate is defined in Settings, and your organization maintains it.

On the contract’s “Acceptance and termination” tab, the application, committee, report, and approval dates for provisional acceptance are each recorded separately.

At provisional or final acceptance, IWB suggests a closing entry for each contract’s revenue and withholding and prepares a draft journal entry. It suggests the accrual but doesn’t post it. For stamp tax on a signed contract, IWB likewise prepares a suggestion and a draft journal entry.

Site costs are collected in Projects. Approved purchase orders are posted to the project as commitments; purchase invoices, expense vouchers, and approved hours are posted as actual cost. Stock materials issued from the warehouse to the site aren’t posted to project cost, and the project’s profitability view flags this with a “Stock materials not included” warning.