Land subdivision operations: their tax treatment (VAT)

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  • What are the steps for obtaining the subdivision permit?
  • What are the stages of a land subdivision operation?
  • What is the treatment of land subdivision operations in terms of VAT?
  • What is the tax situation of the owners of the land developer?

Definition:
A subdivision is made up of a set of lots through the division of land in order to be able to put buildings there that will be sold together or separately after the developer realizes:

Access roads
Collective spaces
Viability works
Connection works to:
Water supply networks
Electricity supply networks
Sewer networks
Telecommunication networks

What are the steps for obtaining the subdivision permit?

In order to create a subdivision, the developer must have obtained authorization from the president of the municipal council, for this the developer must file an application for authorization at the headquarters of the municipality where the subdivision is located.

This application requires the following documents:

Certificate of conservation of land ownership which certifies that the land to be subdivided is registered or in the process of registration
A topographic map;
Any document for the urban design of the subdivision (composition of the subdivision and its integration into the sector);
Technical documents relating to the construction of roads and various networks (water, sanitation, electricity).
A plan issued by the conservation of landed property specifying the limits of the property subject to the subdivision
The regulations on the creation and development of subdivisions are subject to administrative law, while the relations between the developer and the purchasers of the lots and the relations between the purchasers of these lots are subject to private law.

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What are the stages of a land subdivision operation?

Land subdivision operations consist of:

First phase: laying of water and sewer pipes;
Second phase: electrification;
Third phase: communication cabling;
Fourth phase: construction of pavements and roads;
Fifth phase: construction and/or laying of curbs, sidewalks;
In general, any operation aimed at transforming raw land into building land.
The developer must proceed with the drafting of regulations, specifications and, possibly, the statutes of a trade union association bringing together the colotis.

What is the treatment of land subdivision operations in terms of VAT?

In terms of Value Added Tax (VAT), the development and development works of building land are considered to be of a real estate nature.

Article 30 paragraph 1-b of the General Tax Code (CGI) specifies the definition of the developer: "any person who carries out development or development work on building land with a view to their sale in whole or by lot , regardless of their method of acquisition.

The subdivision operation: is it subject to VAT?

Article 89 of the General Tax Code defines the scope of application of VAT for subdivision operations, this article stipulates:

are subject to value added tax;
4°- real estate works, subdivision and real estate development operations;
However, this VAT works differently from other taxable transactions. Indeed, the sale of land in itself is outside the scope of VAT.

How to determine the tax base of land servicing operations?

Article 97 paragraph 5 of the General Tax Code to determine the tax base on land subdivision operations, the article stipulates that: "for subdivision operations, by the cost of development and servicing works"

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What is the tax situation of the owners of the land developer?

Land owners who have activities of land subdivision operations are divided into two categories:

First, those who carry out these operations themselves;
Second, those who have them carried out by third parties.
A) Land subdivision operations entrusted to third parties
According to circular 717 of the general tax code, the taxation of this work is not complex. Indeed, in the case of the owner of the land bears the VAT on the works which are invoiced by the contractor. However, it remains subject to the reporting obligation.

B) Land subdivision operations carried out by the owner himself
In this case, the servicing work must be self-delivered by the owner. This delivery is subject to value added tax.

The developer must determine the tax base according to the cost of the development works. This cost consists mainly of expenses relating to studies, incorporated supplies and labour.

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