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    • Are you preparing for TAMA 38? Key clarification issued by the tax administration
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    Are you preparing for TAMA 38? Key clarification issued by the tax administration

    Umito Posted on

    A few weeks ago, the tax administration announced that it had started publishing a new type of publication: professional positions. These are short, focused posts, usually addressing a specific question on a particular topic. Following this announcement, an additional position statement was published on October 15 on Tax Authoritydealing with the sale of construction rights in TAMA 38/2 projects and the cash purchase of construction services from the contractor.

    In transactions where the building is strengthened by demolition (TAMA 38/2), residents sell their construction rights to the developer in exchange for construction services provided by the developer. Chapter 5 of the Real Estate Tax Law states that, generally speaking, the owner is exempt from capital gains tax for the receipt of residential property. apartment in the building, provided that its area does not exceed the area of ​​the original apartment plus 25 square meters.

    However, it may happen that one of the building owners holds additional construction rights which have not been sold to the developer and wishes to exercise them by commissioning construction services and paying the developer for them.

    The position paper clarifies that in these cases, for the portion of construction rights not sold to the developer, the owner may be considered to be purchasing construction services from the developer in full payment, which would not necessarily constitute a “sale” of real estate. inheritance rights in accordance with the law.

    For the part of the rights sold to the promoter, the owner will receive a apartment in the building and be eligible for the exemption mentioned above, subject to meeting the conditions of the chapter.

    The position paper also specifies various parameters that will be examined to ensure the transaction is reasonable, including the market rate for construction services, the proportion of construction rights sold by other residents to the developer, etc. Additionally, it clarifies that if the Real Estate Tax Administrator determines that the transaction constitutes a sale of real estate rights rather than a payment for construction services, the owner will be liable for purchase tax as if purchasing a completed residential apartment.

    It should be noted that this is not a change from the existing legal situation, but rather a clarification of the position of the tax administration, aimed at providing greater certainty to owners and their representatives when deciding how to proceed.



    Umito
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