Land Promotion Agreements And Vat

In its simplest forms, a developer obtains, as part of a transport contract, the building permit for the development of the land, which will then be sold, and the developer participates in the proceeds of the sale. Some developers may require that an option or pre-purchase be included in the transportation contract so that they can purchase the property themselves once the planning is complete. Option agreements are therefore the most widely used and most landowners are familiar with this model. Whichever agreement is chosen, a landowner should be advised and carefully considered the tax situation. If a promotion contract is chosen, there are two immediate concerns. First, that the developer is required to collect VAT on all payments it receives (i.e., reimbursement of its transportation and development costs and its percentage share of the proceeds of the resulting net sale); second, landowners and developers run the risk of being treated in partnership and taxed as such. The landowner should consider controlling the developer`s costs, which are ultimately deductible from the sale price. The main advantage for the landowner is that he/she does not have a significant prior fee for obtaining the supervision of the building permit, especially since the time to obtain it can be long and long. As a general rule, if planning is not done, there is no charge. This benefit is offset by the cost to advertising support for its services. In addition, the landowner could reverse his share of the revenue if there is no mechanism to define and limit the amount of costs that the developer can bear. Otherwise, the developer is not encouraged to cap his expenses, as he is certain of the full refund if all costs incurred are deducted from the final sale price.

The developing country is now a very popular country. If you are a landowner with surplus land and want to sell, now may be a good time to use the commercial opportunities that residential construction offers. There is no simple, correct or wrong answer to a landowner`s approach to making an informed decision: our clients are increasingly looking for ways to use their assets more efficiently and tax-efficiently. Combined with the relaxation of planning rules and the possibility of using more land for housing construction, this inevitably leads to a reflection on the land they own and whether a sale would be the right way to proceed. To help them get the best price for the country, they often work with rural operators and/or developers. The developer charges the landowner a fee for his services based on a percentage of the sale price and may also reduce the proceeds of the sale because of the planning costs he has incurred. The guarantee of the landowner`s obligations through a transportation contract could take one of two forms. The developer could benefit from a residual option for the purchase of the land if the landowner refuses to sell on the open market.

The sale price should take into account all planning costs incurred and a share of the added value of the development site. Another way forward would be for the developer to take a first legal charge on the (unloaded) property, giving him the opportunity to exercise purchasing power should he come.