Construction services - date of the income generation


The changes that were introduced in the field of value added tax in terms of determining the moment when the tax obligation arises for construction and construction and assembly services made many taxpayers wonder whether they also influenced the determination of the moment of income tax revenue. This article should dispel these doubts.

Construction services - revenue on the date the service is performed

The moment when revenue in construction services arises is considered to be the date when the service was rendered (or when the service was partially performed), but no later than on the date of issuing the invoice or settling the amount due (except for services settled in settlement periods).

Revenue creation date - date of signing the handover protocol

The construction service acquires the status of completed upon the technical acceptance of construction works, which usually happens at the time of signing the handover protocol. Therefore, the revenue from construction works should be shown on the date of signing the technical acceptance protocol. This rule applies as long as no invoice has been previously issued and no payment for the service has been received. This position was also taken by the Ministry of Finance.

Date of income generation - position of the Ministry of Finance

In the opinion of the Ministry of Finance, the moment of performance of the construction service is determined on the basis of documents confirming their acceptance and implementation. A handover protocol should be considered such a document. The investor certifies the completion of the commissioned works.

The Ministry has indicated two types of settlement of construction services that are applicable in practice:

  • settlement of investments in accordance with the work schedule,

  • collection and settlement only after the completion of the entire investment.

In a situation where the contract contains provisions:

  • concerning the method of investment implementation,

  • work schedule,

  • rules for the acceptance of individual stages of the works performed,

  • regarding the settlement of the investment, which will take place at specific stages, and their implementation will be confirmed by a delivery and acceptance protocol.

Then the protocol will constitute a confirmation of partial performance of the service, and thus will determine the moment of revenue generation.

If the contract stipulates that the acceptance and settlement of the works will be performed after the completion of the entire investment, and at the same time will not specify the partial acceptance and settlement of individual stages of the completed works, then the revenue should be shown on the date of complete completion and settlement of the investment (no later than on the date of issue invoices or payments).

The Ministry of Finance indicates that the determination of the moment of performance of a construction or construction-assembly service under the Income Tax Act is independent of the regulations contained in the VAT Act. Therefore, the changes in the act regarding the determination of the moment when the VAT obligation arises for the provision of construction or construction and assembly services are not related to the determination of income tax revenue.