Expenses incurred to the name of the landowner in constructions in return for flat
 
The ruling issued by the Directorate of Ankara Tax Office dated 10.02.2006, reads as follows:
 
In your petition mentioned in the Ref section above, we are informed that you are an income tax liable registered in the …………….  Tax Office Directorate under registration number ……………. on account of your occupation as a contractor for constructions in return for flat, and that the payments that you have borne, but which should have been by the owner of the construction pursuant to the construction inspection agreement,  constitute the cost of the construction, and we are inquired to provide our view on whether or not the documents relating to the payments extended to yourself, but that were drawn up to the name of the owner of the construction, can be accepted as expense documents.
In Article 2/1 of Law Numbered 4708 Concerning the Inspection of Constructions, it is stated that inspection of construction services shall be executed in accordance with the provisions of the service agreement that is signed between the construction inspection firm and the owner of the construction or his legal proxy, that the owner of the construction shall be disallowed to appoint the contractor with whom he has  signed a contract for the undertaking of the construction work as his legal proxy; and in Article 5/1 of the same Law, it is stated that the construction inspection contracts can be signed between the owner of the construction and the construction inspection firm.  
In Article 13 of the Regulation Concerning the Procedures and Principles of Construction Inspection Application. Promulgated in the Official Gazette dated 12.08.2001  and numbered 24491,  under the caption “Maintaining of the Construction Inspection Accounts”, it is stated that construction inspection accounts will be opened in banks to the name of private provincial administrations and municipalities in order to meet the expenses of the construction inspection firms. And the service charges for construction inspections envisaged in Law No. 4708 Concerning the inspection of Constructions,  shall be deposited in these accounts by the owners of the constructions.
Meanwhile, in Article 40/1 of the Income Tax Code No. 193, it is stated that general expenditures made in order to acquire commercial earnings and perpetuate them shall be allowed for deduction in the determination of the net commercial earnings.. 
 For the acceptability of an expense item to be relevant to the acquisition and continuation of  commercial earnings, a cause and effect relationship should exist between the expense item and the acquisition and continuation of commercial earnings,  the occurrence of the expenses should not be haphazard, in other words, the disbursement of the expense in question should be imperative for the  acquisition of that earning, and an intangible asset should not have been acquired in consideration of the expense that is borne.
Moreover, such expenses should be based on authenticating documents (such as, invoices or documents that pass as invoices) and should be tracked in the legal records.
Meanwhile, pursuant to Article 3 of the Tax Procedures Code Numbered 213, in taxation, the true nature of the event giving rise to the tax and of transactions relevant to that event may be proved by means of all manner of evidence with the exception of sworn testimony.

 
Since pursuant to Law Numbered 4708, Concerning the Inspection of Constructions, the service charges should be paid  by  the owner of the construction, the documents relating to such payments are drawn up to the name of the owner of construction. However, since the true nature of the taxable event is essential in taxation, provided that the fact that the payments in question are borne by yourself on behalf of the owner of the construction is  properly authenticated through a contract concluded between yourself and the owner of the construction containing the above issues,  or by a bank note, pursuant to Article 40 of the Income Tax Code, the payments in question can be treated as a deductible expense in the determination of the commercial earnings. 
Kindly Be Informed
 
(Ruling issued by the Directorate of Ankara Tax Department Dated 10.07.2006, and Numbered B.07.1.GİB.4.06.16.01/ )