What Is Land Improvement Tax?
Land Improvement Tax is a direct tax imposed on the increase in the value of real estate resulting directly from the execution of various public works, except for sewer and sidewalk projects.
Land Improvement Tax creates a privilege in favor of the Treasury over the improved property, regardless of the person to whom it is transferred, and this privilege is registered on the real estate sheet, Article 45.
Creation of Improvement
Improvement arises from the execution of public works. No consideration is given to improvement resulting from economic factors or other factors that cannot be considered as resulting from the decree declaring public benefit and the execution of works.
The second paragraph of Article 37 provides the following:
It is presumed, in principle, that the remaining parts of properties affected by planning benefit from an improvement in value. If the affected part is less than one quarter of the property area, it is annexed to public property without compensation. This means that the execution of public works for which expropriation was carried out leads to an increase in the value of the properties affected by such works and in the value of other properties.
In this case, the expropriating administration is entitled, under conditions determined by law, to collect part of the value of this improvement. Accordingly, the free quarter taken without compensation is legally determined to offset the improvement affecting the property. This improvement is fixed as a lump sum not exceeding the value of the quarter, whether the improvement is equal to, greater than, or less than its value.
It must be emphasized that the quarter taken free of charge from the owner may only be imposed if an actual improvement occurs in the remaining part of the expropriated property.
It is worth noting that the amendment introduced by the law issued on 8/12/2006 and published in Official Gazette No. 60/2006 does not allow the taking of the quarter without compensation in properties facing closed highways or bridges and affected by planning.
Determining the Value of Improvement
Improvement means the increase affecting the value of the property, or part of the property, as a result of the project, from the date it is declared to be of public benefit until the date it is put into use. This increase is calculated by comparison with the value of the property not affected by the improvement, Article 46.
The ordinary expropriation committee determines the amount of improvement for each property by comparing the prevailing prices at the date of commencement of expropriation procedures with the prices prevailing after the completion of the project, whether wholly or partially, before expropriation or investment, Article 53.
The committee also takes into consideration:
- No consideration is given to improvement resulting from economic factors or other factors that cannot be considered as resulting from the decree declaring public benefit and the execution of works.
- Account is taken of any part of the property expropriated without compensation pursuant to Article 37 of the Expropriation Law, and its value is deducted from the value of the Land Improvement Tax, Articles 51 and 53.
Competent Authority for Handling Land Improvement Tax
The competent authority for handling Land Improvement Tax is the Land Improvement Tax Department – Revenue Directorate, Article 48. It is entrusted with:
- Preparing a detailed statement of the properties that have benefited from improvement, approved by a decision of the Director of Revenues, and sending a copy to the Land Registry Secretariat for registration on each property sheet indicating that the property is subject to Land Improvement Tax.
- If the committee’s decision is not received within two months from the date of the scheduled meeting, the Revenue Directorate may, based on the meeting minutes and with the approval of the Director of Revenues, prepare the improvement file and begin collection.
- Preparing a detailed report containing the information obtained and the observations and documents of the concerned parties.
- After being notified of the completion of the works, forwarding the said report with the full file to the competent committee for determining the value of improvement, Article 50.
Competent Authority for Determining the Value of Improvement
The jurisdiction of the expropriation committees includes:
- Determining the amount of all compensation due because of expropriation.
- Determining the value of improvement as a basis for imposing the tax, Article 21.
The expropriation committees determine the value of improvement in accordance with the rules and procedures provided for in Articles 15 to 21 of the Expropriation Law. The committee determines the amount of improvement for each property according to the principles stated in Article 46 and by comparison between the prevailing prices at the date of commencement of expropriation procedures and the prevailing prices after completion of the project and after it has been put wholly or partially into operation.
On Whom Is Land Improvement Tax Imposed?
Land Improvement Tax is imposed, in principle, on the owner of the improved property. If there is a usufruct right over the property, it is distributed between the bare owner and the usufructuary according to the table provided for in Article 23 of the Expropriation Law, Article 54.
Who Imposes Land Improvement Tax?
The competent authority for handling Land Improvement Tax is the Land Improvement Tax Department at the Revenue Directorate – Ministry of Finance, Article 48.
The Land Improvement Tax Department issues assessment schedules based on the committees’ decisions determining the value of improvement, and notifies each concerned party of an extract of the assessment, Article 55.