What Is Land Betterment Tax?
Land Betterment Tax is a direct tax imposed on the increase in the value of real property resulting directly from the execution of various public works, excluding sewerage and sidewalk projects.
The tax creates a lien in favor of the Treasury over the improved property, regardless of the person to whom ownership is transferred. This lien is recorded on the property's real-estate register sheet (Article 45).
When Betterment Arises
Betterment arises from the execution of public works. Any increase in value resulting from economic factors or other causes that cannot properly be attributed to the decree declaring public interest and the execution of the works is disregarded.
The second paragraph of Article 37 provides that the remaining portions of properties affected by planning are presumed, in principle, to benefit from an increase in value. Where the affected portion is less than one quarter of the total property area, that portion is incorporated into the public domain without compensation.
This means that public works carried out for the purpose of expropriation may increase the value of the properties directly affected and of other properties. In such cases, the expropriating authority may, subject to the conditions established by law, collect part of the value of that betterment.
The uncompensated transfer of one quarter is therefore established by law as an offset against the increase in value enjoyed by the remaining property. This betterment is fixed as a lump-sum amount that may not exceed the value of that quarter, whether the actual increase in value is equal to, greater than, or less than that amount.
The quarter may be taken without compensation only where an actual increase in value has occurred in the remaining part of the expropriated property.
It should also be noted that the amendment issued on 8 December 2006 and published in Official Gazette No. 60/2006 does not permit the taking of one quarter without compensation for properties facing closed highways or bridges and affected by planning.
Determination of the Betterment Value
Betterment is the increase in the value of a property, or part of a property, resulting from a project from the date on which it is declared to be in the public interest until the date on which it is put into use. The increase is calculated by comparison with properties that did not benefit from the betterment (Article 46).
The competent Expropriation Committee determines the amount of betterment for each property by comparing market prices at the date on which the expropriation procedures began with market prices after completion of the project and after it has been wholly or partly put into use or operation (Article 53).
The Committee also takes the following into account:
- Any increase in value resulting from economic factors or other causes that cannot properly be attributed to the decree declaring public interest and the execution of the works is disregarded.
- Any portion of the property expropriated without compensation under Article 37 of the Expropriation Law is taken into account, and its value is deducted from the amount of the betterment tax (Articles 51 and 53).
Authority Responsible for Administering the Betterment Tax
The competent authority responsible for administering the betterment tax is the Betterment Tax Department within the Revenue Directorate (Article 48). Its responsibilities include:
-
Preparing a reasoned statement identifying the properties expected to
benefit from betterment. The statement is approved by decision of the
Director of Revenue, and a copy is sent to the Land Registry Office so that
an entry may be recorded on each property's register sheet indicating that
it is subject to betterment tax.
The entry is removed only after a final decision of the Expropriation Committee determines that no tax is due, after the tax is paid where applicable, or after a security deposit is paid on account of the betterment tax following a proposal by the Head of the Betterment Tax Department and approval by the Director of Revenue.
- Preparing a detailed report containing the information obtained, together with the observations and supporting documents of the concerned parties.
- Upon being notified that the works have been completed, referring the report and the full file to the competent committee responsible for determining the betterment value (Article 50).
Authority Responsible for Determining the Betterment Value
The jurisdiction of the Expropriation Committees includes:
- Determining all compensation due as a result of expropriation.
- Determining the betterment value as a basis for imposing the tax (Article 21).
The Expropriation Committees determine the betterment value in accordance with the rules and procedures set out in Articles 15 to 21 of the Expropriation Law. The Committee determines, by decision, the betterment attributable to each property on the basis set out in Article 46 and by comparing market prices at the start of the expropriation procedures with market prices after completion of the project and after it has been wholly or partly put into use.
Who Is Subject to the Betterment Tax?
The betterment tax is imposed, in principle, on the owner of the improved property. Where a usufruct exists over the property, the tax is apportioned between the bare owner and the usufructuary in accordance with the schedule referred to in Article 23 of the Expropriation Law (Article 54).
Who Imposes the Betterment Tax?
The authority responsible for administering the betterment tax is the Betterment Tax Department within the Revenue Directorate of the Ministry of Finance (Article 48).
Based on the decisions of the committees determining the betterment value, the Betterment Tax Department issues assessment schedules and notifies the concerned parties of a summary of each assessment (Article 55).