Immovable Property Tax (IPT) – Example 1 Construction in Progress
ABC Company is constructing a building in July 2014 located in Khan Chamkamon for admin office.
Based on the construction completion certificates issued by the contractor, the construction was 62% completed as at 31 December 2015 and was valued at $100,000.
As at 31 December 2016,the construction was reported as 88% complete and was valued at $200,000.Due to an urgent task for office space, ABC Company started using 50% of the completed building (88%) in early 2016.
It’s assumed that the market value for Immovable Property Tax is equal to the estimated completed construction value ,and the exchange rate is $ 1 = KHR 4,000.
Required:
Calculate the Immovable Property Tax in Khmer Riels if any of the construction for 2014, 2015 and 2016.
Solution
Year 2014
There is no immovable property tax because ABC Company starting construction.
Year 2015
There is no immovable property tax because house, building or construction that is less than 80% completed and is not put into use is exempt from the immovable property tax (IPT). The construction of ABC Company was 62% completed as at 31 December 2015.
Year 2016
As at 31 December 2016, ABC’s building construction was 88% completed with the market value of $200,000. Since the building is completed more than 80% and put into use, so this construction is subject to immovable property tax based on its market value.
Tax Base = ( market value x 80% – 100,000,000)=(200,000 x 4,000 x 80%-100,000,000)=540,000,000 KHR
Immovable property tax = tax base x 0.1% = 540,000,000 x 0.1%=540,000 KHR