The construction sector is one complex environment wherein lots of works and business transactions are dealt with legality or legal bases. Financial transactions, business agreements for any construction projects (buildings, highways, bridges, etc.) have to be put in place before commencing any of them. These transactions cannot be done without the help of legal representatives; this is the reason why legal services from construction lawyers are of great significance – they see to it that there are no legal hurdles for their clients who are venturing for a certain construction project.But what specifically are the legal issues a construction attorney can help you or your company with? Below are some of the most common:Dealing with bid protest – a construction lawyer can represent you at every level of public project development, including prosecuting and defending bid protests. A construction law firm usually has documented protests, and its lawyers usually appear before various local government agencies. They are experienced when it comes to handling this kind of work.Contract review – contract review is necessary to every client in the construction industry and a lawyer who has specialized in construction law can help them when it comes to preparation and negotiation of a full range of construction contract, which includes legal matters like owner-builder agreement.Construction Claims – construction lawyers can help you with all types of construction claims – enforcement and defense of mechanic’s liens, bond claims, government code claims – among other legal claims.Handling dispute resolution – this is one of the most common legal works a construction lawyer can help you with – from negotiating resolution before formal litigation as well as mediation or arbitration.Labor disputes – construction lawyer can also help you, most especially if you are running a construction company with a number of workers, in developing comprehensive employee policy manuals and employment agreement designed for your business’s unique needs. He can protect your business from unnecessary labor-related disputes. They can defend contractors in dealing with disputes with union trust funds, and other related matters.Real time assistance – aside from working with you during the course of any legal works, a construction lawyer can also give real-time assessment so that you are guided in every legal transaction you are getting in, helping you and your business in handling legal-related matters.Above are just few of so many things a construction lawyer can help you with.
A. One of the most common problems in audits of construction projects is the moment of sale by investors avoiding fiscal obligations and paying only personal income tax to the amount of 10% of their incomes from sale. Meanwhile, considering this a point of common abuse, the tax administration issued a circular to all local tax offices to register them as active taxpayers. Below is the document of 2003, not still in force but the problem and the solution is the same.1. Taxpayers in the category “Investors” in construction will be registered as VAT and profit tax taxpayers. In fact, this taxpayer category will be subject to profit tax since sale of residential buildings is exempt from VAT. It is up to the investors to choose their status, i.e. whether they create a company and register with the commercial registry or register with the court as a private commercial individual. Regardless of their registration form, in fiscal terms they will be taxpayers of VAT (which they are exempted from) and profit tax.In case an investor or a group of investors, identified and acknowledged by the Tax Office wants to register, the taxpayer or group of taxpayers should provide the taxpayer with an authorization according to article 12 “Fiscal Representative” of Law “On fiscal procedures in the Republic of Albania”. In order to avoid delays and abuse, in every case, the investor or group of investors (contracted parties) will be obliged to register for taxes with the same Local Tax Office as the company declaring them as investors, and their entire activity will be documented with this office.2. During tax periods there must be a careful follow up of the profit tax amount to be paid by the investors. For this, they should take into consideration the surface area available from contracts and profit earned from apartment sales, i.e. the difference between sales cost and price. Minimum fiscal limits have been already established for these two elements, i.e. average cost and average sales price.B. Another problem appearing in audits of residential construction activities is the moment of supplying technical services by non-resident specialists. Several contractors have been provided answers regarding this specific case. Below we are presenting the answer to a similar case, in which the foreign specialist is an Italian resident.If the “Double taxation agreement” is in force in their countries of residence, the provisions of this agreement will apply in cases of technical services supply performed by non-resident contractors or companies. The first condition to meet in the framework of this agreement is that the company providing the technical service, etc. should be resident in the country with which the agreement has been finalized. In such case, the provisions of the agreement explain each country’s taxation rights. Thus, business incomes are taxed in the country of residence, except when the company is doing business in the other country through a permanent office, and only incomes attributed to this office/branch can be subject to tax in Albania.For the concrete case and in view of the agreement in force with Italy, we hereby explain:In order to avoid taxation of Italian companies providing project services to the benefit of your company (Albanian resident), you should provide evidence and documents to confirm that the companies providing such services to you are Italian residents (e.g. certificates issued by Italian tax authorities). You should provide evidence that the service is entirely performed in Italy, i.e. that the Italian companies have had no permanent office/branch in Albania as specified by the Agreement and the Law “On income tax” and consequently have not been obliged to be taxed in Albania for incomes attributed to this office.Based on the domestic law and the Agreement, for fiscal purposes the Albanian tax administration has the right to make corrections to these payments when they are made between related persons and when they have been artificially increased in order to avoid taxes from your part. This means that in case of transactions between related persons, the tax administration has the right to not fully or partially acknowledge as deductible costs the payments your company has made to the benefit of Italian companies.Another frequent problem is the treatment of some cases in terms of obligations in the construction phase and profit tax in construction of residential buildings and business premises therein for personal reasons by investors or landowners at the moment of sale.1. At the moment of construction, the landowner or investor should meet the following criteria:
– If the landowner or investor has signed a contract with a contractor for the construction of a residential building for personal purposes, the constructing company in the role of only the contractor performs the work till completion. According to the instruction from the General Tax Directorate, a minimum VAT per 1m2 of construction surface area at the value of respective period in the final inventory applies to every residential construction project. This minimum VAT should be paid by the holder of the construction and afterwards utilization permit. This VAT in construction is in conformity with the tables for zones, available in the Tax Office- In case taxpayers have failed to meet the VAT and profit tax parameters for a given construction moment, Tax Offices should require the respective company to pay the difference between the minimum applicable VAT/m2 and the VAT declared so far as well as the respective profit tax, according to the instructions issued by the General Tax Directorate. If the landowner declares that the final part of construction work is performed by him/her or a third party, while the construction company has not declared any work performed, the landowners should pay as withheld tax to the Tax Office, the difference between the minimum applicable VAT/m2 and the VAT declared so far. If another contractor takes over the work, that contractor should pay the difference of VAT and profit tax for the ongoing construction period, according to parameters for construction zones.The following procedures apply with regard to tax on the moment of sale:2. At the moment the building is sold by the investor or landowner it is required that:
– In case investors are registered with the Tax Office as such, it is your legal right to request the corresponding payment for profit tax on sale for the residential building or business premises therein. However, investors’ obligation to register for residential buildings and business premises therein arises only when they exercise economic activity for residential buildings sale.
– In case the investors have a contract with contractors for constructing their personal residential buildings, the contracting company in the sole role of contractor should pay respective VAT and profit tax obligations in the construction stage.
– If the construction and utilization permit are in the name of landowners who are also investors, they are responsible for obligations arising (profit tax) after the construction project is completed and ready to be registered with the Real Estate Registration Office.Below we are providing some cases related to the investors’ or landowners’ position at the moment a residential building should be registered in the Real Estate Registration Office.Case 1: When investors (or group of investors) or landowners are not selling any m² of the building or business premises therein:
– With regard to profit tax on sale, the tax office will require the investors and landowners to produce a certified document confirming that the residential building is not for sale, but, instead, it will be used for personal purposes.
– For the purpose of building registration with the Real Estate Registration Office, the tax office will issue a certificate, which requires the latter to block any transferal of this property to third parties.Case 2: When investors (or group of investors) or landowners are selling part of surface areas m² of the building or business premises therein and are not registered:Based on the Law “On income tax”, in every case, real incomes generated from sale of surface area will be taken into consideration when calculating profit tax for investors or landowners, constructing and/or selling surface areas designated for residence, trade, production or service. Sold surface areas imply areas stated in sales contracts with clients (surface areas transferred as compensation to landowners or common surface areas, when the latter are not specified in the contract).Taxable sales profit on partial surface areas will be the difference between incomes from sales and costs incurred for partial sales. In such case, the salesperson should register as investor or group of investors with the tax office. Profit on sold part will be minimally equal to the sold surface area multiplied with the difference between minimum price for the respective zone and minimum cost foreseen in the Agreement. In such case, individuals trying to register their buildings as residential buildings are not obliged to register with tax authorities, since they do not exercise economic activity.If the residential buildings were constructed for sale and consequently profit, individuals will be required to pay respective tax obligations for their activity for buildings constructed during these years and pending for registration with the Real Estate Registration Office in the year 2005.Case 3: When individuals or groups of individuals claim financing for part of the residential building and business premises therein are registered as corporate with tax authorities:With regard to profit tax, procedures will respect instructions issued by the General Tax Directorate for local tax offices, which relate to profit tax at the moment of sale of residential building and business premises therein. In such cases, the Real Estate Registration Office can register the corresponding part in the name of the corporate (legal entity). The Real Estate Registration Office will calculate the “tax on property transferal” for every m2 transferred by the company (investor or group of investors establishing the company). In each of the above cases, when the Real Estate Registration Office is notified that any of the investors, some of them or all of them want to transfer all or part of the property they own, the Tax Office will calculate all missing tax obligations in the profit tax, together with penalties, and authorize transferal of this property only after all tax obligations have been settled.
At the heart of your office is an administration hub. Make sure it is well resourced. There is nothing more likely to crush staff morale and thus affect business than an unhappy working environment.It’s not difficult to build confidence amongst your staff which will lead to them being great ambassadors for your company. If they can take ‘ownership’ of their workplace and believe in the products and services you are selling, your marketing strategy will be enhanced no end by ‘natural’ promotional growth triggered by your own staff.Of course, communication is one of the keys to good staff relations and if they have a say in the way their working environment is set up, you will get the best out fo them. This will definitely affect the company’s bottom line profits margins.Here are a few suggestions of essential building blocks which will make a world of difference to the way your company operates.1. You need an efficient computer database system that is networked to give easy access to all personnel dealing with sales, marketing and business development. This should include the estimating department. Information should include client management and department structure showing names, titles, and relationships and a record of all contacts made. This ensures that everyone is reading off the same page and can see at a glance at what stage each project proposal has reached. There are a variety of databases available on the open market, some of which are specifically tailored for the construction industry. Most computers these days come with a database system already installed as part of a software package. You need time to learn the programe but once mastered you can build your own database for a fraction of the price of the ‘off the shelf’ systems. Depends how far your budget stretches!2. Management at the highest level of your company should have a public face and they should be available internally to create a catalyst that will envision and motivate staff. Accompanying hands on participation in the running of the office and client relations strategy alleviate the ‘siege mentality’ that can cripple the smooth running of your company, especially when staff feel that they have no voice.3. If you haven’t got one yet, get a refrigerator! It’ll do wonders for staff morale when they know they can bring food and drink and keep it fresh. Some offices do not have air conditioning. It’s worth considering if you are working in a warm climate. Around 3.00pm is not a good time for most office staff! To prevent drowsiness and low work output, keep them cool!4. Make sure you have a good photo copier at hand. It’s surprising how cost effective and time saving a piece of equipment like this can be. Printing costs can be horrendous. So having a better quality color copier can save a lot of money in the long term. Even better if you have your own inhouse designers. It’s not difficult to put together high quality promotional material these days with the amount of creative software out there.5. Have some form of display board system, so that everyone can see the proposals and contracts that are in the pipeline, those that have been won and the projects now on site. Especially good if you have a reception area where potential clients wait. Remember, first impressions count.6. Have regular team meetings which will be a motivational time to encourage your staff and workforce to deliver for the company. Reward them appropriately.