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May 15, 2026

This Article outlines the tax accounting treatment for long-term contracts under the accrual method. It stipulates that a taxpayer must calculate income and expenses based on the percentage of work completed within the taxable year. The completion percentage is determined by comparing the contract costs incurred during the year with the total estimated costs of the entire contract. The text defines a 'long-term contract' as one for manufacturing, installation, construction, or related services that is not completed in the same year it commenced. However, it explicitly excludes contracts expected to be completed within six months of their start date.

Chapter 6 - Tax Accounting Rules

Article 26 - Long Term Contracts

For a taxpayer who uses the accrual method, income and expenses relating to a long term contract shall be calculated on the basis of the percentage of the work completed during the taxable year.
The percentage of work completed shall be determined by comparing the costs of the contract incurred during the taxable year with the total estimated cost of the contract.
For the purposes of this Article, the term 'long term contract' shall mean a contract for the manufacture, installation, construction, or performance of services related thereto, and whose execution is not completed within the year in which execution started, with the exception of a contract that is expected to be completed within six months of the actual starting date of work cited in the contract.