Notice of VAT increase to 20 percent

The legislative framework

Let us turn to the Federal Tax Service Letter No. SD-4-3/ [email protected] dated 10.23.2018. It provides clarification on how to deal with this tax during the transition period. From January 1, everyone without exception switched to 20%. And it doesn’t matter when the contract was concluded.

But usually the document strictly states “18 percent.” This means that this condition needs to be officially adjusted. Accordingly, if tax conditions are not specified in the text, then there is no need to sign anything additional.

Some prescribed in advance the possibility of revising the cost unilaterally when amending the legislation. They also don’t need extra documents.

How to change contracts from 2021

We recommend evaluating already concluded contracts regarding the wording on cost and VAT. If the contract is of a continuing nature and can be transferred from 2021 to 2021, then it is advisable to conclude an additional agreement with the counterparty and regulate in more detail the procedure for changing the cost in connection with an increase in the rate to 20%.

For example, you can include a condition that the total cost of goods remains unchanged; if the tax increases, the cost of goods without it decreases at the same time.

And, conversely, if you agree to increase the total cost of the goods, it is advisable to indicate the procedure and timing of additional VAT payment by the buyer.

How to specify a change in the VAT rate in a contract

It all depends on what formulations were used initially. The following options are possible (for example, let’s take the cost of 100,000 rubles).

Formulation	What to do	New edition
100,000 rub. + VAT	There is no need to change anything, since the exact amount of the tax is not given	–
100,000 rub. excluding VAT	There is no need to change anything, since there is no indication of the amount of tax	–
100,000 rubles + 18%	Change to current value	100,000 rubles + 20%
118,000 rubles, including value added tax 18,000 rubles	Recalculate taking into account the current value	120,000 rubles, including value added tax 20,000 rubles

A letter sent to a counterparty about a change in the VAT rate is an example of the fact that you are trying to prevent all possible omissions in advance.

Personal Tax Management

From January 1, 2021, the VAT rate will increase from 18% to 20% in relation to goods (work, services), property rights shipped (performed, rendered), starting from January 1, 2021.

Fix the price of goods, the amount of VAT and the rate in an additional agreement to the supply agreement.

With the fact that in contracts and agreements concluded from January 1, 2021, it will be necessary to indicate the VAT rate of 20%, everything is clear. Questions remain regarding changes and the need to make such changes to contracts concluded before January 1, 2021. Making changes to existing agreements will allow companies to eliminate future disputes with counterparties and avoid claims from tax authorities regarding the calculation of VAT.

Taxpayers' questions boil down to the following: Is it possible to apply a VAT rate of 18% to payments and supplies/provision of services/performance of work if the contract was concluded by the parties before January 1, 2021? Is it necessary to conclude additional agreements to existing contracts?

Is it possible now to include in contracts a condition that a VAT rate of 20% is applied to goods (work, services) shipped (performed, rendered) from January 1, 2021? What should be indicated in the additional agreement to the contract if its conclusion is related to a change in the VAT rate?

How to calculate VAT if no changes are made to the contract? Is it possible to require (including in court) the counterparty to pay an increased amount? Let's consider each of the questions separately: 1. Is it possible to apply a VAT rate of 18% to payments and supplies/provision of services/performance of work if the contract was concluded by the parties before January 1, 2021?

The law does not make the amount of the applicable VAT rate dependent on the date of signing the agreement. Federal Law dated August 3, 2018 No. 303-FZ

“On amendments to certain legislative acts of the Russian Federation on taxes and fees”

There are no exceptions for goods (work, services), property rights sold under contracts concluded before January 1, 2021, including those providing for the transfer of advance payments. This position was also taken by the Russian Ministry of Finance in its Letter dated 08/06/2018 N 03-07-05/55290.

How to correctly make changes to the contract when increasing VAT - sample additional agreement

The rate increase from January 2021 affected not only the prices of goods and services, but also a number of other issues. These may include purely technical aspects, for example, how to fix the cost, or more significant ones, for example, what payments are now provided.

To avoid controversial issues during long-term cooperation, lawyers recommend drawing up an additional agreement on changing the VAT rate.

Let's look at this case in more detail. Contents After amendments to the Tax Code, the basic interest rate is 20%. In order not to incur losses and not get confused in settlements with agents, it is advisable to draw up an additional agreement to change VAT by 20.

It specifies certain requirements and amendments; in addition, the document always serves as support for legal activities before the Federal Tax Service. After the shipment was made after January 1, a new percentage is entered in the documentation, even if the previously concluded contract states 18%.

It is the agreement that makes it possible to make changes and avoid mistakes.

To understand how to include certain data in a contract, it is worth paying attention to several factors.

The following points are subject to correction:

If the contract specifies a price excluding VAT, then the agreement states that interest is charged on the cost at the current rate, this will avoid negativity on the purchasing side of the buyer; the contract itself does not need to be changed.
If a specific 18% is formed in the contract, then the additional agreement includes the cost of the goods excluding VAT and information that the tax will be charged on top of the price that was fixed at the time of shipment.
If the contract does not say about interest, then the additional agreement states that the cost of the contract does not have information about VAT, and the interest itself is calculated based on the current rate.

We recommend reading: What is the amount of monthly payments when establishing the fact of gross negligence?

Such contributions do not apply to all entrepreneurs. If the product is sold at a rate of 0% or 10% (printed scientific and educational publications, medicines, baby food); if the cost is determined in other documents, for example, estimates; or if the seller has the right to raise the price when increasing the value added tax unilaterally and this is stated in the contract - then there is no need to make changes and enter into additional agreements.

Additional agreement to change the VAT rate: sample

The additional agreement on changing the value added tax rate should resolve all discrepancies that arose in connection with amendments to the legislation. In general, its structure looks like this:

A title indicating the number and date of conclusion of the original document.
Date and city of signing.
Point to be reformulated.
Its new edition.
Effective date of the new provisions.
Details and signatures.

We discussed above how to correctly specify the VAT rate in the contract. However, in the additional agreement it is advisable to do this as precisely as possible.

But there is another opinion. In accordance with it, during the transition period it is better to refrain from indicating the amount of tax liability. This applies to both percentage and monetary terms. It is better to simply refer to paragraph 3 of Article 164 of the Tax Code.

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When to enter into an additional agreement

Example. in 2021 entered into an agreement with for the supply of building materials. made an advance payment in 2021, but she received the parts only in 2021. If an additional agreement is not concluded, one of the companies will suffer losses due to an increase in VAT.

You can record an increase in VAT in the following ways:

Price adjustment taking into account the changed VAT rate. You can specify from what date the new cost will be applied.
Indication of the cost without indicating the exact VAT rate, with reference to paragraph 3 of Article 164 of the Tax Code.
Fixation of cost taking into account the new VAT, taking into account paragraph 3 of Article 164 of the Tax Code.

It is recommended to make a reference to Article 164 of the Tax Code, on the basis of which the VAT rate changes.

Increasing the VAT rate to 20 percent: how to prepare for the changes?

Determining the cost of services (goods, work) with a VAT rate of 20% depends on the terms of the contract.

Option 1: if the cost of goods (work, services) is established in the contract including VAT. For example, it is indicated that the cost of services is 118 rubles, incl. VAT is 18%, then in this situation, according to the author, the seller will have to pay the “extra” 2% VAT at his own expense, i.e.

the seller's costs will increase. If he is ready to enter into disputes with the buyer, then under certain conditions the contract can be terminated or modified by the court (but this, in the author’s opinion, is unlikely). Let us explain our position. In accordance with paragraph 1 of Art. 422 of the Civil Code of the Russian Federation, the contract must comply with the rules obligatory for the parties, established by law and other legal acts (imperative norms) in force at the time of its conclusion.

The execution of the contract is paid at the price established by agreement of the parties (clause

1, 2 tbsp. 424 of the Civil Code of the Russian Federation). If, after the conclusion of an agreement, a law is adopted that establishes rules binding on the parties, other than those that were in force at the conclusion of the agreement, the terms of the concluded agreement remain in force, except in cases where the law establishes that its effect extends to relations arising from previously concluded agreements (P.

2 tbsp. 422 of the Civil Code of the Russian Federation). The Law on increasing the VAT rate to 20% does not directly state that its effect applies to contracts concluded before 01/01/2021. And, in the author’s opinion, the clarification that

“the new rate applies to goods (work, services) shipped from 01/01/2021”

- as an indication that new rules apply to “old” contracts, it is impossible (clause 4 of article 5 of Law No. 303-FZ).

In other words, according to the author, in order to calculate VAT, the seller is obliged to calculate the amount of tax at a rate of 20%, but in accordance with the norms of the Civil Code of the Russian Federation, the seller has no grounds for automatically increasing the cost of goods (work, services) established by an agreement concluded before January 1 2021, at 2% VAT, i.e.

the total cost specified in the contract, including VAT, must remain unchanged.

Letter to client about price increase (samples)

Letter No. 1

Dear Clients!

Due to the fact that our supplier has increased the cost of products, we are forced to revise the prices of some goods upward. At the moment, a slight increase in prices has affected finishing and paint materials.

We sincerely hope for your understanding.

Sincerely,

Petr Ivanov.

Letter No. 2

Dear Viktor Alexandrovich,

Employees of your company have been attending business courses and seminars provided by our company for a long time. We appreciate your trust and are grateful for your cooperation.

Since the primary goal of our company is to provide high-quality modern services, we decided to invest in the development of new innovative methods and the acquisition of the latest technical equipment. Expanding the training base will allow our clients to use our services even more comfortably.

However, due to the serious amount of investment, we are forced to increase the prices of some of our products and raise the cost of training. We hope for your understanding and believe that our innovations will become the basis for your prosperity.

The price list with current prices is available on our website.

Sincerely,

Petr Ivanov.

Letter No. 3

Dear Clients!

The rapid growth of inflation in our country forced us to revise the cost of our company's products upward.

We will send you the current price list.

We apologize for the inconvenience.

Sincerely,

Delo.ru LLC.

Letter No. 4

Dear partners!

Due to the rise in price of the main raw materials used to produce our products, we were forced to increase the price of decorative cosmetics and perfumes. You can view the current prices in our new price list.

Sincerely,

Anna Aleksandrovna

LLC "Goddess"

Letter No. 5

Dear Viktor Alexandrovich,

We inform you, as our regular customer, that due to the rise in the cost of gasoline, we were forced to increase the cost of our services from 03/05/2014.

We promise you that regardless of the economic situation in the country, the cost of our transport services will not be revised in the next six months. However, if the cost of gasoline decreases, we will definitely revise our prices downward.

We ask you to treat this forced measure with understanding.

Sincerely,

Petr Ivanov.

Letter No. 6

Dear Viktor Alexandrovich,

When drawing up the budget for the current year, we did not plan to increase the cost of our products. Despite the economic situation in the country, we tried to keep prices for our products in the same range. However, to our great regret, from today we are forced to increase the cost of finishing materials by an average of 5%.

We look forward to further cooperation.

Sincerely,

Petr Ivanov.

Letter No. 7

Dear Viktor Alexandrovich,

We inform you that due to an increase in prices from our supplier by 5% of the previous cost, we are also forced to revise the cost of some goods. A complete update of prices is planned from April 1, 2014. Until this time, you can buy goods at your usual prices.

We look forward to working with you.

Sincerely,

Petr Ivanov.

Letter No. 8

Dear partners!

We inform you that from April 1, 2014 we will recalculate the cost of basic goods. This measure is due to increased prices for components and raw materials.

You will soon receive a price list with current data.

Orders placed before this date will be billed at the same prices.

For questions regarding the new cost of products, you can contact the sales department by phone: 220-00-02.

Sincerely,

Delo.ru LLC.

Letter No. 9

Dear customers!

From April 1, 2014, the cost of alcohol and tobacco products will increase by 5%. These changes are due to an increase in customs duties, as well as an increase in the dollar exchange rate.

We apologize for the inconvenience.

There is a system of discounts for wholesale and regular customers.

Sincerely,

Delo.ru LLC.

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