Accounting for advances from the seller
1. The following postings are made:
Dt 51 Kt 62 - prepayment received.
Dt 76 Kt 68 - VAT is reflected on the prepayment.
2. An advance invoice is being prepared (Article 169 of the Tax Code of the Russian Federation).
The supplier has 5 days to issue it. It is compiled in 2 copies: one for yourself, the second for the buyer. The rules for issuing invoices for advances received are regulated by Decree of the Government of the Russian Federation of December 26, 2011 No. 1137 (hereinafter referred to as Decree No. 1137).
For information on how to correctly fill out an advance invoice, see the material “Acceptance for deduction of VAT on advances received”
3. The advance invoice is recorded in the sales ledger.
The invoice is registered in the period in which the advance payment was received (clause 3 of the Rules for maintaining the purchase ledger, approved by Resolution No. 1137).
Next, the seller has 3 possible situations:
- there were no sales during the advance payment period;
- there was a sale during the period of transfer of the advance;
- the advance was returned to the buyer.
Option when there was no shipment during the advance payment period
The seller needs to enter the amount of the prepayment and VAT from the advance received in line 070 in columns 3 and 5, respectively, of section 3 of the VAT return (order of the Federal Tax Service of Russia dated October 29, 2014 No. MMV-7-3 / [email protected] ).
An option when the seller returned the advance to the buyer
- The seller accepts VAT on advances received for deduction (clause 5 of Article 171 of the Tax Code of the Russian Federation), making the following entries:
Dt 62 Kt 51 - refund of advance payment.
Dt 68 Kt 76 - acceptance of VAT on advances received for deduction.
- Reflects VAT for deduction in the purchase book.
- Fills out line 120 of section 3 of the VAT return.
Option for selling previously paid inventory items
- The seller accepts VAT from the advance received for deduction (clause 8 of Article 171 of the Tax Code of the Russian Federation), making the following entries:
Dt 62 Kt 90 - revenue received from sales.
Dt 90 Kt 68 - VAT is charged on sales.
Dt 68 Kt 76 - VAT on advances received is deducted.
- Shows the VAT deduction for advances received in the purchase book with the invoice number that was issued by the seller upon receipt of the advance.
- Fills out a declaration in which he enters the deduction on line 170 of section 3.
On the deadlines for accepting VAT for deduction, see the material “Deductions of “advance” and “agency” VAT cannot be postponed”
Note! Tax authorities believe that VAT is charged on advance payments received in any case, even if the periods of receipt of advance payment and sales coincide (letter of the Federal Tax Service of Russia dated July 20, 2011 No. ED-4-3/11684).
In addition, according to sub. 3 p. 3 art. 170 of the Tax Code of the Russian Federation, the seller, having sold goods and materials for an amount less than the advance payment, can deduct VAT only from the sale amount, and not from the entire prepayment.
For more information on the rules for deducting VAT on advances, see the material “Acceptance for deduction of VAT on advances received”
ConsultantPlus experts explained how to reflect advances received in the VAT return. Get trial access to the system and proceed to examples of filling out the report for free.
Conditions for deducting VAT on advances issued to the buyer
Deduction of VAT from advances issued is possible only if the conditions established in Art. 171 and paragraph 9 of Art. 172 of the Tax Code of the Russian Federation:
- The advance payment is made against future deliveries of goods (performance of work, provision of services or transfer of property rights) intended for transactions subject to VAT.
If the advance payment was made for the supply of goods (performance of work, provision of services or transfer of property rights) purchased for VAT-free transactions, the invoice issued by the seller for the payment received is not subject to registration in the purchase book (subclause “e” of paragraph. 19 Rules for maintaining a purchase book, approved by Decree of the Government of the Russian Federation of December 26, 2011 No. 1137). In this case, tax is not deductible.
- Presentation of tax and issuance of an invoice by the seller upon receipt of an advance payment.
- Mandatory reflection in the contract of the conditions for making advance payment.
When concluding several independent agreements with the same enterprise, the buyer has the right to deduct VAT on advances issued to the seller only under agreements in respect of which the above conditions are met.
IMPORTANT! The deduction of VAT on advances received must be declared in the tax period in which the right to deduction arose. It cannot be transferred to later periods (see letter of the Ministry of Finance of the Russian Federation dated 04/09/2015 No. 03-07-11/20290).
In what period can a VAT deduction be claimed if the advance payment is made in one quarter and the invoice is issued and received in another? The answer to this important question was given by ConsultantPlus experts. Get trial access to the system for free and get to know the point of view of professionals.
Buyer's actions when making an advance payment
The buyer, by virtue of clause 12 of Art. 171 of the Tax Code of the Russian Federation can accept advance VAT for deduction if:
- there is a correctly executed invoice;
- there is a document confirming payment;
- The contract specifies the possibility of prepayment.
Having transferred the advance, the buyer:
- Makes the following entries:
Dt 60 Kt 51 - advance payment is transferred.
Dt 68 Kt 76 - advance VAT is deducted.
- Enters VAT deductions from advances issued in the purchase book with the invoice number issued by the seller.
- Reflects advance VAT on line 130 of section 3 of the VAT return.
- Restores advance VAT during the sales period: Dt 76 Kt 68.
- Reflects VAT restoration in the sales book.
- Reflects in the declaration VAT on advances on line 090 of section 3 (at rates 10/110 and 20/120).
On the issue of filling out line 090 of the declaration, see the material “How to fill out line 090 of section 3 of the VAT declaration”
See also: “Acceptance for deduction of VAT on advances issued”
VAT deduction when returning an advance payment or goods
Upon receipt of prepayment, the seller charges VAT. When shipping goods as an advance payment, he has the right to apply a deduction of this amount of tax. However, there are situations when, due to a change in the terms of the contract or its termination, the prepaid goods are not shipped or are shipped in smaller quantities. In this case, the seller can claim VAT on the advance payment. Also, the right to deduct tax accrued on proceeds from the sale of goods arises from the selling company when they are returned by the buyer.
VAT deduction when returning an advance payment
In general, when receiving an advance payment for future deliveries of goods (works, services), the seller becomes obligated to charge VAT. On the date of shipment of goods (performance of work, provision of services) for which an advance was received, the organization has the right to deduct VAT previously accrued from the advance payment.
