Both simple and complex
Value added tax is indirect and is levied in Russia at the rate of 20% when selling goods or providing services. Thanks to the efforts of the Russian Ministry of Finance, the country now has two systems for calculating and collecting VAT.
In the usual VAT payment scheme, the tax payer is the seller of the goods. Each of the participants in the value chain pays to the state the difference between the amount of VAT received on the sale of goods and the amount spent on the purchase of goods and services.
In certain types of activities - the sale of raw unprocessed animal skins, scrap ferrous and non-ferrous metals, secondary aluminum, and from January 1 of this year, waste paper - an agency VAT payment scheme is in effect. Its difference from the usual one is that the obligation to charge and pay tax is transferred from the seller to the buyer. The latter thus acts as a tax agent for the seller. Other things being equal, the regular and agency schemes provide the same amount of tax.
From the fourth quarter of 2021 to the end of 2018, the sale of waste paper was exempt from VAT. This taxation procedure, which received the name “Fokin VAT” in the industry after the initiator of the law, member of the State Duma Committee on Ecology Alexander Fokin , entailed a number of positive consequences, but the most obvious of them were a sharp increase in budget revenues and the rapid development of the waste paper recycling industry.
The need to switch to Fokina’s VAT was that the usual scheme for calculating VAT was often used by unscrupulous payers to directly steal money from the budget, admits the director of the Association of Tax Consultants, Vladimir Saskov . Thus, it is noted in the expert opinion on the issue of taxation of transactions and the sale of waste paper with VAT, conducted by the Plekhanov Russian Economic University, only payments from the budget for this tax in 2012–2014 exceeded the amount of tax received, resulting in budget losses amounting to 45 million rubles , that is, they took (to put it simply, stole) more from the budget than they paid into it. The development of the industry turned out to be virtually blocked: conscientious producers lost in competition to fly-by-night firms and were unable to develop their business; processors suffered from a lack of raw materials and claims from the Federal Tax Service due to non-payment of taxes by waste paper processors and exporters.
The place of waste paper in the production of paper and cardboard products
Source: System Solutions Center
The exemption from VAT on the sale of waste paper has led to the fact that plants processing waste paper have lost the opportunity to offset VAT amounts paid on its purchases. In fact, processing enterprises began to pay VAT both for themselves and for all participants in the procurement segment. The benefits provided to waste paper producers were offset by increased tax revenues from processors. And it wasn’t just compensated. In the first year of the Fokin VAT, the Federal Tax Service recorded an increase in VAT receipts from the industry from 3.78 billion to 9 billion rubles.
The conditions of the waste paper market in 2021, compared to 2016, could not ensure more than a twofold increase in the added value generated in the industry. The dynamics of waste paper collection in 2021 shows that 5 billion rubles of tax per year were simply dissolved among unscrupulous industry players. VAT Fokina returned the missing tax amounts to the budget.
How to reflect VAT on waste paper for a seller in 2021
VAT. The amount of tax calculated by the tax agent, as well as the corresponding deductions of VAT amounts are reflected in section.
3, 8 and 9 of the VAT tax return (Letters of the Federal Tax Service of Russia dated January 16, 2018 N SD-4-3 / [email protected] , dated April 19, 2018 N Thus, if the seller ships waste paper to the buyer, who is the tax agent for this operation , then he registers an invoice with code 34 in the sales book and reflects this operation in section.
9 VAT return.
Filling out the declaration by buyers of recyclable materials, hides, waste paper - VAT payers. Reflect advance and shipping VAT on these transactions in section. 3 declarations, and the corresponding invoices - in section. 8 and 9 (and in the Appendices thereto).
Info VAT performance of work (provision of services) by state institutions, as well as budgetary and autonomous institutions within the framework of a state (municipal) assignment, the source of financial support for which is a subsidy from the corresponding budget of the budgetary system of the Russian Federation. Does this standard apply when selling waste paper?
Let's start with the fact that in paragraphs. 4.1 clause 2 art. 146 of the Tax Code of the Russian Federation talks about the performance of work and provision of services by institutions.
The sale of goods is not equivalent to the performance of work and provision of services.
Financiers make a similar conclusion regarding government institutions in letters dated September 27, 2017 No. 03-03-06/3/62496, dated July 25, 2016 No. 03-07-11/43314.
We also draw attention to the fact that the delivery of waste paper by cultural institutions is carried out outside the framework of state (municipal) assignments.
Therefore, when a cultural institution delivers waste paper, paragraph 1 does not apply. 4.1 clause 2 art. A cultural institution is exempt from fulfilling the duties of a VAT payer or is not recognized as a VAT payer.
From paragraph 8 of Art. 161 of the Tax Code of the Russian Federation it follows that the sale of waste paper is subject to VAT only if the cultural institution is not exempt from fulfilling the duties of a VAT payer.
When selling waste paper, taxpayers-sellers who are exempt from fulfilling taxpayer obligations related to the calculation and payment of tax, and persons who are not taxpayers, make an appropriate entry in the agreement or primary accounting document or put down an o.
How the industry works
The Russian waste paper processing industry consists of 84 enterprises with a total processing capacity of 4.5 million tons per year. About 40% of all paper and cardboard products in the country are made from waste paper. More than 50% of recyclable waste paper is recycled
Recycling of waste paper in Russia and the EU
Source: CEPI, Rosstat, Center for System Solutions
To fully understand the situation, an analysis of the structure of the waste paper recycling industry should be provided. At the top level is a plant where waste paper is converted into various types of paper products (container boards, tissue paper, molded paper fiber packaging, paperboard-based building materials, etc.).
The main supplier of waste paper for factories is production and procurement enterprises (PZP), where waste paper is sorted and product batches are formed. Each plant usually works with several dozen PPPs, says Artem Kiryanov .
The PPP and waste paper generation sites are connected, without exaggeration, by a huge number of primary producers - individual entrepreneurs, micro and small businesses, simply put - drivers with one Gazelle. Tens or hundreds of primary procurers can cooperate with one PPP.
As you can see, one plant completes a chain consisting of hundreds, and in some cases thousands of participants. It is easy to control the payment of taxes by processing enterprises—there are currently 84 of them in the country. It is almost impossible to track all the suppliers. But with Fokin’s VAT, the number of participants in the chain no longer matters: the plant pays the tax for everyone. It is enough to appoint one Federal Tax Service inspector for each of the 84 factories to effectively control the accrual and payment of taxes.
Waste paper balance in 2021
League of Waste Paper Recyclers, System Solutions Center
An important circumstance: the waste paper procurement segment, including primary procurers and PPPs, is a completely small business that has the right to use a simplified taxation system.
How to pay VAT on waste paper from 2021
From 2021, VAT will be collected from waste paper. The previous law, which eliminated paper waste from taxes, has expired.
Who will pay the tax, the procedure and rules for its deduction, the provision of deductions, you will learn all this from this article. From January 1, 2021, waste paper became subject to VAT. Amendments to the Tax Code of the Russian Federation were introduced by Law No. 424-FZ of November 27, 2018. This was quite expected. Since the legislative act of June 2, 2016 No. 174-FZ, which provided a VAT exemption for paper and cardboard waste, became invalid on December 31, 2021.
Taxation of value added tax on waste paper in 2021 is based on the principle of deductions from scrap metal and animal skins, indicated in Article 161 of the Tax Code of the Russian Federation. In 2021, the purchase and sale of waste paper is subject to VAT deduction.
Before this period, such transactions were not subject to taxation. What waste is now subject to 20% collection in favor of the state. Clause 8 of Article 161 of the Tax Code lists among them:
- Business papers, documents for write-off, cardboard folders, cardboard cards, used books, used magazines, newspapers and other printed materials that can no longer be used;
- Used cardboard, packaging cardboard, cardboard waste generated during work or as a result of its use for various needs;
- Paper waste generated as a result of a production or consumer process;
- Marriage.
The responsibility for calculating and deducting VAT falls on buyers.
At the same time, individual entrepreneurs and organizations receive the right to: claim a deduction for it, restore it, and declare it in reporting. Buyers are recognized as tax agents.
But there are many underwater reefs here, which we will talk about further.
First of all, let’s look at who the law classifies as VAT payers on paper and cardboard waste. Belong to tax agents Not considered tax agents
- Notaries (lawyers, advocates)
- Businessmen;
- Legal entity, regardless of the method of paying taxes (including those exempt from it under Article 145 of the Tax Code of the Russian Federation);
VAT according to Fokin
The result of the application of Fokin’s VAT was an increase in the number of industry participants and investments, Artem Kiryanov points out. According to experts, in 2021 the volume of waste paper procurement increased to 4 million tons, 800 thousand tons more than in 2016. The growth is ensured by an increase in the number of primary producers - individual entrepreneurs, micro- and small enterprises - in proportion to the increase in collection volumes, that is, by at least 25%.
Anticipating an increase in the incoming flow of raw materials, factories planned a massive commissioning of capacity. Only in the segment of production of container boards (the main raw material for the production of corrugated cardboard, material for the most popular transport containers and packaging) for the period until 2023, it was planned to commission new and modernize existing production facilities with a total capacity of more than 2.5 million tons per year (according to processing). Taking into account the current capacity, the input volume will be sufficient to process all recyclable waste paper.
The result of applying Fokina VAT:
— multiple increase in budget revenues;
— attracting a significant number of new participants to the waste paper procurement segment;
— growth in volumes of waste paper procurement and processing;
— increasing the transparency and investment attractiveness of the industry;
— a multiple reduction in the volume of tax administration, an explosive increase in the efficiency of the tax service.
Strange decision
And against this background, the Ministry of Finance is pushing agent VAT through the State Duma in the waste paper procurement segment, throwing the industry back three years and blocking its development.
What was the department guided by when proposing and promoting its initiative? Harmonization of legislation? But why should harmonization go in the direction of complexity - or, at least, should not take into account the specifics of the subjects of regulation? Virtually all legal entities operating in Russia are involved in the circulation of waste paper: in accordance with the latest edition of Art. 161 of the Tax Code, “waste paper is paper and cardboard waste from production and consumption, rejected and out-of-use paper, cardboard, printed products, business papers, including documents with expired shelf life.” Inevitable errors when registering the sale of waste paper within the framework of the VAT agency scheme will hit any of the organizations operating in Russia. There will be fewer and fewer people willing to hand over accumulated waste paper for recycling under such conditions.
Increased control? But by pushing through the introduction of the tax, the Ministry of Finance created for itself the subject and object of control: if there is no tax, then there is nothing to control. In what case will control be simpler and more effective: when there are 84 tax payers or when there are hundreds of thousands of them? How much will it be necessary to increase the resources allocated for tax control in the industry? If during the Fokin VAT, one inspector per processing enterprise ensured the receipt of more than 107 million rubles of tax, then what amount would be required per inspector under the agency scheme?
Growth in the volume of VAT administration under the agency scheme
Source: League of Recyclers, System Solutions Center
The actions of the Ministry of Finance look especially strange against the backdrop of modern services already offered by its division, the Federal Tax Service. At the II All-Russian Forum “Dialogue with the Taxpayer”, the Federal Tax Service presented a service for professional income tax payers - simple, maximally user-friendly, fully automated. But if a self-employed user of the service takes the risk of contacting the collection of waste paper and purchases at least a kilogram from a legal entity, he will acquire all the duties of a tax agent for VAT.
Did the department expect an increase in budget revenues? But what were these expectations based on? An increase in tax payment, all other things being equal, is possible solely due to the growth of the tax base, that is, the volume of procurement and processing of waste paper. Redistribution of responsibilities for tax payment, accounting and reporting will not lead to the desired result.
Fokin's VAT provided for levying a tax on the maximum amount of added value generated at the end points of its formation - at factories. The agency scheme cannot in any way contribute to the growth of added value, but only increases the number of taxpayers, each of whom pays tax on an insignificant part of the added value generated by the industry. The Ministry of Finance is inclined to believe that if you take 20% of every hundred rubles a hundred times, the result will be more than if you took 20% of a hundred rubles once?
* * *
We examined the general procedure for calculating VAT by buyers of waste paper - tax agents. The explanations of the competent authorities apply to this situation in relation to all goods specified in paragraph 8 of Art. 161 Tax Code of the Russian Federation.
Let's add a few words about the payment of taxes by tax agents. The procedure for calculating the amount of VAT that the tax agent must pay to the budget based on the results of the quarter is established in clause 4.1 of Art. 173 Tax Code of the Russian Federation. The tax is calculated cumulatively in relation to all goods listed in clause 8 of Art. 161 of the Tax Code of the Russian Federation, and in relation to all transactions for the past tax period. The total amount of tax calculated in accordance with clause 3.1 of Art. 166 of the Tax Code of the Russian Federation, increases by the restored amounts on the basis of paragraphs. 3, 4 p. 3 art. 170 of the Tax Code of the Russian Federation and is reduced by the amount of deductions provided for in paragraphs 3, 5, 8, 12 and 13 of Art. 171 of the Tax Code of the Russian Federation, regarding operations carried out by the named tax agents.
As for the VAT return, changes have now been made to the form, format and procedure for filling it out. Now for tax agents specified in paragraph 8 of Art. 161 of the Tax Code of the Russian Federation, a clear procedure is prescribed.
VAT: problems and solutions, No. 4, 2021
The Ministry of Finance is killing the industry
Thus, 2021 has placed the industry in extremely difficult conditions. From a simple and understandable system they turned it into a complex and confusing one. “Now we are increasing the number of payers, which increases the burden on administrative authorities, and we cannot expect an increase in revenues, since what was previously collected in one place will be distributed along a long chain. What 80 companies did will now spread across millions. Why was this done? Unclear. And VAT is a tax on which decisions should be made only after in-depth analysis,” says Vladimir Saskov.
The main mistake of the Ministry of Finance specifically regarding waste paper is that waste paper was considered by the department in the same way as other regulated items, in particular scrap metal. In the procurement of scrap metal, there is a period of emergence of a semi-finished product, which can simply be “drawn” on paper, although in reality it will not exist.
New paper machine at Sukhonsky Pulp and Paper Mill (United Paper Mills)
Source: OBF press service
This, on the one hand, is still scrap metal, and on the other hand, it is a semi-finished product, not a finished product. And in a number of cases, industry participants have abused this. They artificially integrated companies into the chains, which seemed to sell them semi-finished products and receive a tax deduction. In the case of waste paper, the ministry, trying to find a similar semi-finished product in the supply chain, had in mind sorted and baled waste paper, that is, raw materials that comply with GOST 10700-97, which producers sell to processors and which, according to law 174-FZ, was exempt from VAT. But industry participants have a logical question: why do they need to manipulate waste paper if this raw material is already exempt from VAT? There is still no answer to it.
Industry participants are sounding the alarm. “We have not yet received requests from the tax office,” says an accountant of one of the PZPs, “but only because the Federal Tax Service itself has not yet understood what is happening.” According to her, there are already known cases when suppliers declared VAT deductible on purchased services.
If earlier this was impossible, because the activities of small distributors of waste paper were not subject to VAT, now they have such an opportunity. And, naturally, the accountant explains, the budget will lose this money.
Large factories have already felt the changes - their work has become more complicated: incoming invoices without VAT may not correspond to reality. You have to constantly call the suppliers and find out what taxation system they use.
There are also purely technical difficulties with accounting. The 1C program currently supports only one version - CORP. And if a waste-generating company needs to take into account even one-time work with waste paper, it must purchase a new program, which costs about 35 thousand rubles. In addition to the costs of the program, the waste generator must also pay for employee training. And all this in order to perform one operation, because VAT must be reported electronically, and the sale of waste paper for the vast majority of waste generators is a non-core job.
But perhaps the most difficult point is that the procurer, as a tax agent, must calculate VAT at the time of shipment, when receiving waste paper. And it must be calculated according to the invoice provided by the waste generator. Accordingly, in the absence of such a document, tax cannot be calculated. What to do about it? Unclear. And since for most waste generators waste paper is a non-core business, it is clear that no one is in a hurry to resolve the issue. The result is obvious: waste paper collection volumes are decreasing.
VAT deduction from the tax agent.
Having received from the seller - the VAT payer the corresponding instruction that the tax is calculated by the tax agent, the buyer of waste paper fulfills the obligation assigned to him, regardless of the applied taxation regime, as well as exemption from the obligations of the VAT payer.
At the same time, the buyer (tax agent) has the right to deduct the VAT calculated when purchasing waste paper only if he is the payer and the goods purchased by him are intended for transactions subject to VAT (clause 3 of Article 171 of the Tax Code of the Russian Federation).
In Letter No. 03-07-14/85863 dated November 28, 2018, the Ministry of Finance indicated that VAT amounts calculated by tax agents - buyers of waste paper based on invoices issued by sellers will be deducted in the tax period in which these goods are supplied for registration. As a rule, the tax period in which tax agents calculate tax for the seller - a VAT payer, coincides with the tax period in which tax agents have the right to deduct tax as a buyer.
Experts for VAT Fokina
Federal Law No. 424-FZ has already been criticized by everyone who has just become acquainted with it or who has been affected by it in one way or another: the League of Waste Paper Recyclers, procurers, the Ministry of Industry and Trade, the Ministry of Natural Resources and Ecology, Moscow University named after S. Yu. Witte, Moscow State University, RANEPA, Russian Economic University, Public Chamber of the Russian Federation, “Business Russia”, “All-Russian Popular Front”, “Support of Russia”.
For example, Natalya Belyaeva , an independent expert authorized to analyze the bill for the State Duma Committee on Budgets and Taxes, notes in her examination that No. 424-FZ identified a number of corruption-related factors. She believes that only one group of people benefits from the adoption of this law, and its very development could be a consequence of pressure from this group - the logging industry.
Experts from the Higher School of Economics opposed the new law, noting, among the negative consequences for the industry, the complication of VAT accounting and reporting, a reduction in the number of industry participants and volumes of waste paper procurement, a drop in tax revenues and a deterioration in the financial performance of enterprises. Representatives of the Ministry of Industry and Trade and the Ministry of Natural Resources also expressed their opinion on the law. Elena Klevanova, a leading expert in the department of forestry, pulp and paper and woodworking industries of the Ministry of Industry and Trade, confirmed: harvesters are experiencing stress from agency VAT, production capacity utilization is decreasing. Therefore, the relevant department of the Ministry of Industry and Trade supports the return of Fokin’s VAT. As for the Ministry of Natural Resources, the current situation is its direct interest, since the transition to a model of environmentally sustainable development was announced back in 2021 by Vladimir Putin , who demanded active action in this direction from all interested parties. The chaos in the recycling industry is contrary to these goals. In addition, the actions of the Ministry of Finance undermine the implementation of the president’s instructions on a circular economy and sustainable development and block the implementation of the national projects “Ecology” and “Development of Small and Medium Enterprises.”
The industry is fighting for its salvation
It is already clear that the entry into force of new amendments to the Tax Code has a serious impact on the entire industry and carries significant risks for both the economy and the environment, since up to 50% of the paper industry is dependent on waste paper. And if we talk about the consequences, the most obvious of them seems to be a decrease in the volume of waste paper procurement due to a decrease in the number of producers, says Artem Kiryanov. This will be followed by a decrease in the volume of production and sales of waste paper processing products; a decrease in profitability and a drop in the investment attractiveness of the industry.
The most obvious solution in the current situation, Artem Kiryanov is sure, is to return to the Fokin VAT, which worked well in 2016–2018. This will allow the industry to develop, and the budget to receive VAT in full, while at least not worsening the environmental situation in the country.
It is possible that the amendments will be revised, perhaps all this may even develop into a new separate bill, but with a more detailed analysis from all government departments related to this. But this will not happen instantly, which means that in 2021 time has already been lost and the budget will not receive significant funds, while the industry itself will suffer seriously. One thing is clear: the industry needs Fokine's VAT and it should be returned as quickly as possible.
How to reflect VAT on waste paper for a seller in 2021
> > Author: Nikitin V., auditor of CG "Ayudar" Magazine "Institutions of culture and art: accounting and taxation" No. 2/2021 Cultural institutions periodically hand over accumulated waste paper to collection points for a fee.
If previously such a transaction was exempt from VAT, then from 2021 it began to be subject to this tax, and a special taxation procedure is applied.
The article discusses issues that arise when taxing such a transaction.
Clause 1 of Art. 39 of the Tax Code of the Russian Federation determines that the sale of goods is the transfer of ownership of them on a reimbursable basis. Thus, handing over waste paper to a collection point for money is recognized as its sale.
From 01/01/2021 Ch. Attention VAT, and the buyer should not act as a tax agent.
In this case, the buyer must ask for certified copies of supporting documents.
Experts from the Glavbukh System remind you that a seller who applies a special tax regime does not issue an invoice when selling waste paper. But in the contract and in the primary accounting document (for example: invoice) there must be an entry “Without VAT”. It is advisable to specify in the contract the reason for exemption from VAT.
The seller, exempt from VAT, is obliged to issue an invoice to the buyer of waste paper marked “Without VAT”.
The entry “Excluding tax (VAT)” exempts buyers from performing the duties of a tax agent.
From January 1, 2021, the basic tax rate will increase by 2%. General provisions on taxation in transactions between related parties” of the Tax Code of the Russian Federation, taking into account tax. According to paragraph 4 of Art. 164 of the Tax Code of the Russian Federation, when calculating VAT by tax agents, the tax rate is determined as a percentage of the tax rate provided for in paragraph.
3 tbsp. 164 of the Tax Code of the Russian Federation, to the tax base taken as 100 and increased by the corresponding tax rate. Consequently, the tax agent calculates the tax base based on the cost of waste paper including VAT, and determines the tax amount using the calculation method at the rate of 18/118.
