Do I have to pay VAT when receiving a security deposit?

We will continue to talk about:

On what (advance, deposit or security payment) VAT is charged and under what conditions. In what cases is VAT not charged (VAT savings occur)?
How does the tax inspectorate look at each type of payment and what to do about it?
How are advances, deposits and payments used in tax accounting using the example of customer-supplier relations?
How can you benefit from tax planning?

And “Teapot” and “Coffeepot” will continue to help us with this. And we started the adventure by explaining the terms and how an advance, deposit and security deposit are reflected in accounting here.

Be careful, there are a lot of subtleties and details!

Advance and VAT. Theory

In addition to Chapter 21 of the Tax Code, VAT on advances is regulated by the Decree of the Government of the Russian Federation dated December 26. 2011 No. 1137 and Order of the Federal Tax Service of Russia dated October 29, 2014 No. ММВ-7-3/ [email protected]
VAT is not charged on the advance received if:

the seller is under a special tax regime and is not a VAT payer (Chapter 26.1–26.5 of the Tax Code of the Russian Federation)
the seller is exempt from paying VAT (Articles 145 - 145.1 of the Tax Code of the Russian Federation)
the prepayment was for a transaction not subject to VAT (Article 149 of the Tax Code of the Russian Federation)
an advance was received for a transaction, the implementation of which will take place abroad (Article 147, Article 148 of the Tax Code of the Russian Federation)
the advance payment was transferred for a transaction subject to a zero VAT rate (clause 1 of Article 164 of the Tax Code of the Russian Federation)
prepayment is made for operations with a long production cycle - more than six months (clause 13 of article 167 of the Tax Code of the Russian Federation)
the seller forgot to charge VAT on the advance payment, but regularly paid the tax upon sale. In such cases, you will have to defend yourself in court. The prognosis is favorable, but a fine will be charged (Resolution of the Central District Court of December 11, 2018 No. F10-5158/18 in case No. A54-9694/2017).

Didn't find yourself on this list? Then you will have to pay VAT on the advance payment. Consider these other nuances:

The Ministry of Finance believes that advance VAT deductions cannot be postponed . They are declared only in the period when the basis for them arose (Letter dated 04/09/2015 No. 03-07-11/20290).
The tax office is confident that VAT is charged on the advance payment received in any case , even if the periods of receipt of the advance payment and the sale coincide (Letter of the Federal Tax Service dated July 20, 2011 No. ED-4-3/11684). The courts believe that it is not necessary to “drive” advance VAT within one tax period, and it is enough just to reflect the implementation (Resolutions of the Administrative District of the North Caucasus District dated July 14, 2017 No. F08-4349/2017, dated July 7, 2016 No. F08-4155/2016 , FAS North-Western District dated 02/20/2014 No. Ф07-10666/2013, Resolution of the Presidium of the Supreme Arbitration Court of the Russian Federation dated 03/10/2009 No. 10022/08, dated 02/27/2006 No. 10927/05).
If the sales amount is less than the advance payment, then only VAT on sales can be deducted.
In order for the buyer to offset advance VAT, the prepayment condition must be in the contract, and the fact of transfer of money must be documented. You also need a correctly completed invoice for the advance payment (clause 9 of Article 172 of the Tax Code of the Russian Federation). VAT may not be restored if the advance payment was transferred from a terminated contract to another concluded with the same seller (Letter of the Ministry of Finance dated 02/08/2019 No. 03-07-11/7650).

Deposit and VAT. Theory

Tax authorities believe that the deposit performs a payment function. Therefore, its receipt should be considered an advance on the basis of subparagraph. 2 p. 1 art. 167 NK. When a deposit is received to secure an obligation under an agreement, the subject of which is a sale subject to VAT, VAT should be calculated on the deposit. The point at which the tax liability arises is controversial.

The Ministry of Finance (Letter dated 04/10/2017 No. 03-07-14/21013) and the Federal Tax Service (letters dated 02/02/2011 No. 03-07-11/25, dated 01/17/2008 No. 03-1-03/60) assure that, according to paragraph 1 of Art. 154 of the Tax Code, the deposit is included in the VAT tax base in the period when the money is received .

This position is reflected in judicial practice. Cognitive Ruling of the Supreme Court of the Russian Federation dated July 18, 2019 N 301-ES19-10310 in case N A82-20708/2017. The organization included a clause in the deposit agreement according to which the money was counted as payment for the purchase and sale agreement for the rabbit breeding complex project. The depositor transferred the money in two installments with the payment basis being “partial payment (then full) of the deposit under the purchase and sale agreement for the rabbit breeding complex No. 15-09 dated September 21, 2015, not subject to VAT.” There are more than enough grounds to recognize the sale and charge additional VAT. There is no need to do this.

The court also indicated: failure to subsequently conclude a purchase and sale agreement and failure to sell may be grounds for applying a tax deduction, but in the period when the basis for it appears.

Despite the “guiding clarifications of the authorities,” the security nature of the deposit, which is not subject to VAT at the time of receipt , is confirmed by judicial practice. Let's look at how to handle the deposit correctly using the example of the Resolution of the Arbitration Court of the Central District dated January 19, 2018 N F10-49/2017 in case N A09-11694/2015.

The preliminary agreement for the purchase and sale of goods included the payment period and the amount of the deposit with the wording “the buyer undertakes to transfer to the seller to ensure the execution of this preliminary agreement.” The fate of the deposit was determined after the expiration of the preliminary agreement. “If neither party took the initiative to conclude the main contract, the deposit will not be returned to the buyer.” It was agreed that if the buyer refuses the main contract, the deposit remains with the seller. We set a deadline for concluding the main contract. The recipient took into account the transferred funds as a deposit received under a preliminary agreement , not subject to VAT. The Federal Tax Service was unable to prove the legality of additional VAT charges.

Lease agreement and security deposit – with or without VAT

The concept of a security payment with VAT is included in the Civil Code of the Russian Federation. According to it, these funds represent an obligation, including the obligation to contribute losses or penalties, which is secured by a cash contribution. Money is transferred from one party to the agreement to another.

Value added tax is indirect and arises when creating goods or works or services. It is paid as goods or services are sold, upon receipt of advance payment from the buyer. Payers are companies and individual entrepreneurs. The main rate is currently 20%, but there are preferential rates of 0 and 10%. This tax is considered one of the most difficult to calculate.

Security payment under the lease agreement

Typically, a security deposit guarantees the fulfillment of an obligation that arises in the future. Upon the occurrence of obligations that are reflected in the contract, the amount is counted towards the fact that the obligation is fulfilled according to the conditions.

Often this amount of money is included in the lease agreement.

This allows the lessor to fulfill payment obligations, compensate for penalties, damage to real estate, etc. If the secured obligation has been terminated, then the money should be reimbursed (unless otherwise stated in the contract).

If the rent increases, the previously paid amount, which guarantees the obligation to contribute funds, cannot insure the landlord against non-payment. To prevent such a situation from arising, it is necessary to provide for when additional deposits are required, in what order the contribution is calculated, etc.

A popular problem is whether the fee is paid with or without VAT. If the parties to the agreement who established the fee work on the OSN, the accrual of the fee is the responsibility of the payer due to the fact that:

The supplier is obliged to calculate funds from the amounts received for upcoming deliveries of goods (services). If a fee has been accrued, it can subsequently be deducted.
The buyer has the right to deduct the fee based on the contribution amount based on the SF.

According to the provisions of the Tax Code, there is a need to perform operations with VAT. At the same time, VAT is a tariff that is charged on income received under the OSN. These do not include those funds that are represented as collateral and are used as security. Thus, this amount is taxed if it performs the function of security and payment.

Accounting for security deposit

Accounting is a system of recording, summarizing data in monetary terms about the property and obligations of the company and their movement. The object of accounting becomes the company's property, liabilities and business transactions performed during its activities.

A popular problem is whether the security deposit is subject to VAT for a lease agreement and in other cases. If the buyer transferred funds to the seller for the purpose of security, which will later be counted towards payment for goods or services, the corresponding transactions are generated.

On the seller's side, the following transactions are made:

DT51KT76 – receiving funds from the buyer.
DT76KT68 – tariff calculation for the corresponding amount.
DT62KT90 – reflection of revenue for a consignment of goods.
DT76KT62 – crediting collateral in the form of payment for products.
DT90KT68 – accrual of tax on revenue.
DT68KT76AV – acceptance of money for deduction.

The buyer's side also prepares accounting entries. When transferring funds, it is written DT76KT51, when receiving goods the amount without VAT is displayed - DT41KT60, when taking into account the tax on received products it is written DT19KT60, when accepting for deduction - DT68KT19. In case of offset against payment of funds, DT60KT76 is indicated.

The answer to the question of whether a fee will be subject to a fee is determined by what happens to the fee in the future. If, according to the terms of the agreement, it is offset against payment, it is subject to a fee in the same way as the advance payment. If it is returned to the buyer after the warranty function has been fulfilled, it may not be subject to collection.

Postings for a security deposit and a deposit: comparison

A popular question is whether there is a need to impose VAT on the security payment. In a broad sense, this amount represents the contribution that a party transfers to ensure the fulfillment of obligations under the contract. By concluding separate agreements, the parties can regulate the possibility of replenishing or returning the amount guaranteeing the fulfillment of obligations.

There are some nuances in calculating the amount under the simplified tax system by the authorized party and the obligated party. For example, a supplier has entered into an agreement with a buyer. According to the agreement, the payer made a contribution to guarantee payments. The seller delivered the product, and the buyer contributed funds for the delivery. As a result, the supplier returned the contribution, since the second one fulfilled its obligations under the contract.

What transactions will the seller have:

The buyer, in turn, will make 2 transactions. DT60/OPKT51 reflects the transfer of funds to the counterparty, DT51KT60/OP – the return of payment by the counterparty. Transactions are displayed differently if the parties work on the OCH. This is due to the fact that they are considered payers of the fee.

There are some differences between a deposit and a security deposit. These include the possibility of funds being retained by a supplier who, in fact, did not deliver anything. If deduction occurs, the supplier reflects this fact using postings.

DT51KT62/3 reflects that the deposit was received. Posting DT62/3KT91 shows that the deposit was included in other expenses, DT91KT68 shows the accrual of a fee on the amount of the deposit. We can say that the postings do not include the goods or the fact that the fee has been charged. The deposit is shown in other income, and not in revenue, which distinguishes it from a security deposit.

Source: https://expert-nds.ru/obespechitelnyy-platezh-nds/

Security deposit and VAT. Theory

The level of tax risks will be reduced if the basis, procedure for using and returning the security are specified in detail in the contract.

De facto, the security payment, which was called guaranteed, was used until 2015. This gave rise to ambiguity in law enforcement practice. 4 years have passed since the appearance of the legal structure in the Civil Code of the Russian Federation. The established position on VAT on a security deposit can be considered the opinion of the Ministry of Finance, which expresses:

Letter of the Ministry of Finance of Russia dated December 28, 2018 N 03-07-11/95829
Letter of the Ministry of Finance of Russia dated February 11, 2019 N 03-07-11/8176).

The occurrence of an obligation to charge VAT on a security deposit depends on the type of transaction. Receipt and return of security without subsequent offset as payment under the contract does not require VAT.

If the tax office can prove that the security is related to the sale, i.e. is counted towards payment for goods, works, services, then they will try to charge additional tax (Letter of the Ministry of Finance dated November 3, 2015 No. 03-03-06/2/63360). For example, a security deposit for the last month of rent often qualifies as an advance. Moreover, they can use sub. 2 p. 1 art. 162 of the Tax Code, which causes difficulties for both parties to the lease agreement with deducting accrued VAT.

Security Deposit: Breaking Down the Basics

A security deposit is a sum of money that one party uses as a guarantee to the other party to confirm that the obligations assumed will be performed to the agreed extent. Let's look at the key points of working with security payments in 2020.

ConsultantPlus TRY FREE

Get access

A monetary obligation, which one party undertakes to provide to the other party as security for obligations assumed, can be provided even for those obligations that arise only in the future. This definition is enshrined in Article 381.1 of the Civil Code of the Russian Federation, answering the question of what a security deposit is.

If certain circumstances occur, the party who received the security payment (SP) has the right to offset the funds against the fulfillment of the obligations for which the funds were received. Consequently, such a tranche acts as a deposit made to the creditor’s current account, from which funds can be withdrawn in favor of fulfilling accepted obligations.

A security deposit as a way to ensure the fulfillment of obligations is often used when concluding lease agreements. For example, the tenant agrees to pay monthly rent to the owner of the property.

If the monthly tranche is not received on time, the lessor has the right to write off unpaid obligations from the deposit.

The lessor also has the right to write off the cost of damaged property, if such was provided for in the lease agreement.

Conditions of use

This type of security has significant advantages for the lender.

After all, the money to secure the agreements that will only be executed has already been made available, for example, in cash at the cash desk or by bank transfer to a current account.

In case of violation, there is no need to demand execution of the contract in pre-trial or judicial proceedings. The lender simply writes off the money to pay off the default.

The security payment of the Civil Code of the Russian Federation can be established in the amount of:

a specific fixed amount, the amount of which is determined by agreement of the parties;
percentage, part of a specific constant value, for example, of a set amount of rent.

It is worth noting that in some cases the lender may establish a permanent amount of the financial guarantee. Consequently, in cases where the creditor has satisfied his claims, the debtor must restore the amount of security to the indicated value (clause 3 of Article 381.1 of the Civil Code of the Russian Federation).

If the contract is fulfilled and no violations are established, then the creditor must return the entire amount of the security. If violations are detected, the lender writes off part of the funds to repay unfulfilled agreements (penalties, delays, fines).

The balance is returned to the debtor after full execution of the contract, unless otherwise provided by the terms of the agreement.

Please note that under the terms of the contract, the parties have the right to specify conditions upon the occurrence of which the security payment will not be returned.

What is subject to security

A security deposit can only be provided for monetary obligations. And absolutely any. For example, regarding the following:

rent;
payment for goods, services, work;
compensation of penalties for late payments;
compensation for damage caused;
compensation for losses and expenses incurred.

Transfer of collateral

It is not uncommon for concluded contracts to be fully executed, their validity periods have passed, and payment remains unclaimed. What to do with funds? Everything depends on further circumstances.

If the parties have fulfilled the accepted conditions and do not plan to enter into new contracts, then the guarantee amount must be returned to the debtor. Moreover, the volume of the return is determined on an individual basis, taking into account the agreements specified in the contract. Let us remind you that in certain cases the creditor has the right not to return the money at all.

The repayment period must be specified in the contract, as well as the amount and rules for writing off the security amount. If such conditions are not fixed in the text of the agreement, then the refund must be made no later than 7 days from the date of receipt of the request for the return of the security.

If the parties decide to extend cooperation, then the security payment can be transferred to a new agreement. But only if such a condition is enshrined in the original contract.

If there are no agreements, then it is best to return the money, and then enter into a new agreement and re-transfer the security. The second option is to decide the fate of the security deposit by agreement of the parties.

For example, by concluding an agreement that the security will be transferred to a new contract.

Taxation: VAT disputes

In most cases, the security payment is not subject to VAT. However, officials have identified two conditions, subject to which the organization is obliged to charge and pay value added tax to the budget:

The guarantee amount can subsequently be offset against payment for goods supplied, services provided, or work performed.
The sale of these goods, works, and services is subject to VAT.

Source: https://ppt.ru/art/plateji/obespechitelniy

How can you benefit from tax planning?

Prepaid expense

With significant amounts of advance payments, the buyer can not only reduce the amount of VAT in the current period, but also reimburse the tax from the budget. This allows you to regulate the uniformity of tax payments. An advance deduction for several supplies can be received one-time and restored in parts in several tax periods.

Deposit

In case of emergency, a deposit can be used as a way to transfer funds free of charge from one company to another or as an interest-free loan. However, when using a deposit in this capacity, you should approach the paperwork very responsibly, since the tax office will try to prove the sham nature of the transaction.

Like an advance, a deposit is convenient to use to regulate the schedule of tax payments. This will allow, on the one hand, to evenly spend working capital (defer the payment of VAT), and on the other hand, to avoid suspicious situations if the amount of one-time VAT deductions is too large.

Security payment

The funds transferred as a security payment are in free circulation with the recipient. Essentially, this is an interest-free loan. A variety of conditions for the occurrence of obligations that require collateral make it possible to insure risks. For example, changes in exchange rates or excise tax rates for long-term cooperation.

The most convenient option to monitor tax planning is a special application that shows the burden for each type of tax and also gives recommendations for reducing them directly in your smartphone in real time.