How are utilities charged with VAT when renting premises?
Utilities consumed by the tenant may be reimbursed to the landlord as part of the rent, on top of it, or as part of an intermediary agreement. Depending on this, the VAT taxation of the lessor and the lessee changes.
For example, if “utilities” are included in the rent, then the landlord pays VAT on the entire amount, and the tenant takes this tax as a deduction.
If utilities are overcharged in excess of the rent, then for VAT purposes such an operation is not a sale. In this case, the lessor does not pay VAT on it, and the lessee does not deduct it.
How does a landlord impose VAT on overbilled utilities?
Payment of VAT on overbilled utility bills depends on how settlements are organized between the landlord and the tenant:
- “utilities” are paid within the rent;
- “utilities” are billed in excess of the rent;
- “Utilities” are transferred within the framework of the intermediary agreement.
VAT on utilities included in the rent
If utility bills are included in the rent, then charge and pay VAT on the full amount of the rent under the contract, including utilities (clause 1, clause 1, article 146, clause 1, article 154 of the Tax Code of the Russian Federation). This is the simplest way to reimburse utility costs for VAT purposes.
Issue an invoice to the tenant for the full amount of the rent. It is not necessary to highlight the amounts of utility bills as a separate line (clause 3 of Article 168 of the Tax Code of the Russian Federation, Letter of the Ministry of Finance of Russia dated 09.19.2006 N 03-06-01-04/175 (clause 2), Federal Tax Service of Russia dated 02.04.2010 N ShS- 22-3/ [email protected] (clause 1)).
You have the right to deduct “input” VAT presented by utility service providers in full. This can be done in the general manner on the basis of invoices issued by utility companies (clause 2 of Article 171, clause 1 of Article 172 of the Tax Code of the Russian Federation, clause 1 of the Letter of the Federal Tax Service of Russia dated 04.02.2010 N ШС-22-3/ [ email protected] ).
VAT on utilities overcharged in excess of rent
If utilities are overcharged in excess of the rent, then there is no need to charge VAT on their cost, since there is no taxable object. Operations involving the transfer by the lessor of electricity, water, gas, etc. to the lessee do not relate to operations for the sale of goods for VAT purposes. Accordingly, there is no need to charge tax on them and issue an invoice.
According to regulatory authorities, you cannot act as a provider of these services for a tenant, since you yourself act as a buyer (subscriber). This follows from Letters of the Ministry of Finance of Russia dated December 31, 2008 N 03-07-11/392, Federal Tax Service of Russia dated February 4, 2010 N ShS-22-3/ [email protected] (clause 2).
In this case, you are not entitled to deduct the “input” VAT presented by utility service providers. Include this tax amount in the cost of utilities, which you re-invoice to the tenant (Letters of the Ministry of Finance of Russia dated 03.03.2006 N 03-04-15/52, Federal Tax Service of Russia for Moscow dated 21.05.2008 N 19-11/48675).
VAT on utilities re-invoiced under an intermediary agreement
If you have entered into an intermediary agreement with the tenant (for example, a commission or agency agreement), on the basis of which you enter into agreements with supply organizations, re-invoice the tenant for utilities under the intermediary agreement. Re-invoiced services are subject to VAT in the same manner as when re-invoicing other expenses under intermediary agreements.
Organization of a communal complex
Utility services provided by public utility organizations are not exempt from VAT. Organization of a utility complex is a legal entity that deals with utility infrastructure systems and operates facilities for the disposal of solid waste. How an organization uses utility infrastructure systems is important. If the system is used for the production of goods or the provision of services to ensure electricity, heat, water supply, drainage and wastewater treatment, then when selling goods, the taxpayer, in addition to the price of the goods, presents the amount of tax for payment to the buyer.
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How can a tenant deduct VAT on overbilled utilities?
The procedure for deducting VAT from the tenant on overbilled utility bills depends on how the settlements between the tenant and the landlord are organized - “utilities” are paid within the rent, on top of it, or as part of an intermediary agreement.
Deduction from utilities included in rent
If utility bills are included in the rent, then you have the right to deduct the entire amount of “input” VAT, including for utilities. This can be done in the general manner on the basis of an invoice issued by the lessor (clause 2 of Article 171, clause 1 of Article 172 of the Tax Code of the Russian Federation, clause 1 of the Letter of the Federal Tax Service of Russia dated 04.02.2010 N ШС-22-3/86).
Including the cost of services in the contract price is the easiest way to reimburse utility costs for VAT purposes.
Can the tenant deduct VAT on utilities overcharged in excess of the rent?
If the landlord overcharged you for utility costs in excess of the rent, then you cannot deduct VAT for such a transaction. After all, for VAT purposes this operation is not recognized as a sale. The landlord does not charge you with VAT or issue an invoice. This conclusion follows from Letters of the Ministry of Finance of Russia dated May 14, 2008 N 03-03-06/2/51, Federal Tax Service of Russia dated March 21, 2006 N ШТ-6-03/ [email protected]
Deduction from utilities overbilled under an intermediary agreement
If you have entered into an intermediary agreement with the landlord (for example, a commission or agency), on the basis of which he concludes contracts for you with supply organizations, then utilities are rebilled to you under the intermediary agreement. The procedure for deducting VAT on utilities in this case is the same as for reimbursement of other expenses under intermediary agreements.
How to correctly recharge utilities to a tenant.
We rent out part of the premises. The cost of utilities is not included in the rent, and tenants reimburse it (cost) separately. We pay our suppliers ourselves. How to re-issue utility invoices to tenants regarding the services they consumed?
To prevent the tenant from losing the deduction of input VAT on utilities, it is better to include in the lease agreement a clause on agency relations between the parties.
Or, in addition to the lease agreement, enter into an agency agreement. Under this agreement, the lessor will, on its own behalf, but at the expense of the lessee, purchase utilities from supply organizations.
Then the landlord will act as an intermediary between utilities and the tenant in purchasing utilities and paying for them.
When receiving invoices from utilities, the landlord will determine the cost of services and the amount of value added tax attributable to a particular tenant and re-invoice him, reflecting the figures from the utility invoices. And the tenant will declare value added tax on these invoices for deduction Letter of the Ministry of Finance dated March 14, 2014 No. 03-07-15/11221.
This option is convenient for the landlord because he will already have documents ready to deduct VAT in relation to the utilities consumed by him.
Since the agency agreement must be paid, the tenant will have to pay the landlord an agency fee. 1006 Civil Code of the Russian Federation. It can be installed in any size. The parties can also agree to reduce the rent by the amount of the agency fee.
If, without an agency agreement, the landlord reissues the tenant an invoice for the utilities consumed by him, then the tax office will refuse the tenant a VAT deduction Letter from the Ministry of Finance dated December 31, 2008 No. 03-07-11/392; Federal Tax Service dated 02/04/2010 No. ШС-22-3/ [email protected] (clause 2).
Re-billing of utility costs to another organization documents.
Necessary Definitions
VAT is one of the taxes that have a fairly large impact on the formation of the budget of our state. At the same time, the essence of value added tax is fully reflected in its name, that is, a person pays a certain percentage of the price that was added by the seller on top of the cost of production.
In accordance with current legislation, this tax is calculated and paid initially by enterprises and manufacturers, retail or wholesale trading companies, as well as private entrepreneurs running their own business.
In practice, the amount of this payment is the product of the rate established by current legislation by the difference obtained between the proceeds that the seller acquired after selling his products, as well as the amount of costs that were required to produce this product.
Re-invoicing of reimbursable costs: how not to lose VAT deductions from end customers
At the same time, the parent company does not reflect these invoices in the books of purchases and sales and does not accept VAT for deduction and does not charge VAT to the budget, while subsidiaries reflect such invoices in the purchase book and accept VAT for deduction. Starting from the 1st quarter of 2015, tax authorities conduct global electronic reconciliation of all invoices and all counterparties.
If discrepancies are detected, the parties will be sent a request for clarification, and buyers may lose their VAT deduction. The rules for filling out an invoice used in VAT calculations (hereinafter referred to as the Rules for filling out an invoice), approved (hereinafter referred to as Resolution No. 1137), provide for the procedure for issuing invoices within the framework of intermediary agreements (commission, agency).
According to this procedure, in the case of purchasing goods (work, services) on his own behalf, the commission agent (agent), when issuing invoices to the principal (principal), reflects in them the indicators of the invoices that were issued to him by the sellers of these goods (works, services) (subclause
The premises are leased: how to correctly re-bille utility bills
Therefore, the landlord re-invoices the amount of utilities to the landlord without charging VAT.
At the same time, according to the financial department and tax authorities, funds received from tenants as compensation for utility services are recognized as non-operating income of the landlord. At the same time, the landlord's costs for paying for these services are taken into account as expenses.
Rationale for the conclusion: To begin with, we note that the legislation does not contain such a concept as “utilities”.
In practice, this term usually refers to a wide range of agreements concluded in order to ensure the activities of the leased object: electricity, heat, gas, water supply, regulated by the norms of paragraph 6 “Energy supply” of Ch. 30 “Purchase and sale” of the Civil Code of the Russian Federation, as well as drainage, cleaning of the premises of the building and the surrounding area, etc.
Re-wiring Electricity
2 tbsp. 539 of the Civil Code of the Russian Federation). As a rule, the tenant is not the owner of the heating and power networks, and he does not have the appropriate equipment to obtain energy, fuel, and water. The likelihood of signing an agreement with the tenant is low.
The procedure for accounting and taxation of the tenant's utility expenses depends on how exactly payment for these services is made. In practice, a tenant can pay for utilities in different ways:
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VAT when re-billing utility bills to the tenant
Since the organization does not sell utility services to the tenant, then, in our opinion, invoices for these services should not be issued.
This has been repeatedly pointed out by regulatory authorities, as well as individual courts (see, for example, letters from the Ministry of Finance of Russia dated May 14, 2008 N 03-03-06/2/51, dated March 24, 2007 N 03-07-15/39, Federal Tax Service Russia by city
Moscow dated July 16, 2007 N 19-11/067415, resolution of the Federal Antimonopoly Service of the Volga Region dated March 4, 2008 N A65-8421/2007-SA1-37). In the resolution of the Federal Antimonopoly Service of the East Siberian District dated October 23, 2008 N A19-5353/08-50-F02-5196/08, the judges came to the conclusion that reimbursement of the landlord’s expenses for payment of utility bills is not recognized as sales.
At the same time, the amount of reimbursement for utility bills received from tenants is not the landlord’s income, since in this case these services are not resold to tenants, but the landlord’s expenses for paying utility bills are compensated.
Pricing for housing and communal services
The standard payment for utility services includes several key contributions, namely:
Payment for maintaining housing in good condition and carrying out repair work includes all kinds of work related to the management of an apartment building, as well as conducting activities related to the maintenance and ongoing repairs of various property located in common property.
Among the most obvious services of this kind it is worth highlighting:
- improvement of areas near the house;
- garbage removal;
- cleaning the yards near the house;
- maintaining the safety and cleanliness of any public areas;
- carrying out all kinds of repair work.
In fact, guided by Part 2 of Article 157 of the Housing Code, in the vast majority of cases those tariffs that were established by the regional authorities of individual subjects are used.
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Registration and taxation of overbilled expenses
Taxation of reimbursable expenses (VAT) In the case where compensation for visa processing costs is carried out under a separate agreement, the VAT amount must be included in the cost of “transit” payments.
This is due to the fact that your organization does not provide visa services, but only re-billes the costs for this service to the customer (subsidiary company).
In this regard, reimbursement of costs for obtaining visas cannot be attributed to operations for the sale of goods (work, services) for the purposes of calculating VAT.
Compensation for utility costs: the position of the Ministry of Finance
For this reason, in practice, most often, under a lease agreement, the tenant compensates the landlord for a share of the cost of the utilities consumed by him separately from the rent.
The landlord directly enters into contracts with organizations that provide utility services.
They, in turn, provide the lessor with primary documents for their services on a monthly basis, and also issue invoices. The total cost of utilities is determined by their actual consumption based on bills issued by utility services.
Rebilling utility bills to the tenant: accounting and taxes
However, the law does not regulate how to provide the tenant with utilities and communication services.
In this connection, by virtue of the principle of freedom of contract (Art.
421 of the Civil Code of the Russian Federation) the parties have the right to independently determine the method of implementing the tenant’s obligation to pay for utilities and communication services. In practice, office space provided for rent is, as a rule, equipped with communication means (telephone, Internet), which the tenant can use.
At the same time, the lease agreement (as in the situation under consideration) often includes the tenant’s obligation to reimburse the landlord for expenses incurred by the latter for utilities and communication services on a separate account (that is, in addition to the rent). The profit of an organization, which is the object of taxation, is determined by the taxpayer based on the income received, reduced by the amount of expenses incurred (Article 247 of the Tax Code of the Russian Federation)
Re-invoicing of reimbursable costs: how not to lose VAT deductions from end customers (Misnikovich L.)
Issues may arise if the parent company identifies itself as the seller rather than the actual seller of the services when re-invoicing.
If discrepancies are detected, the parties will be sent a request for clarification, and buyers may lose their VAT deduction. What needs to be taken into account by the parent company as an intermediary Rules for filling out an invoice used in VAT calculations (hereinafter referred to as the Rules for filling out an invoice), approved by Decree of the Government of the Russian Federation dated 26.
Re-invoicing of services, postings, which is our income and expense
With such, albeit incomprehensible, formulations, it should follow that the intermediary must be a subscriber
from the energy supply organization, and you are
a sub-subscriber
. Although you don’t need an agreement with the e-organization for this. To do this, an agreement is drawn up between the e-organization and the intermediary as a subscriber, and in this agreement the sub-subscriber is determined. Deal with this because this is the essence of VAT. With this determination, the intermediary subscriber must issue you a s/f.
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The picture is as follows: A contract for electricity consumption has been concluded with an energy company, but the meter is ours, and energy metering goes through an intermediary company. issues electricity bills to us, we pay them directly to the Energy Company, sometimes we pay. We cannot receive bills directly from the Energy Company, because this substation belongs to the “Intermediary” and accounting must go through it.
