What VAT should be deducted during contract construction?

VAT by contract method

VAT based on invoices issued by the customer If the customer and the investor are different organizations, the tax deduction is carried out by the investor based on the invoices presented by the customer.

The customer, in turn, draws up invoices based on the documents presented by the contractor.

Clause 6 of Article 171 of the Tax Code establishes that tax amounts presented by contractors and customer-developers when carrying out capital construction work are deducted.

The deduction is carried out in the usual manner on the basis of received invoices after the work has been accepted for accounting. VAT deduction is possible only after the object has been accepted for accounting. Thus, the contractor issues invoices to the customer for its work. Based on them, the customer issues invoices for the investor.

VAT on the construction of fixed assets in 2021

Further, Article 753 “Deliverance and acceptance of work” states that the customer begins acceptance of work from the moment he receives a message from the contractor about readiness for handover of the object.

In the event that the customer accepts individual stages of work, the risk of accidental death passes to him if the damage and death did not occur through the fault of the contractor.

Article 746 of the Code establishes the procedure for settlements between the parties, when payment for contract work is made in the amount specified in the estimate and in the manner established by the contract, or, if this is not provided for in the contract, in accordance with the legally established procedure.

Analyzing the norms of civil legislation, we come to the conclusion that either stages of completed work or a finished building after the final completion of capital construction can be transferred under the act.

Procedure for VAT refund during construction

Important Value added tax paid to the seller can be reimbursed in the following way:

at the time of the transaction under the purchase and sale agreement;
after completion of construction, commissioning of the asset and depreciation.

When a commercial organization, to complete the construction of fixed assets, involved contracting companies, and also purchased various materials, then VAT will be reimbursed after the first depreciation charges are reflected in the accounting and tax records.

Reimbursement by the investor Commercial organizations that are engaged in various investment projects have the opportunity to reimburse the paid value added tax from the state budget.

What is the procedure for accounting and deducting VAT during the construction of fixed assets?

Experts from the Ministry of Finance recommend that customers, when preparing invoices, separately highlight in the document the cost of construction and installation work for each contractor and the cost of construction materials and goods separately for each supplier.

At the same time, the customer attaches to the invoice transferred to the investor copies of the invoices on the basis of which it was compiled, as well as copies of all primary documents confirming the amounts indicated in the invoices and copies of documents confirming payment of tax amounts to the customs authorities, if any importation of materials or goods into Russia.

copies of the contractor's invoices and primary documents are attached to the invoice. The customer transfers the invoice to the investor once either at the time or within five days after the transfer of the building or other object for which capital construction has been completed to the investor's balance sheet.

VAT for the construction of fixed assets by contract and economic methods

But, if an organization simply made repairs in its office, then these works are not included in the taxation. An organization, having carried out construction and installation works on its own at its own facility which it will use in its activities, can claim the amount of VAT for deduction (clause 5 of Art.

172 Tax Code of the Russian Federation), accrued on the cost of work performed and registered in the purchase book, the basis for this will be the issued invoice. Let's also consider a situation where a company builds a facility for itself under a contract method and engages an individual as a performer under a civil law agreement.

When submitting documents for desk audit, these services were highlighted (debit 08 credit 76). The inspectors demanded that VAT be charged.

VAT during construction - calculation and deduction procedure

Attention: Distribution of risk between the parties” of the Civil Code of the Russian Federation, the contractor bears the risk of accidental loss or accidental damage to a construction project that is the subject of a construction contract until acceptance of this project by the customer.

Article 753 “Delivery and acceptance of work” stipulates that the customer, having received the contractor’s message about the readiness for delivery of the result of the work performed under the construction contract or, if provided for by the contract, the completed stage of work, is obliged to immediately begin accepting it.

The customer, who has previously accepted the result of a separate stage of work, bears the risk of the consequences of death or damage to the result of work, which did not occur through the fault of the contractor. The procedure for payment for work is established by Art. 746 of the Civil Code of the Russian Federation.

VAT deductions for capital construction

One of the options for acquiring fixed assets for an organization is their construction and construction, both economically and through the involvement of contractors.

In a situation where an enterprise erects buildings and structures on its own for further use and independently carries out construction and installation works, the organization is obliged to charge VAT on the cost of work performed at the end of each tax period, or rather each quarter, then issue an invoice and register it in the sales book in accordance with subclause 1.3 clause 1 of article 146 of the Tax Code of the Russian Federation. is included in the VAT tax base at the time of the act of acceptance of the transfer of the object to another person.

VAT contract construction

In accordance with this standard, payment for work performed by the contractor is made by the customer in the amount provided for in the estimate, within the time frame and in the manner established by law or the construction contract. In the absence of appropriate instructions in the law or contract, payment for work is made in accordance with Art.

711 »

Procedure for payment for work" of the Civil Code of the Russian Federation. A construction contract may provide for payment for work at a time and in full after acceptance of the project by the customer. Based on the stated norms of the Civil Code of the Russian Federation, it is concluded that the contractor transfers the work performed under the act either in stages, or after completion of construction of the facility as a whole.

Accordingly, invoices that entitle the investor to deductions are issued either as stages are completed or upon completion of the entire construction.

Source: https://redtailer.ru/nds-podryadnym-sposobom/

What does practice show?

In the situation under consideration, the organization is engaged in the construction of a residential cottage village, and also constructs administrative buildings, that is, it has non-taxable and VAT-taxable operations. In addition, it builds infrastructure facilities. An agreement has been concluded with local government bodies on the transfer of infrastructure facilities free of charge to these bodies in the future.

As practice shows, in such situations, tax authorities refuse taxpayers to accept a VAT deduction for goods (work, services) related to the construction of utility networks.

The grounds for refusal are the norms of paragraph 2, paragraph 2, Article 146 and paragraph 22, paragraph 3, Article 149 of the Tax Code of the Russian Federation:

— utility networks (or part thereof) are an integral part of residential buildings, therefore they are used in activities exempt from VAT taxation (clause 22, clause 3, article 149 of the Tax Code of the Russian Federation),

— the presence of an agreement concluded between the organization and local government bodies, containing provisions on the possibility (obligation) of the taxpayer to transfer infrastructure facilities to these bodies free of charge after the completion of their construction.

There is no official position on this issue.

In such situations, the courts take the side of taxpayers.

According to the courts, infrastructure facilities are not part of residential buildings and are not sold together. They are an independent object of fixed assets. In this regard, the application of the VAT deduction is legal (Resolutions of the Federal Antimonopoly Service of the Moscow District dated July 16, 2010 N KA-A40/7326-10 in case N A40-96735/09-112-708, dated November 30, 2009 N KA-A40/12294- 09 in case No. A40-32243/09-109-98, dated November 25, 2009 No. KA-A40/12462-09 in case No. A40-29736/09-151-123, dated November 23, 2009 No. KA-A40/12336- 09 in case No. A40-33566/09-127-164, etc.).

In one of the disputes, the tax authority denied the taxpayer a deduction for work related to the construction of utility networks and a boiler house, the cost of which was not included in the distribution of costs. As the Federal Antimonopoly Service of the North Caucasus District indicated in its decision (Resolution dated July 16, 2014 in case No. A32-9021/2013), the costs of constructing utility networks are allocated to a separate estimate. These objects are accounted for on the company's balance sheet as independent fixed assets. The corresponding engineering infrastructure objects can be used in activities subject to VAT. The court concluded that the company was lawful in deducting VAT on work (goods, services) related to the construction of utility networks and a boiler house.

Also, the AC of the North Caucasus District, in Resolution dated April 30, 2015 N F08-2027/2015 in case N A32-43553/2013, did not agree with the inspectorate’s conclusions about the illegal deduction of VAT on the costs of constructing external utility networks of a multifunctional complex and a boiler house, on the basis of that external engineering networks and a separate boiler house are not independent objects of fixed assets, the costs of construction of these objects are capital costs for the construction of residential buildings, subject to distribution.

Guided by the norms of the Tax Code of the Russian Federation and based on the accounting policy of the company, the courts found that the company kept records of the costs of creating an investment object in the debit of account 08 “Capital investments”. All expenses incurred by the company were divided into costs included in the cost of construction of each specific object on a direct basis (direct costs), and expenses to be distributed among all construction projects. The distributed expenses included: other capital expenses, current expenses (general). Other capital expenses were allocated at the time of commissioning of the first construction project. The calculation was made in proportion to the area of each object in the total construction area or in proportion to the power consumption. Current costs were distributed at the end of each reporting period in proportion to the direct costs of construction of each facility in the total amount of direct costs.

When determining the share of costs for the construction of residential buildings in the total direct costs for the construction of a multifunctional complex, the company proceeded from the fact that the costs for the construction of external and internal utility networks were direct costs for the construction of a multifunctional complex, and not distributed capital costs related directly to residential buildings . The company carried out work related to the construction of external networks and structures that constitute independent real estate objects and are located outside the residential buildings included in the multifunctional complex. Objects of engineering infrastructure were not part of residential buildings and were not sold together with residential buildings, but were taken into account on the company’s balance sheet as independent fixed assets.

Therefore, the court recognized the application of the VAT deduction as legitimate, concluding that the company’s expenses associated with the installation of external networks are not included in the increase in the initial cost of residential buildings and lead to the creation of separate inventory items of fixed assets. Fifteenth AAS in the Resolution dated April 23, 2014. No. 15-AP-20502/2013 noted that the presence or absence of infrastructure affects the market price of a residential complex, however, the construction of utility networks and infrastructure itself is not involved in the creation and sale of the residential buildings themselves.

The FAS Moscow District considered a dispute in which, under the terms of the agreement, the organization transferred residential premises and utility lines to the ownership of the city of Moscow. Such transfer was a prerequisite for the construction and acquisition of rights to the administrative business complex. The taxpayer used the administrative business center to carry out transactions subject to VAT - leasing office premises, providing services for maintaining premises, leasing parking lots, which is confirmed by the invoices and accounting certificates available in the case materials. Consequently, as the court indicated, the organization rightfully claimed a VAT deduction for work related to the construction of residential premises and utilities transferred to the city (Resolution of June 22, 2011 N A40-36961/10-90-262).

The Arbitration Court of the Ural District, in Resolution dated November 11, 2016 N F09-9885/16 in case N A60-61701/2015, considered a case in which the tax authority refused to apply a VAT deduction to the taxpayer, since infrastructure facilities were built by the company for the purpose of mandatory transfer to executive authorities subject of the Russian Federation and/or local government (or on their instructions to other persons), while it is normatively established that such a transfer can be exclusively free of charge.

According to the inspectorate, no evidence of the reality of the company’s intentions to enter into contracts with commercial organizations or to take measures for the transfer (sale) of infrastructure facilities was presented during the audit; in the VAT reporting, the taxpayer did not reflect either the proceeds from the sale of infrastructure facilities or the restoration of previously applied deductions . The taxpayer did not comply with the conditions necessary for the application of tax deductions, while the company claimed a refund of the amount of VAT as a share of the costs of property that was not completed, not capitalized and not sold; evidence of proper accounting of the construction project "Infrastructure" as a fixed asset on account 01, costs for the construction of the construction project "Infrastructure" on account 08, other proper accounting (tax) accounting of the construction project "Infrastructure" (its cost) by the company during a tax audit and in was not presented at court hearings.

The tax authority noted that most of the work and goods purchased in accordance with contracts presented by the company can be classified as both operations subject to VAT and operations not subject to VAT, but the taxpayer did not keep separate records of such costs; from the presented documents it does not follow that the work was carried out to the point of delineating the balance sheet ownership of engineering infrastructure objects, that is, they could be carried out both on the adjacent land plot and on public land, therefore, the installation of utility networks and internal infrastructure of the village are inseparable from those built on this territory of residential buildings are created for use only on the territory of this village and for residential buildings in the village. From the available documents it is not possible to establish that the costs of constructing the village infrastructure are allocated in a separate estimate, and are not distributed among capital costs related directly to residential buildings; funds from the sale of houses to individuals are not received separately for the construction of infrastructure facilities and the construction of residential buildings, that is, payment for residential real estate is carried out as a whole; differentiation based on received funds is not provided for in the taxpayer’s accounting policy.

As the inspectorate indicated, since when performing transactions that are not recognized as an object of taxation in accordance with Chapter. 21 of the Tax Code of the Russian Federation, and transactions exempt from taxation, the specified tax does not go to the budget; receiving it from the budget in the form of a tax deduction contradicts the provisions of Art. 170, 171, 172 of the Tax Code of the Russian Federation.

However, the court sided with the organization, stating the following:

According to the legal position of the Federal Tax Service of Russia, set out in letter dated November 28, 2008 N ShS-6-3 / [email protected] , the tax amounts presented to the taxpayer by contractor organizations (customers-developers) for goods (works, services) purchased for construction - installation works calculated when performing construction and installation work for own consumption, when purchasing objects of unfinished capital construction, as well as acquired under a contract of sale of real estate (fixed assets), are accepted for deduction in full, regardless of the fact that objects under construction (acquired) are intended to be used simultaneously in both taxable and non-taxable transactions.

Provisions of Ch. 21 of the Tax Code of the Russian Federation do not link the right to receive deductions with the moment of further sale (use) of goods and results of work (services). Within the meaning of the provisions of Art. 171, 172 of the Tax Code of the Russian Federation, the taxpayer’s right to apply tax deductions for purchased goods (work, services) is not made dependent on the use of these goods or the results of work (services) to carry out taxable activities during the period of their acquisition, as well as on the beginning of use of the goods or results of work (services) in such activities. Accordingly, the defining moment in this case is the purpose of the purchased goods (works, services) and the potential possibility of using them in activities subject to VAT.

Work under contract agreements was accepted by the company according to acts of acceptance of completed work for accounting and reflected in accounting account 08.03 “Construction of fixed assets”. All primary documentation for the transactions on the basis of which VAT was claimed for refund, including acts of acceptance of work performed, invoices and certificates of the cost of work performed and expenses by the taxpayer were presented. The company’s accounting policy provides for separate accounting of income and expenses in the context of the following objects: construction and sale of “Housing” objects, construction and sale of “Commercial” objects, construction and subsequent transfer (sale or use) of “Infrastructure” objects, carrying out activities on the basis of simple contracts partnerships (joint activities), provision of loans and transactions with securities. The accounting policy resolves the issues of calculating the limit for the distribution of VAT, determining the proportion of distribution of VAT, the operations for which VAT is subject to distribution are determined, there is no input VAT, VAT is included in the cost of goods (work, services) - in relation to “Housing” objects.

According to the drawings attached to each contract, the work was carried out on an intra-village public plot with cadastral number 66:41:0000000:81236, while adjacent plots have different cadastral numbers. The cost of houses is determined by water supply, gas and heat supply devices, as well as sewerage devices, starting with the inlet valve or tee at the buildings, depending on the connection points of the supply pipeline. Work on the creation of infrastructure, for which VAT deductions are claimed, was carried out in order to ensure the possibility of technological connection of houses to engineering support networks: electricity supply, gas supply, water supply, sewerage and cannot be recognized as work on the construction of residential buildings, the implementation of which is not taxable operation.

The engineering infrastructure of a residential complex being built by a taxpayer is an independent fixed asset object, which, due to its purpose, can be used in business activities and be a source of profit in the provision of paid services for the transfer of heat resources, that is, to participate in operations subject to VAT.

The court also indicated that the decision on the possibility of a taxpayer deducting VAT amounts paid to suppliers of goods (works, services) cannot be determined by the taxpayer’s intentions and plans to use goods or results of work (services) in activities subject to or non-taxable to VAT; the right to apply tax deductions should be determined by objective rather than subjective criteria. The tax authority did not provide any evidence confirming the transfer of engineering infrastructure objects to the executive authorities of a constituent entity of the Russian Federation and/or local self-government (or on their instructions to other persons).

Under these circumstances, the court, having established that the company had submitted all documents confirming its right to deduct VAT, came to the conclusion that the taxpayer legally included the VAT paid to contractors during the construction of engineering infrastructure as part of tax deductions, and in the case of transfer of objects to municipal property, the organization will be obliged to restore the specified tax amounts on the basis of paragraphs. 2 p. 3 art. 170 Tax Code of the Russian Federation. Another dispute arose over the issue of applying VAT tax deductions from the cost of contract work performed during the construction of engineering and transport infrastructure facilities of a cottage village being built by the organization. According to the Federal Tax Service, external (intra-village) utility networks are part of residential buildings and costs are included in the cost of one square meter of housing. Since the sale of residential buildings is exempt from VAT (clause 22, clause 3, article 149 of the Tax Code of the Russian Federation), VAT amounts are not deductible. The Volga Region District Court, in Resolution No. F06-12556/2016 dated September 21, 2016 in case No. A55-26706/2015, took the side of the organization and proceeded from the following.

The decision on the possibility of a taxpayer deducting VAT amounts paid to suppliers of goods (work, services) cannot be determined by the intentions and plans of the taxpayer to use goods or results of work (services) in activities taxable or non-taxable to value added tax, since the right to the application of tax deductions should be determined by objective rather than subjective criteria.

A conclusion about the VAT-free nature of the gratuitous transfer operation can only be made at the time of completion of construction and transfer by the taxpayer of the relevant objects to local governments (specialized organizations) on the basis of a special decision.

Engineering and transport infrastructure is an independent object of civil circulation and does not follow the fate of a residential building. When purchasing a residential building, buyers do not acquire ownership rights to engineering and transport infrastructure facilities located on public territory. Since the work for which VAT is claimed by the company for reimbursement is not directly work on the construction of a residential building, but relates to infrastructure facilities, the tax is deductible on a general basis in accordance with the provisions of Articles 171 and 172 of the Tax Code of the Russian Federation.

The court rejected the inspector’s argument that since the constructed infrastructure facilities were accounted for on account 08 “Investments in non-current assets”, that is, it was not accepted on account 01, accordingly, there is no right to a refund of tax amounts. According to the court, accounting for real estate in account “08 “Investments in non-current assets” has no legal significance for determining the period of emergence of the right to apply VAT tax deductions, since the provisions of Chapter. 21 of the Tax Code of the Russian Federation does not make the taxpayer’s right to tax deductions dependent on the account in which the acquired real estate is recorded.

The Resolution of the Tenth AAS dated April 16, 2015 N 10AP-19427/2014 in case N A41-64184/14 also considered the refusal to apply a VAT deduction by the tax authority, which referred to paragraphs. 2 p. 2 art. 146 of the Tax Code of the Russian Federation. However, the court came to the conclusion that the object of VAT taxation when transferring engineering networks and external communications to operating organizations does not arise only if there is a decision by state authorities or local governments to transfer such objects to specialized organizations that use or operate them for their intended purpose. Such a decision may mean the presence in the investment contract with the city authorities of a condition on the transfer of utilities to operating organizations upon completion of construction. Thus, only at the moment of completion of construction and transfer of the relevant objects to authorities or special organizations on the basis of a special decision can a conclusion be made about the non-taxable nature of the operations to create property to be transferred.

Moreover, in this dispute, the specified conditions were absent (the objects were not created, decisions on the transfer of specific property were not made). Therefore, the tax authority’s arguments are unfounded and do not comply with current legislation.

A similar position is set out in the Resolution of the Moscow District Court of March 19, 2015 in case No. A41-33643/14.

In Resolution 18 of the AAS dated March 21, 2013 No. 18AP-1205/2013 in case No. A07-22548/2011, the court came to the conclusion that until the company transfers the engineering networks built by it at its own expense, as an investor, to state authorities or local local government, the taxpayer has the right to claim a deduction for the costs of constructing these communications.

VAT for the construction of fixed assets by contract

Deduction of VAT in construction Procedure for calculating VAT during construction and installation works To calculate VAT when performing construction and installation work for the taxpayer’s own consumption, the following steps are performed sequentially:

The tax base for completed construction and installation works is calculated.
The tax period in which VAT must be calculated and the tax amount must be calculated is determined.
An invoice is drawn up for the cost of construction and installation work performed.
The amount of VAT on purchased materials, works, services necessary to carry out construction and installation work, and the amount of VAT accrued on the volume of construction and installation work performed are subject to deduction.
A completed VAT return is submitted to the tax authority.
Tax is paid to the budget if the declaration reflects the amount of VAT payable.

Determination of the tax base for VAT during construction and installation work The tax base for VAT during construction and installation work is determined as the cost of this work.

VAT on construction of fixed assets

Attention A natural question arises: does the contractor include the received compensation amounts in the VAT tax base? Financiers express an unambiguous opinion on this matter; the contractor charges VAT on the amounts received as reimbursement of expenses (see.

letter No. 03-07-11/300 dated August 15, 2012). In fact, by issuing invoices for reimbursement of additional expenses, the contractor acts as a seller; the reimbursement amounts received must be included in income and charged VAT at the rate of 18/118, in accordance with paragraph 4 of Art. 164 Tax Code of the Russian Federation.

In this case, the organization deducts the amounts of input VAT on additional expenses in the usual manner. See letters of the Ministry of Finance No. 03-07-11/37 dated March 2, 2010, No. 03-07-11/37 dated February 26, 2010 and others.

And so, receipts in the form of reimbursements and other additional expenses are also subject to inclusion in the VAT tax base.

VAT for the construction of fixed assets 2021: posting VAT deductions

In turn, the investor, after accepting the work for accounting, accepts VAT as a deduction. Completion of capital construction and the procedure for issuing invoices And so, having completed the capital construction of an object, the customer organization transfers the completed construction object, for example, a building, to the investor.

The customer, after transferring to the investor a building or other object on which construction work has been completed, issues an invoice in accordance with the generally established procedure.

The customer prepares the invoice on the basis of invoices received from contractors for construction and installation work performed by them, and on the basis of invoices received from suppliers when purchasing construction materials.

Procedure for joining the self-regulatory organization

The data on the amount of input VAT on goods (work, services) purchased for construction and installation work, and the amount of tax presented by contractors, are necessary to calculate the indicator on line 120 of section. 3 VAT declaration forms (paragraph 6, clause 38.11 of the procedure for filling out the declaration, approved.

by order of the Federal Tax Service of Russia dated October 29, 2014 No. ММВ-7-3/). It is necessary to deduct VAT, which was accrued on the amount of expenses incurred during the construction of a fixed asset using one’s own resources, on the last day of the tax period at the time the tax base is determined.

This procedure for accepting deductions is established in paragraph. 3 paragraph 6 art. 171 and para. 2 clause 5 art. 172 of the Tax Code of the Russian Federation. Thus, VAT on completed construction work can be claimed for deduction in the same quarter in which it was accrued for payment to the budget (letter of the Federal Tax Service of Russia dated March 23.

2009 No. ШС-22-3/).

VAT for contract construction of fixed assets

To do this, taxpayers must fulfill a number of conditions:

have correctly executed expense documents;
put into operation fixed assets and charge depreciation on them;
the erected buildings must be used in the economic activities of a commercial organization and cannot be used for their own needs.

Compensation for shared construction The legislation in force in the Russian Federation allows shareholders to transfer building materials to developers (for the construction of a private house) on a toll basis.

Since 2001, Russian commercial companies have been able to assign all amounts of value added tax paid on materials received for construction work to expenses. In accordance with Art.

Conclusion

Thus, taking into account the established arbitration practice, the taxpayer has the right to apply a VAT deduction related to infrastructure facilities.

VAT amounts on a capital construction project are accepted for deduction as the work itself or stage of work is accepted, regardless of the date of completion of construction and commissioning of the capital construction project.

A taxpayer can exercise his right to deduction within three years after registration of goods (works, services), property rights purchased on the territory of the Russian Federation (clause 1.1 of Article 172 of the Tax Code of the Russian Federation).

According to the courts, the right to apply VAT deductions is not related to the future fate of the facilities under construction. If the disputed infrastructure objects are accepted for accounting, are listed on the taxpayer’s balance sheet, there are properly executed invoices and primary documents, and there is no evidence confirming the transfer of utilities into state or municipal ownership, the deduction of VAT amounts is legal. If the objects are subsequently transferred free of charge into state or municipal ownership, the following must be taken into account. Even the presence in agreements with local governments of conditions on the transfer of infrastructure facilities is not a basis for refusal to apply tax deductions for VAT, since in accordance with paragraph 2 of paragraph 3 of Article 170 of the Tax Code of the Russian Federation, tax amounts previously accepted for deduction are subject to restoration if goods, works, services, fixed assets begin to be used in activities not subject to VAT (exempt from taxation). That is, even if the taxpayer makes a gratuitous transfer of infrastructure facilities to local governments in the future, the VAT previously declared for deduction will be subject to restoration and payment to the budget.

It should also be noted that in some cases the transfer of objects to local governments is not inherently free of charge. The paid nature of such a transfer is also recognized by the Ministry of Finance of Russia (Letter dated December 1, 2015 N 03-03-06/4/69955). The agency points out that the transfer of engineering and social facilities to state or municipal ownership is not a gratuitous transfer, since the construction of these facilities is subject to legal requirements and is carried out for the purpose of implementing contracts for the construction and sale of housing stock.

VAT deduction during construction: order and procedure, documents

The construction of capital construction projects for use for production purposes can be carried out using the enterprise’s own funds and capabilities or involving contractors.

In this case, all work, from the formation of the project and estimate to the final cycle - turnkey delivery - is carried out by highly specialized specialists - professionals.

But in any situation, this event lies in the sphere of state interests.

The construction of facilities is the basis for taxation, one of the main state taxes that fill the budget.

Actually we will talk about value added tax and filling out the corresponding declaration.

And today we will consider the refund (deduction) of VAT during the construction of residential buildings, fixed assets by contract, as well as the deduction of VAT from the developer during shared construction and other cases of compensation.

General rules

So, let's look at VAT refunds for capital construction, refunds for the construction of a private house, VAT for writing off unfinished construction, and other cases of the possibility of such deductions. The production of a complex of construction and installation work in connection with the conditions for deducting VAT in modern legislation is considered as follows:

Contracting organizations. At the same time, the organization that accepts the constructed object as a fixed asset on its balance sheet also accepts the amount of VAT on construction for deduction, which the contractor presents to it.
Construction using one's own resources or in an economic way. Art. 116 of the Tax Code of the Russian Federation regulates the procedure for deducting VAT during the construction of facilities for one’s own needs. The deduction amount is formed from VAT on materials and goods purchased, services used and work performed.
Mixed construction method. The deduction is formed by the amounts presented by the involved organization, the costs of purchasing the necessary materials, goods and services, as well as those accrued in the process of carrying out the work by its own team and purchased building materials.

This video will tell you about VAT calculation in construction:

Method of purchasing building materials

The method of purchasing building materials is also important.

If the materials are provided by the contractor, then VAT is included in the cost of the work.
When transferring materials from the customer to the contractor, a separate deduction for work and materials is accepted.
In the case of the supply of building materials at the expense of the contractor, the investor deducts the consolidated VAT on work and materials.
When a customer sells building materials to a contractor, after completion of construction the customer causes VAT to be deducted from the sales volume.

No deduction possible

Both the possibility of deduction and its absence are stipulated by a number of legislative acts. Thus, it is impossible to deduct VAT in the following cases:

Clause 1 Art. 172 of the Tax Code of the Russian Federation. Payment documents that actually confirm the payment of import VAT amounts when crossing the border of the Russian Federation are missing or collected incompletely.
Clause 1 Art. 171 Tax Code of the Russian Federation. The constructed facility is not subject to transactions subject to VAT.
The development cannot be registered in accordance with Art. 172 clause 1 of the Tax Code.

We will tell you below how to get VAT benefits in construction.

This video will tell you about VAT in construction under the simplified tax system:

Required documents

In order to carry out the VAT deduction procedure, it is necessary to submit to the local tax authority an application of the established form and a package of necessary documents confirming the right to deduction. A standard application form can be found on the website of the Federal Federal Service of the Russian Federation or at the local tax authority.

The legally approved grounds for claiming VAT deduction are:

When construction is carried out by a contractor - form KS-2, which confirms the fulfillment of contractual obligations for development, completed individual installation, commissioning and other work inextricably linked with the facility.
When constructing using an economic method or a mixed method, in order to deduct VAT, you will need invoices, delivery notes and accompanying shipping documentation, bank statements with attachments in the form of payment orders for payment for materials and work, a selection of acts of work performed and estimates for services consumed.
Financial documents confirming payment of input VAT when goods cross the border of the Russian Federation.

Construction and its taxation is one of the most complex and time-consuming accounting tasks. Therefore, if you have insufficient experience, it is better for a novice accountant to resort to the services of specialized firms and bureaus.

When can I get a deduction?

The right to a deduction during the construction of a house arises only after registration of ownership of a constructed residential building , since according to paragraph 6, paragraph 3, Article 220 of the Tax Code of the Russian Federation, the obligatory document for obtaining a deduction is an extract from the Unified State Register of Real Estate (certificate of state registration of the right to a residential building) .

At the same time, you will be able to apply for a deduction to the tax authority only at the end of the year in which you became entitled to it. So, if you received an extract from the Unified State Register of Rights (certificate of registration of rights) for a residential building in 2021, then you can apply for the deduction in 2021.

Example: Ivanov I.I. began construction of a residential building in 2021. In 2021, Ivanov completed the construction of the house, in 2021 he registered ownership of the completed residential building and received an extract from the Unified State Register of Real Estate. In 2021, Ivanov can contact the tax authority and receive a property deduction for the construction of a house.

At the same time, it is not necessary to submit documents for deductions for the next year after registering the house. The right to a property deduction has no time limit, however, tax refund is possible only for the last three years preceding the year of filing documents for the deduction.

You can find out more about this information in the article: “When and for what years to submit documents to receive a property deduction.”

Example: Ivanov S.A. built a residential building in 2021 and registered ownership of it. In 2021 and 2019, Ivanov did not have official employment. Officially got a job in 2021.

Thus, Ivanov has the right to start using the construction deduction in 2021 and get a refund of the income tax he paid in 2021. If Ivanov does not completely exhaust the deduction, then he will be able to continue to use it in subsequent years: in 2022, return the tax for 2021, in 2023 - for 2022, etc.

If you have received an extract from the Unified State Register of Rights (certificate of registration of title) for a residential building, but do not want to wait until the end of the year, then you can take advantage of the opportunity to receive a tax deduction through your employer. Read more about this in the article “Obtaining a property tax deduction when purchasing an apartment/house through an employer.”