Advance payments in the Tax Code
Speaking about VAT and advance payments, it is necessary to take into account the provisions of a number of articles of the Tax Code of the Russian Federation. Article 168, paragraph 1, declares the seller’s obligation to present VAT to the buyer for payment on amounts of prepayment, partial prepayment for goods, works, services, property rights. The tax is calculated according to the rules of Art. 164 clause 4, by calculation method at a rate of 20/120 (in some cases 10/110).
Within five days from the date of receipt of the money, the buyer who has made an advance payment is presented with an invoice (Article 168, paragraph 3). The buyer has the right to accept the amounts presented by the seller for deduction (Article 171, paragraph 12).
If the delivery does not take place: the contract between the parties is terminated or its terms have changed, the advance payment is returned:
- The seller can deduct VAT from partial or full prepayment (Article 171, paragraph 5);
- the buyer is obliged to restore the full amount of the “advance” VAT accepted for deduction in the tax period when the advance was returned from the seller (Article 170, paragraph 3-3).
Postings when returning the advance payment to the buyer - VAT
Let's consider the reflection of transactions for the return of advance payments in accounting:
The transaction was terminated by agreement of both parties on December 20, 2018, as a result of which the following entries were made in the parties’ accounting records:
When returning the advance, the seller deducts the VAT that he previously paid to the budget from this payment. He can do this within a year from the date of refusal of goods (works, services) subject to all conditions.
The form of repayment of the advance (cash or other) does not matter. For example, when offsetting counter obligations, the seller also has the right to deduct VAT previously paid on the advance payment.
But when returning the advance on property rights, the seller will not be able to receive a deduction. In this case, instead of a deduction, he has the right to submit an application for a refund or offset of overpaid VAT amounts.
When the advance is returned to him, the buyer must restore the VAT that he previously accepted for deduction in the quarter when the advance was returned to him.
VAT deductible: actions and deadlines
Refunding the advance allows the seller to accept previously paid VAT as a deduction. Let us consider, as an example, the option of terminating the contract between the parties.
Obviously, in order to legally carry out a deduction, it is necessary:
- actually terminate the contract under which the advance was made;
- return the transferred amount to the buyer;
- reflect the refund in documents.
Termination of the contract can occur by agreement of the parties, unilaterally (if the buyer refuses the goods, works or services, the seller refuses delivery) or on the terms specified in the document itself at the time of its preparation (for example, delivery dates are indicated, and if violation, the contract becomes invalid).
Before terminating the contract, it is advisable to reconcile settlements with your business partner in order to avoid mistakes when working with VAT. Termination can be formalized by drawing up a corresponding letter, usually with a reconciliation report attached, and receiving a written consent in response. Another way is to draw up an additional agreement to the contract on its termination. Both options are completely equivalent from a legal point of view.
Refund of the advance payment is possible by transfer, in cash from the cash register, to a third party (if the buyer has stated this in writing).
The refund may also take place against settlements under other contracts with the same buyer. So that tax officials do not have grounds to refuse to accept VAT deduction, it is necessary to formalize this fact in a letter to the buyer, notification or other similar document and make sure that it is received. The notification contains detailed information about two contracts: the one that has been advanced and the one for which there is arrears in payment; amounts, including VAT. The offset is reported with reference to Art. 410 of the Civil Code of the Russian Federation - the article allows for offset if there is an application from only one party.
If there is an uncredited balance of the advance, its amount and method of return are indicated. The safest settlement option is an agreement between counterparties or a bilateral act. Judges, as a rule, rule in favor of the organization in such a situation. In general, confirmation of the return of the advance will be payment documents, for example, a bank payment order.
On a note! The return of an advance payment with property is not a reason for refusing to accept VAT for deduction (decision of the Plenum of the Supreme Arbitration Court No. 33 of 05/30/14, paragraph 23).
The seller can exercise the right to deduction no later than a year from the date of return of the advance (Article 172, paragraph 4 of the Tax Code of the Russian Federation), provided that the corresponding adjustment transactions are reflected in the accounting.
Settlement of mutual counter obligations
The situation is possible in cases where several agreements were concluded between the parties, the terms of which provided for the receipt of an advance payment. By concluding a netting agreement, the parties can secure a VAT deduction, since the amounts of advances can be considered returned (Letters of the Ministry of Finance of Russia dated 04/01/2014 N 03-07-РЗ/14444, dated 06/22/2010 N 03-07-11/262).
Example:
According to the supply agreement, June LLC must ship products to Vesne LLC in the amount of 94,400.00 thousand rubles. (including VAT). The agreement provides for an advance payment of 50%, which Vesna LLC transferred. In addition, Vesna LLC was supposed to provide advertising services to June LLC, for which it received an advance in the amount of 47,200 rubles. (including VAT).
Both contracts were later terminated. Based on the offset, counter obligations to repay advances were terminated. Despite the fact that no actual refund was made, the parties have the right to receive a deduction of VAT that they previously paid to the budget.
However, if the seller counts the advance from the buyer under the terminated contract against new supplies, then in this case there are no grounds for deducting VAT (Letters of the Ministry of Finance of Russia dated 04/01/2014 N 03-07-РЗ/14444, dated 08/29/2012 N 03- 07-11/337). Based on clause 8 of Art. 171, paragraph 6 of Art. 172 of the Tax Code of the Russian Federation, the seller will have the right to deduct only when goods are shipped under the terms of a new agreement (Letter of the Ministry of Finance of Russia dated 04/01/2014 N 03-07-РЗ/14444).
Tax accounting: what to pay attention to
When working with advance payments, you must be careful when filling out invoices. Tax authorities, in particular, pay attention to the correct indication of the tax rate - 10/110 or 20/120, and not 10% and 20%. When making advance payments, VAT calculations are carried out only at estimated rates.
When registering an invoice for an advance payment in the purchase book in case of a return, the seller uses transaction type code 22 (List of codes for transaction types indicated in the purchase book, attached to the Federal Tax Service order No. ММВ-7-3 / [email protected] dated 14/03 /16).
The details of the invoice for the advance payment, a document confirming the return of money to the buyer - usually a payment order (column 7, see letter of the Ministry of Finance No. 03-07-11/16044 dated 24/03/15) are also indicated. In the relevant In the columns you need to indicate the name of your company, INN, KPP, the full amount of the advance, VAT on the advance is only deductible. The tax must correspond to the refund amount (column 16).
The buyer in the same situation is obliged to restore the tax by reflecting the seller’s invoice for the advance payment in the sales book (it was already reflected in the purchase book). Operation type code 21 is used (Federal Tax Service order No. ММВ-7-3/136, appendix).
How to reflect the advance refund
If the advance is returned to the buyer, the seller receives the right to receive a VAT deduction.
When receiving an advance, the seller charges VAT on the amount received. The following entry is recorded in the accounting for this operation: debit 62 (advance) and credit – 68.
When the down payment has been received, the seller issues an advance invoice and is required to register it in the sales ledger. The invoice registration date is the actual date of receipt of the prepayment to the recipient's account. This rule is stated in paragraphs. 2 p. 1 art. 167 Tax Code. According to the law, it does not matter when the final shipment of goods or provision of services occurs within the framework of the received advance payment. VAT on the advance received by the seller is calculated on the same day.
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The advance invoice is displayed in the sales book for the quarter when the advance payment was received, in accordance with paragraphs. 3.17 Rules for maintaining a sales book. One copy of the invoice is transferred to the buyer according to clause 3 of Art. 168 of the Tax Code. This is done within 5 calendar days after receipt of advance payment from the buyer.
When returning the advance payment to the buyer in order to deduct VAT, two important rules must be taken into account (according to paragraph 9 of Article 172 of the Tax Code):
- VAT can be refunded only if the refund is related to a change in contractual terms or termination of the contract.
- The seller has the right to accept VAT for deduction only on the date of actual return of the advance payment. The amount of tax to be deducted will be calculated as follows: the advance amount multiplied by the VAT rate: 10/110 or 18/118 (according to paragraph 5 of Article 171, paragraph 4 of Article 172 of the Tax Code).
Thus, these rules assume that an agreement must be concluded between the seller and the buyer, which involves the transfer of an advance payment. The buyer must also have a previously received invoice from the seller and a payment order for the transfer of the advance payment.
The deduction can only be applied directly in the quarter when the above conditions were met. This means that carryover of the deduction to later periods is not allowed. This position is explained in the letter of the Ministry of Finance dated 2015 No. 03-07-11/41908.
Refund of unused advance
Please note that in practice a situation may arise when the seller returns the unused advance payment to the buyer for the upcoming delivery of goods, performance of work or provision of services. In this case, the return of the advance payment is not related to the termination of the contract. As a rule, the amount of tax previously accrued upon receipt of this amount has already been taken for deduction. With a literal interpretation of the provisions of the Tax Code, in the case of a refund of an advance payment not related to a change or termination of a contract, a deduction of previously accrued tax is not provided. Therefore, there is a high probability of tax disputes related to the legality of deducting VAT previously accrued on payment amounts for upcoming deliveries of goods (performance of work, provision of services). In this case, we recommend that you reverse this tax amount in your accounting and submit an updated VAT return to the tax authorities.
CORRECT OPTION OF CALCULATIONS At the time of provision of services: DEBIT 62 CREDIT 90-1 – 107,600 rubles. — revenue from the provision of services is reflected; DEBIT 90-3 CREDIT 68 – 16,414 rub. — VAT is charged on the sale of services; DEBIT 68 CREDIT 62 “Advance received” – 16,414 rubles. — previously accrued VAT was accepted for deduction in the part of the realized CREDIT 62 – 107,600 rubles. - offset of advance payment. At the time of transfer of the unused advance: DEBIT 62 “Advance received” CREDIT 51 – 10,400 rubles. — return of the advance payment to the buyer; DEBIT 68 CREDIT 62 “Advance received” – 1586 rubles. — accepted for deduction of VAT on the returned part of the advance.
O. S. Ganeles , senior consultant in the tax department of KPMG
Upon receipt of an advance payment, the seller (executor) is obliged to charge VAT, including if the advance payment was received in non-monetary means (for example, by a third party’s bill of exchange). In paragraph 5 of Article 172 of the Tax Code, the condition for deducting VAT in the event of a change in conditions or termination of a previously concluded agreement with the buyer (customer) is the return of the corresponding amounts of advance payments. However, it is not indicated that such a return must necessarily be made in cash. In this regard, we can conclude that when an advance payment previously received by the seller is returned by a third party bill of exchange, the corresponding amount of VAT is subject to deduction, regardless of whether this third party bill of exchange was received as an advance from the buyer (customer) or otherwise. This conclusion is also confirmed by a number of court decisions (post. FAS MO dated June 20, 2005 in case No. KA-A40/5402-05, FAS PO dated March 28, 2005 in case No. A12-20637/04-C36, dated April 26, 2007 in case N A55-11874/06, dated January 15, 2009 in case N A65-9611/2008).
Author of the article: I. N. Syraev, magazine expert
Expertise of the article: A. I. Matrosova, chief accountant
1 clause 3 art. 168 Tax Code of the Russian Federation 2 clause 8 art. 171, paragraph 6 of Art. 172 Tax Code of the Russian Federation 3 clause 5 art. 171 Tax Code of the Russian Federation 4 post. FAS North Caucasus Region dated January 13, 2010 N A20-137/2009 5 letter of the Federal Tax Service of Russia dated May 24, 2010 N ShS-37-3/2447 6 post. FAS MO dated 02.08.2005 N KA-A40/5402-05 7 letter of the Ministry of Finance of Russia dated 06.06.2005 N 03-04-11/126 8 post. FAS PO dated January 26, 2007 N A57-16025/05-33 9 post. FAS MO dated 12/20/2007 N KA-A40/11879-07 10 letters of the Ministry of Finance of Russia dated 03/07/2007 N 03-07-15/29, dated 08/12/2008 N 03-07-09/23 11 letters of the Ministry of Finance of Russia dated 03/07. 2007 N 03-07-15/29, Federal Tax Service of Russia dated March 23, 2007 N MM-6-03/ [email protected]
Is it necessary to register VAT for refunds?
Some illiterate taxpayers are wondering how to apply for a VAT refund for individuals, and how much they are entitled to. To answer this question, we have prepared special material explaining what error lies here and how to get the money you are entitled to.
VAT refund for individuals It is necessary to understand what VAT is. So, the required abbreviation stands for value added tax.
From the definition
Accounting and legal services
Deduction of VAT from the seller when returning advances and goods September 8, 2010 The use of tax deductions often causes difficulties for accountants.
Not long ago, a new letter from the Federal Tax Service of Russia on this topic was published. How can the seller deduct VAT when returning advance payments to the buyer in the event of termination of the supply contract? Is it possible to return the advance payment with my own property?
Let's consider these and a number of other questions in our article. In general, when receiving an advance payment for future deliveries of goods (works, services), the seller becomes obligated to charge VAT.
Postings
What is VAT in simple words: who pays, tax rates, calculation examples and use of tax deductions
Every aspiring entrepreneur who has registered his own individual entrepreneur is faced with the need to maintain financial statements. Knowledge and strict adherence to the current rules of the tax system gives a businessman the opportunity to protect himself from possible problems with the tax service, and in some cases even save a little money. VAT is one of the most difficult to calculate.
The key difficulty in calculating such a tax lies not only in the different interest rates, but also in some features associated with the possibility of obtaining a refund of the assigned tax payment.
If you look at any available business directory, you will see that VAT is a tax imposed on a company or an enterprise engaged in the production and sale of products or services. VAT creates something like a buffer of additional market value of the goods produced by the company.
How does VAT refund work for legal entities?
/ / 10.03.2019
The VAT refund to a legal entity is the difference between the lost profit of the enterprise and the value added tax actually paid.
To return overpaid value added tax to a legal entity, there is a certain procedure approved by law.
As part of this procedure, the necessary documents are prepared, collected and submitted to the tax authorities.
In this case, the funds that could have been received by the company if the products were sold are compensated.
VAT refund: what is VAT and how to make a tax refund correctly
Cool | 17 Jun 2021 | 7678 VAT is a tax; part of the price for any product, service or work created at any stage of the procedure for the production of a product grid and other things is withdrawn from the state budget.
It is included in the budget as production progresses. — Phased maintenance of payment of budget taxes
- Additional questions along the way;
- Primary requirements;
- Regulatory program for reimbursement of the state budget.
- Specifics of the taxpayer;
To apply the right to a VAT refund, the payer must correctly calculate the amount of tax withholding, the amount of which will be displayed in the declaration.
VAT refund: return procedure, desk audit, application
— If a taxpayer has submitted a declaration to the tax authority in which VAT is reflected for reimbursement, he has every right to, after it has been confirmed by a desk audit carried out by the inspectorate.
176.1 of the Tax Code of the Russian Federation, which directly follows from its name.
As the practice of applying these norms of the Tax Code of the Russian Federation has shown, the procedure for returning VAT amounts claimed for refund is not simple and causes many disputes between tax authorities and taxpayers.
Let's consider how to correctly apply all these provisions. Note. The taxpayer has the right to apply both a credit for other taxes and a refund of these amounts.
On the deduction of “advance” VAT when returning an advance payment to the buyer (Zaitseva S.N.)
How to fill out a purchase book when returning an advance?
Not long ago, specialists from the Ministry of Finance gave their explanations on this matter.
Source: https://advleks.ru/vozvrat-denezhnyh-sredstv-nuzhno-li-propisyvat-nds-39744/
