How to calculate VAT on advances if the VAT rate is 10%?

On July 1, an updated list of food products subject to VAT at a rate of 10% came into effect. Since new goods have been included, some companies receiving advances on them immediately add a reduced VAT rate to the cost of the goods. However, many people wonder how to calculate VAT on the prepayment received?

First of all, you need to figure out what products will be included in the list. According to Decree of the Government of the Russian Federation dated 03/09/2020 No. 250, the changes will affect some products with milk fat substitute. This:

• pastes, creams, sauces
• condensed milk
• soufflé, jellies, puddings, mousses
• milk-containing ice cream
• drinks, jelly, cocktails

Sellers and manufacturers of these goods already know about the rate reduction and take an advance from customers, which includes 10% VAT.

This is not surprising, since companies do not want to return part of the prepayment to customers and immediately take the required amount. Although this approach is not entirely correct, it does not pose any big risks to anyone. The seller may not be afraid of anything at all, and the client who wants to receive VAT as a deduction can only in rare cases be refused.

However, in the end, the seller does not know whether VAT can be calculated at a reduced rate?

Shipment 2018 – payment 2019.

When shipping goods, performing work, or providing services (hereinafter, to avoid repetition, we will use the concept “product”), regardless of receipt of payment for them, invoices are issued to customers indicating the tax rate in effect on the date of shipment. This means that for shipments before 01/01/2019, subject to VAT at the base tax rate, VAT is calculated at the rate in force before the entry into force of Federal Law dated 08/03/2018 No. 303-FZ[1], - 18%, regardless of the moment receipt of payment for shipment (see, for example, Letter of the Ministry of Finance of the Russian Federation dated October 29, 2018 No. 03-07-05/77563). If payment is received for a product shipped before 01/01/2019, the tax will not be recalculated in 2021.

Issuing an invoice for advance payment

The registration procedure is determined by Decree of the Government of the Russian Federation No. 1137 of December 26, 2011. Please note that registration must be done on a special form.

The document is filled out as follows:

1. Lines 3 and 4 require a dash.
2. Line 5 requires the number and date of the payment document.
3. Lines 2 to 6 are marked with dashes.
4. In line 7 you must indicate the tax rate in effect at the time of registration.
5. Line 8 contains the tax amount.
6. The amount of the prepayment is recorded in line 9.
7. Lines 10 and 11 must contain a dash.

About contracts moving into 2021.

Questions may arise in the opposite situation: when shipment under previously (before 01/01/2019) concluded long-term contracts, including the transfer of advance payments, is carried out in 2021.

A kind of instruction on the actions of taxpayers during the transition period was prepared by the main tax department of the country in Letter dated October 23, 2018 No. SD-4-3 / [email protected] It follows from the letter that, regardless of whether adjustments are made to the terms of such agreements, shipment of them in 2021 must be accompanied by VAT at a rate of 20%. Therefore, no amendments to the agreement regarding the VAT rate are required.

The Ministry of Finance also issued a number of letters on this topic (dated November 27, 2018 No. 03-07-11/85574, dated October 16, 2018 No. 03-07-14/74188, dated August 6, 2018 No. 03-07-05/55290). In Letter No. 03‑07‑11/64576 dated 09/10/2018, for example, department specialists spoke out regarding lease agreements: when calculating VAT on the cost of rent, the VAT rate is determined based on the period in which the services were provided. Thus, when preparing the “primary” and issuing invoices for rent amounts for December 2021, a rate of 18% is used, for January 2021 - a rate of 20%. The date of conclusion of the contract does not matter.

The advance was received in 2021: we are clarifying the calculations.

When receiving an advance on account of a future shipment, the contractor (seller) - VAT payer is obliged to calculate “advance” VAT (paragraph 2, paragraph 1, article 154, paragraph 2, paragraph 1, article 167, paragraph 8, article 171 of the Tax Code of the Russian Federation) . For funds received before 01/01/2019 (even if the contract states that the product is taxed at a rate of 20%), the tax is calculated at the rate of 18/118. The relevant data is entered by the seller into the sales book (clauses 3 and 17 of the Rules for maintaining the sales book [2]). “Advance” VAT is presented to the buyer (paragraph 2, clause 1, clause 3, article 168, clauses 5.1, 6, article 169 of the Tax Code of the Russian Federation), and he (being a payer of this tax, subject to all necessary conditions) has the right to take advantage of the VAT deduction (clause 12 of article 171 of the Tax Code of the Russian Federation).

At the time of shipment in 2021, the seller will again calculate VAT (clause 3 of Article 164, clause 14 of Article 167 of the Tax Code of the Russian Federation), but at an increased rate of 20%. At the same time, he has the right to claim “advance” VAT for deduction (clause 8 of Article 171, clause 6 of Article 172 of the Tax Code of the Russian Federation, clause 22 of the Rules for maintaining a purchase book [3]). The buyer, in turn, will take into account the “input” VAT at the new rate as part of the deductions and will restore the “advance” VAT at the VAT rate in force in 2018 (clause 3, clause 3, article 170 of the Tax Code of the Russian Federation).

Thus, an increase in the rate leads to additional tax payment. But at whose expense?

In Letter No. CD-4-3/ [email protected] the Federal Tax Service considered the situation when an additional burden falls on the shoulders of the buyer. The procedure for calculating VAT by the seller depends on when the funds are received: in 2021 (including until 12/31/2018) or after 01/01/2019.

In the first case (2018 transfers), such an amount can be presented as a new (so to speak, follow-up) advance, an additional payment of the cost of the product against future delivery in 2021.

In fact, the seller has the right to accompany this operation with an “advance” invoice. But the Federal Tax Service emphasizes: in such cases, an adjustment invoice (ACF) is issued reflecting the difference due to the increase in the cost of the product.

Below is a fragment of the CSF to the invoice for the advance amount (conditionally) 118 rubles, including VAT - 18 rubles. The cost of the product (due to an increase in the VAT rate) has been increased by 2 rubles, which is fixed in the additional agreement to the contract.

Note:

Recording the agreement of the parties on this issue is an important point. The fact is that the additional payment transferred before 01/01/2019 (the date of entry into force of Federal Law No. 303-FZ) can be regarded as unjust enrichment. This conclusion follows from the Ruling of the Supreme Court of the Russian Federation dated June 23, 2015 in case No. 305-ES14-8805, A40-2065/2014: the amount of VAT paid by the buyer of services in excess of the amount established by the Tax Code of the Russian Federation is a performance that was carried out in the absence of legal grounds, and must be returned to that person. That is why (in order to avoid controversial situations) the parties to the contract are recommended to agree and sign (any!) document increasing the advance payment by 2% VAT. If it is not possible to sign an agreement with the counterparty to increase the advance amount before transferring funds in 2021, it is better to wait until 2021 to make the payment.

The additional payment (by agreement) can be included in the advance payment immediately (in other words, instead of the initially provided 118 rubles, the buyer, taking into account the VAT rate of 20%, will pay, for example, in December 2018, 120 rubles). In this case, there is no need to compile a CSF. Upon receipt of funds, the seller will calculate “advance” VAT in the amount of 18.3 rubles. (120 rub. x 18/118), will reflect the data in the VAT return based on the results of the fourth quarter of 2021, and when shipping the product in 2019, it will deduct VAT from the entire prepayment amount. “Shipping” VAT, of course, is calculated at a rate of 20%.

In the second case (transfers from 01/01/2019), the tax difference of 2% will not be calculated in advance, therefore the seller does not need to calculate VAT at the estimated rate.

If the buyer is a VAT payer, upon receipt of the additional tax payment, the seller should issue a CSF for the difference between the amount of tax on the invoice previously drawn up using a tax rate of 18/118 and the amount calculated taking into account the amount of the additional tax payment.

If the buyer is a VAT defaulter or exempt from the duties of a taxpayer related to the calculation and payment of tax, an invoice may not be drawn up for him (by written consent of the parties) (clause 1, clause 3, article 169 of the Tax Code of the Russian Federation). Then the seller records in the sales book:

• “primary document” confirming the occurrence of facts of economic life;
• other documents (for example, an accounting statement) containing summary data on the specified transactions performed during the calendar month (quarter).

With regard to the registration of data on additional payment of tax from 01/01/2019 by a VAT non-payer or “exempt person”, the Federal Tax Service clarified: in this case, the seller reflects in the sales book the amount of additional tax payment on the basis of a separate adjustment document containing summary data on all cases of additional tax payments received by the seller from the specified persons during a calendar month (quarter), regardless of the readings of cash register equipment.

If the buyer does not agree to the additional payment.

Of course, it is more profitable for the seller for the difference to be repaid at the expense of the buyer. But it is not a fact that he will agree to the additional payment. If the contract initially stipulated a price that included VAT, the following position has the right to life: the parties have already agreed on the final price, and how much tax is in it is up to the seller. Especially if the buyer is a special regime person (a person who does not have the right to deduct VAT): for him, this additional payment is simply an increase in price. And the VAT payer, who has the right to deduct, can express his reluctance to pay additional tax, because the amount of funds extracted from turnover will increase (the seller must pay more in “real” money now, and this amount can be deducted only at the end of the quarter) .

In this case, the following option for changing the terms of the transaction is possible: the shipment to the buyer will be for as long as the amount of the prepayment minus tax at a rate of 20% is sufficient. Or, based on the same amount, they will calculate how much the cost of the product needs to be reduced in order to maintain its quantity in supply and not pay extra for it.

For example, 100% advance in the amount (conditionally) of 118 rubles. (VAT, respectively, 18 rubles) is transferred in December 2021. Shipment will take place in 2021. The buyer refused to pay additional tax, and therefore the parties signed an additional agreement to the contract and changed the quantity of shipment: it is enough for the amount of 98.33 rubles. (118 RUR - 118 RUR x 20/120).

On the date of shipment, the seller issued a “shipment” invoice with a smaller quantity of product, the price of which without VAT is 98.33 rubles. VAT at a rate of 20% will be 19.67 rubles. (RUB 98.33 x 20%). The seller's revenue is 98.33 rubles. The tax is transferred to the budget actually at the expense of the buyer.

How to reflect VAT when receiving an advance payment when switching to the simplified tax system from OSNO and vice versa

If an individual entrepreneur previously worked on the main tax system and received an advance from the buyer, and then switched to the simplified tax system, then the following procedure applies. Considering that this tax almost always does not need to be paid under the simplified tax system, there is no obligation to pay tax upon completion of the transaction. However, a previously taken into account advance payment is not allowed to be deducted.

If an entrepreneur switched from the simplified tax system to the general taxation system, having previously received an advance payment, then upon delivery of a consignment of goods and receipt of full payment, he pays VAT in full to OSNO.

If the difference in tax is paid by the seller.

Letter No. SD-4-3/ [email protected] on the rules for calculating tax during the transition period considers situations when the buyer pays additional VAT. Meanwhile, the seller himself can pay the difference. But it will not be possible to reduce taxable income on it.

The Ministry of Finance, referring to clause 19 of Art. 270 of the Tax Code of the Russian Federation[4], spoke on this matter in Letter No. 03-07-11/78170 dated October 31, 2018: if the taxpayer pays the amount of VAT that must be presented to the buyer (acquirer) of goods (work, services, property rights) at the expense of own funds, then this amount of VAT is not taken into account for profit tax purposes.

However, you can do it this way. The seller (if the buyer does not agree to change the terms of the transaction and refuses to pay additional VAT in the amount of 2%) will transfer the missing part at his own expense, and will reflect the receivables in accounting. You can write it off as non-operating expenses after the statute of limitations expires (clause 2, clause 2, article 265 of the Tax Code of the Russian Federation). This point depends on the terms of the contract or agreements with the buyer. For example, if you present a demand to the counterparty for the repayment of a debt and a deadline for its fulfillment, three years will need to be counted from the day when the deadline for payment passes (Clause 2 of Article 200 of the Civil Code of the Russian Federation). (By the way, for the buyer, debt write-off is reflected in non-operating income - clause 18, part 2, article 250 of the Tax Code of the Russian Federation.)

It is possible to write off a “receivable” arising in connection with the sale of goods, not repaid on time and not secured by collateral, even if a reserve for doubtful debts is created in tax accounting (Article 266 of the Tax Code of the Russian Federation), as soon as it is recognized as uncollectible (para. 2 clause 5 article 266).

Situations are different.

In Letter No. SD-4-3/ [email protected] the Federal Tax Service clarified other situations related to the calculation of VAT during the transition period. Let's go over them.

The cost of the product shipped before 01/01/2019 has been changed from 01/01/2019. In this case, the tax rate that was in effect on the date of shipment (transfer) is applied, and therefore in column 7 of the CSF (based on clause 3 of Article 168 of the Tax Code of the Russian Federation) it is drawn up no later than five calendar days counting from the date of drawing up the documents specified in clause. 10, Article 172 of the Tax Code of the Russian Federation) reflects the same tax rate as in column 7 of the invoice to which the CSF was drawn up (see also Letter of the Ministry of Finance of the Russian Federation dated October 22, 2018 No. 03-07-09/75650).

Corrected invoice for product shipped before 01/01/2019. According to clause 7 of the Rules for filling out an invoice[5], corrections to invoices are made by the seller by drawing up new copies of invoices in accordance with this document. In the new copy, changes to the indicators (number and date) reflected in line 1 of the previous invoice are not allowed, and line 1a is filled in, where the serial number of the correction and the date of the correction are indicated.

In this regard, if corrections are made to the invoice issued for shipment before 01/01/2019, column 7 of the corrected invoice reflects the tax rate in effect on the date of shipment of the goods and reflected in column 7 of the invoice issued upon shipment .

After 01/01/2019, the return of low-quality goods shipped before 01/01/2019 was made. During the transition to an increased rate, the Federal Tax Service allowed the CSF to be issued for returns of goods in 2021, which will ensure the application of the same VAT rate at which these goods were shipped in 2021. Moreover, it is recommended for the seller to issue a CSF in any case, be it the return of goods accepted or not accepted for registration, whether it is returned by a “traditional” buyer or a special regime buyer.

By the way, the seller transfers one copy of the CSF to the buyer, a VAT payer, to restore the tax accepted for deduction. If the buyer is not a taxpayer or is exempt from fulfilling taxpayer obligations related to the calculation and payment of tax, then when he returns from 01/01/2019 goods shipped (transferred) to him before 01/01/2019, the seller registers an adjustment document in the purchase book containing the total ( summary) data on return transactions completed during a calendar month (quarter), regardless of the cash register readings.

The buyer (if he has accepted the VAT amounts presented to him for deduction), in turn, restores the tax on the basis of the CSF received from the seller, regardless of the period of shipment of the goods, that is, until 01/01/2019 or from the specified date.

VAT is calculated by tax agents. Some of them apply the VAT rate during the transition period in the same way as VAT payers. These tax agents include:

• organizations (IP) purchasing scrap metal and raw animal skins from VAT payers (clause 8 of Article 161 of the Tax Code of the Russian Federation);
• organizations (IP) participating in settlements on the basis of a commission agreement, commission or agency agreement, when goods are sold in Russia by foreign persons who are not registered for tax purposes in the Russian Federation (clause 5 of Article 161);
• Russian railway carriers who, from October 1, 2018, provide services for the provision of rolling stock and containers under an agency agreement, commission agreement or agency agreement (clause 5.1 of Article 161);
• organizations (IP) selling confiscated property, ownerless valuables and other property mentioned in paragraph 4 of Art. 161.

Another group of tax agents calculates VAT during the transition period in a special way:

• organizations (IP) purchasing from a foreign seller who is not registered with the Russian tax authorities, goods, work or services, the place of sale of which is recognized as the territory of the Russian Federation (clause 4, clause 1, article 148, clauses 1, 2, article 161 Tax Code of the Russian Federation);
• tenants and buyers of state, municipal property or property of constituent entities of the Russian Federation specified in clause 3 of Art. 161 Tax Code of the Russian Federation.

These persons determine the VAT base on the earlier of two dates - the date of payment for shipment or the date of transfer of the advance payment.

The Federal Tax Service emphasized: in the case where the advance was paid before December 31, 2018 inclusive, and the product was shipped already in 2021, the “advance” VAT must be calculated at the rate of 18/118. In the future, the tax is not recalculated (clause 2.1 of Letter No. SD-4-3/ [email protected] ).

In the opposite situation (the product was shipped in 2021 and paid for in 2019), it is also allowed to use a rate of 18/118, despite the fact that the date for determining the tax base falls on 2019. This is explained by the fact that the 20% rate, according to the rules established by Federal Law No. 303-FZ, applies to products shipped starting from 01/01/2019.

"Google Tax" during the transition period. The Federal Tax Service also spoke out regarding the calculation of the so-called Google tax during the transition period (clause 2.2 of the letter). In a nutshell[6]: if payment for services in electronic form is received in 2021, a foreign organization (remember, from 01/01/2019 it itself pays VAT to the budget - clause 3 of Article 174.2 of the Tax Code of the Russian Federation) will calculate VAT using settlement rate:

• 15.25% – when services are provided up to December 31, 2018 inclusive;
• 16.67% – when services are provided starting from 01/01/2019.

If a foreign organization received an advance in 2021 or earlier for services that will be provided in 2021, it should not calculate VAT, since on the date of transfer of the advance the buyer (organization or individual entrepreneur), being a tax agent, calculated VAT himself (clause 9 Article 174.2 of the Tax Code of the Russian Federation).

Change in the cost of goods/services after 01/01/2019

Nowadays, adjustments to invoices/acts are common.
What to do if such an adjustment becomes necessary to make after the VAT rate has changed? The Letter states that, as expected, it states the rate and amount before and after the changes made. But what’s interesting is that in the last paragraph of clause 1.2 of the Letter it is directly stated that, regardless of whether the change led to an increase or decrease in the original amount, in column 7 “Tax rate” the same rate is indicated as in the initial invoice.