The tax base
The tax base for calculating VAT is the cost of work performed, taking into account all the actual expenses of the organization for their implementation (clause 2 of Article 159 of the Tax Code of the Russian Federation).
Situation: when calculating the tax base for VAT, is it necessary to include the rental fee for a plot of land that is in federal (municipal) ownership in the cost of work performed on a self-employed basis?
Yes need.
The tax base when performing construction and installation work for one’s own consumption is defined as the cost of the work performed, calculated on the basis of all the actual expenses of the organization for their implementation (clause 2 of Article 159 of the Tax Code of the Russian Federation). At the same time, construction and installation include work related to capital construction.
In accounting, capital construction costs are reflected in account 08 “Investments in non-current assets”. Therefore, in practice, tax inspectorates require that VAT on construction and installation work performed on a self-employed basis be charged on the entire amount of expenses collected on account 08, with the exception of the cost of work by contractors.
Although this position is ambiguous, in the current situation it is more expedient to include the amount of rent (accounted for in account 08) in the cost of construction and installation work for own consumption, charge VAT on this amount and deduct the tax in the same quarter (clause 6 of Art. 171, paragraph 5 of Article 172 and paragraph 10 of Article 167 of the Tax Code of the Russian Federation).
Situation: when determining the tax base for VAT, is it necessary to include the costs of developing design and estimate documentation in the cost of construction and installation work performed independently? The organization is building non-residential premises.
Yes, it is necessary if the design and estimate documentation is developed by the organization itself.
Carrying out construction and installation work for one’s own consumption is subject to VAT (subclause 3, clause 1, article 146 of the Tax Code of the Russian Federation). The tax base for such operations is defined as the cost of work performed, which includes all actual expenses for their implementation (clause 2 of Article 159 of the Tax Code of the Russian Federation). Construction of non-residential premises without appropriate design and estimate documentation is not permitted. This follows from the provisions of paragraph 3 of Article 48, paragraphs 1 and 7 of Article 51 of the Town Planning Code of the Russian Federation. Thus, the preparation of design estimates is inextricably linked with the start of construction work, and the costs of preparing documentation should be included in the cost of the construction project. Consequently, the costs of developing design and estimate documentation, carried out by the organization itself, increase the VAT tax base when performing construction and installation work on a self-employed basis. Similar clarifications are contained in the letter of the Ministry of Finance of Russia dated March 22, 2011 No. 03-07-10/07.
About the economic method of construction
The term “economic method” was originally applied to construction and means a situation when an organization constructs an object for its own needs on its own, without the involvement of a contractor.
With the contract construction method , the organization acts as the customer, and the construction is carried out by a professional contractor - a construction organization.
Example
A manufacturing organization decided to build a warehouse building to store purchased materials.
The decision was made to build the warehouse on our own.
This option for constructing a facility is called “economic method” .
Example
A manufacturing organization decided to build a warehouse building to store purchased materials.
A decision was made to engage a contractor to construct a warehouse building.
This option for constructing a facility is called the “contract method” .
Example
A manufacturing organization decided to build a warehouse building to store purchased materials.
It was decided to carry out part of the work on the construction of the building on our own, and to involve a contractor for the other part of the work.
This option for constructing a facility is called “mixed method”.
The name “economic method” comes from the fact that construction is considered to be this method, when the developer becomes the owner of the object and builds it on his own. Such an object is taken into account by the developer as a fixed asset.
The economic method of construction is used by organizations that have professional construction divisions on their balance sheet. Such divisions are often referred to as “capital construction departments” (UCS), “capital construction departments” (DCS).
It should be noted that the term “economic method” is sometimes applied not only to construction performed on one’s own, but also to other types of work (services) performed on one’s own (for example, R&D performed on one’s own). But regulatory documents apply this term only to construction work.
The term “Economic method of construction” has been used since the times of the USSR.
Date of determination of the tax base
The tax base for construction and installation work performed on a self-employed basis must be determined on the last day of each tax period (Clause 10, Article 167 of the Tax Code of the Russian Federation). This means that VAT should be charged on the cost of construction and installation work performed on its own on the last day of each quarter in which the organization carried out this work. Thus, on this day, you need to draw up an invoice for the cost of construction and installation work performed on your own and register it in the sales book.
An example of determining the tax base for VAT when carrying out construction and installation work on a self-employed basis with the involvement of contractors
Alpha LLC is building a hangar on a self-propelled basis with the involvement of contractors.
In the first quarter, costs for the construction of the hangar amounted to RUB 548,000, including:
- cost of building materials – 120,000 rubles. (excluding VAT);
- wages for workers involved in the construction of the facility (including contributions for compulsory pension (social, medical) insurance and insurance against accidents and occupational diseases) - 98,000 rubles;
- the cost of foundation work performed by the contractor is RUB 330,000. (excluding VAT).
The tax base for calculating VAT when performing construction and installation work using self-employed methods is equal to: 120,000 rubles. + 98,000 rub. = 218,000 rub.
The VAT amount is: RUB 218,000. × 18% = 39,240 rub.
VAT is not charged on the cost of construction and installation work performed by the contractor (letter of the Federal Tax Service of Russia dated July 4, 2007 No. ШТ-6-03/527).
The invoice for the cost of construction and installation work performed on a self-employed basis was dated March 31 by the Alpha accountant. On the same day, the invoice was recorded in the sales ledger and purchase ledger.
Step-by-step instruction
The organization decided to build an additional warehouse to store finished products on its own.
In the second quarter, construction work was carried out using economic methods. The costs of building the warehouse were:
- material costs - 250,000 rubles;
- wages - 80,000 rubles;
- insurance premiums - 24,160 rubles.
On July 2, construction was completed and the warehouse was put into operation.
On July 10, an extract from the Unified State Register of Real Estate was received regarding the registration of ownership of the property.
Let's look at the step-by-step instructions for creating an example: PDF
What is the customer responsible for?
- The construction customer provides the entire construction process.
- He owns or leases a plot of land and receives a building permit.
- He prepares design documentation and construction site.
- Investor funds are collected in his account.
- If the customer does not build it himself, then he selects contractors and transfers money to them for construction.
- Upon completion of the work, the customer receives permission to put the facility into operation and transfers it to investors.
After registering the commissioning of the facility, the customer’s activities are considered completed.
We will understand the nuances of calculating and paying VAT by the construction customer.
Historical reference
The term “Economic method of construction” was used in pre-revolutionary Russia.
For example, in the story “Gentlemen Everyman” (1884) by the Russian writer Anton Pavlovich Chekhov (1860 – 1904):
“ Firemaster . Good with. Now, therefore, you are arguing that the tower should be raised two arshins... Good. But if you look from that point of view and in the sense that public, so to speak, state interests are interested here, then I must note, gentlemen, that if a contractor takes on this matter, then I must keep in mind that it will cost the city twice as expensive, since the contractor will be observing his own interests here, and not the public. If we build economically , slowly, then if we put bricks, let’s put it at fifteen rubles per thousand and delivery on fire horses and if (raises his eyes to the ceiling, as if mentally counting) and if fifty twelve-arshine logs of five vershoks... (counts) .
Vowels (by an overwhelming majority of votes). Entrust the repair of the tower to Semyon Vavilych, for which purpose allocate one thousand five hundred twenty-three rubles forty-four kopecks for the first time!”
Categories:
Construction, Real estate
Value added tax
Tax Guide
EXAMPLE No. 1
In one of the divisions of JSC “Lutik”, shelving for storing finished products was manufactured.
The following entries will be created in the accounting records of JSC Buttercup:
| Contents of a business transaction | Debit | Credit | Amount, in rubles |
| Construction materials purchased for the manufacture of shelving have been accepted for accounting. | 10-8 | 60 | 100 000 |
| VAT is taken into account on the cost of building materials. | 19-4 | 60 | 18 000 |
| VAT is accepted for deduction. | 68 | 19-4 | 18 000 |
| The cost of written-off building materials is taken into account. | 23 | 10-8 | 100 000 |
| The department's costs associated with the manufacture of shelving are taken into account. | 23 | 70,69,02 | 25 000 |
| Reflected as part of capital investments are the costs associated with the manufacture of racks. Calculation: 100,000 rub. + 25,000 rub. = 125,000 rub. | 08-3 | 23 | 125 000 |
An organization has the right to deduct VAT if the following additional conditions are met:
- the property in respect of which construction and installation work was carried out is intended for carrying out operations subject to VAT;
- the value of the property for which construction and installation work was carried out will be taken into account as expenses when calculating income tax.
VAT can be deducted at the time the tax base for such work is determined, that is, on the last day of the tax period (quarter) .
Accounting services from RUB 1,667/month
More detailed information on this issue is available to registered users of the “My Business” service.
Internet accounting "My Business". You don't need to be an accountant to keep records and submit reports!
Ideal for LLCs and individual entrepreneurs on the simplified tax system, patent
Only 833 ₽/month
Just a minute to issue an invoice! Until the client changes his mind
Issue invoices from the service immediately with a payment button. Your clients will be able to make payments in any way convenient for them. We've thought of everything!
Try it
Submit reports without leaving home
The service will automatically generate a report, check it and send it online. You can find out whether your report has been accepted or whether there are any questions from the inspector at any time.
Try it
Nobody wants to pay taxes, but...
We will help, at least, not to overpay. The service itself will calculate taxes and contributions and offer you all possible options to reduce taxes.
Try it
We won’t leave you alone with accounting
No need to Google, ask your question to the experts of “My Business”. We will analyze your situation and offer the optimal solution within 24 hours.
Try it
Check with the Federal Tax Service before they themselves show interest
You can check whether you have tax debts for previous periods directly from your personal account. You no longer need to visit the inspection for verification.
Try it
Don't forget about the employees
Contributions, salaries and other payments are calculated automatically. A complete package of necessary documents for registration of employees is generated in one click.
Try it
Convenient integration with banks
Instant uploading of payment orders for sending to the bank, uploading bank statements to the service. Now cash flow is always under control.
Try it
We are responsible for our actions
We are not mistaken, but... For your peace of mind, our liability is insured for 100,000,000 rubles!
Try it
Integration with My Business.API
An open API allows you to exchange data with any service you use.
Try it
When can an object be capitalized?
Conditions for including created property in the OS:
- Long service life - over 12 months.
- Making a profit from use - the object must participate in economic activity to obtain benefits.
- No intention to sell the asset in the next year.
If these three conditions are not met, the manufacturing object is not accepted as part of fixed assets, but is included as inventory.
Important! If we are talking about construction, then the constructed real estate before the state registration of rights to it is accounted for in an independent subaccount 01 of account.
