When does it become necessary to restore VAT?
If a taxpayer carries out transactions on which VAT is not paid for one reason or another, the input tax on the values (or works, services) used in them, previously accepted for deduction, should be paid to the budget (that is, restored). This is indicated by clause 3 of Art. 170 Tax Code of the Russian Federation.
There are several reasons for carrying out such an operation, in particular:
- transfer of assets as contributions, including to a management company (or transfer to increase the target capital of non-profit structures);
- further sale of goods outside the Russian Federation;
- acquisition of goods and materials for the purpose of carrying out activities exempt from taxation;
- changing the taxation system to one that does not involve the accrual of VAT after the purchase of goods and their further sale without the accrual of tax.
More detailed information about possible options for VAT recovery can be found in the article “Art. 170 of the Tax Code of the Russian Federation (2017): questions and answers.”
Another case when the obligation to restore VAT arises is export. More precisely, situations when unplanned export operations are carried out during the sale of goods. That is, when initially assets (works, services) were purchased exclusively for domestic sales, and were used for export operations. What to do with input tax in such cases? Restore. But you need to keep in mind that from July 1, 2016, the restoration of VAT, previously accepted for deduction, is made only in relation to goods, works, services, property rights that are used for export operations of raw materials. The explanation of the Ministry of Finance of the Russian Federation on this issue is given in the material “VAT on goods that are used for the export of raw materials is restored.”
Find out the procedure for recovering VAT on fixed assets when exporting here.
If the sale of fixed assets took place on the territory of the Russian Federation, the obligation to restore VAT previously accepted for deduction does not arise. You can learn about this from the article “Sale of OS does not require VAT recovery.”
If fixed asset, previously used in activities subject to VAT, begins to be used in transactions not subject to VAT, then the VAT previously accepted for deduction must be restored in proportion to its residual value. Details in the material “Part of the OS was scrapped - the VAT deduction needs to be restored.”
The position of the Ministry of Finance on the issue of restoring VAT on goods, works, services for periods when the taxpayer had the right not to keep separate records of input VAT, and later these goods, works, services began to be used in transactions not subject to taxation or exempt from VAT, see in the material “Recovery of VAT amounts for periods without separate accounting.”
If there are receivables, the repayment of which is not possible, a controversial situation arises. If the seller, who cannot recover payment from the buyer for the goods shipped to him, has no reason to restore the VAT accepted for deduction at the time of purchase of the materials, then the situation may be different for the buyer.
Provided that the organization has decided to write off receivables recognized as bad, which were formed in the case of prepayment in the absence of further deliveries, the tax on advances should be restored when writing off this debt. Otherwise, disagreements may arise with the inspection authorities. The controllers’ position on this issue is reflected in the article “How to take into account VAT amounts when writing off accounts receivable?”
For information on how buyers should act in the event of the formation of receivables from advance payments paid and when to restore VAT , read the article “When and how can a buyer restore VAT from a transferred advance payment?”
After shipment of the goods, the seller must recover VAT from the advance previously received from the buyer. The article “How can a seller get a VAT deduction from an advance payment from a buyer” will help you do this correctly.
As for actions to write off your own debt, there are also controversial issues for both the seller and the buyer. Under what circumstances will it be necessary to restore the tax in full, and when is it not necessary? What consequences are possible in this or that case? Read our article “VAT when writing off accounts payable: problematic situations.” There are often situations when property belonging to an economic entity (fixed assets, materials, goods) becomes unusable. In this regard, the question often arises: is it necessary to restore the VAT that was previously paid? Read more about the actions of taxpayers in such circumstances in the following materials:
- “Procedure for VAT recovery when writing off goods”;
- “Should VAT be restored upon disposal of fixed assets and inventory as a result of their write-off, theft, damage, shortage, loss, wear and tear, etc.?”;
- Is it necessary to restore VAT on burnt property?
- “An accident is not a reason to restore VAT.”
The resulting discount to the price of the goods from the buyer leads to the need to restore VAT. Read more in the material “Volume discount may require VAT recovery.”
From 07/01/2017, recipients of subsidies for reimbursement of expenses related to the purchase of goods, works, services or the payment of import VAT will have to restore VAT regardless of the level of the budget from which they were received. You can read about this change in legislation in the material “From July 1, 2017, the procedure for restoring VAT when receiving budget subsidies has been adjusted.”
On this issue we take the following position:
The transfer of the damaged vehicle to the insurer is a sale for tax purposes. Accounting for income from sales is carried out based on the value of the usable remains according to the assessment of the damaged vehicle made by an expert of the insurer.
The amount of insurance compensation (excluding the value of useful balances) received by the organization from the insurance company as a result of the occurrence of an insured event is taken into account for profit tax purposes as part of non-operating income.
In tax accounting, the residual value of a car reduces the income from its sale. The loss arising in this case is taken into account when calculating taxable profit.
The organization is not obliged to restore VAT previously accepted for deduction when purchasing a car. However, we cannot exclude the risk of a tax dispute when following this position.
Justification for the position:
Income tax
The object of taxation for income tax for Russian organizations that are not members of a consolidated group of taxpayers is profit, which is defined as the difference between the income they receive and the amount of expenses incurred, determined in accordance with Chapter 25 of the Tax Code of the Russian Federation (clause 1 of Article 247 of the Tax Code of the Russian Federation ). Accordingly, the tax base for income tax for this category of taxpayers is recognized as the monetary expression of profit, defined as the difference between the income they received and the expenses incurred (clause 1 of Article 274 of the Tax Code of the Russian Federation).
Income for the purposes of Chapter 25 of the Tax Code of the Russian Federation includes income from the sale, in particular, of goods, as well as non-operating income, determined in accordance with Art. 249 of the Tax Code of the Russian Federation and Art. 250 of the Tax Code of the Russian Federation, respectively.
The list of non-operating income given in Art. 250 of the Tax Code of the Russian Federation, is not closed. For the purpose of calculating income tax, non-operating income is recognized as all income not specified in Art. 249 of the Tax Code of the Russian Federation and meeting the definition of income given in Art. 41 Tax Code of the Russian Federation.
Currently, the question of the procedure for taxation (as well as accounting for transactions) on the disposal of a car in connection with the relinquishment of ownership rights to it in favor of the insurer is the subject of debate. This is due to the ambiguity in the interpretation of legislative norms; there is currently no clear answer to questions such as whether a transaction for the transfer of damaged property is recognized as a sale and which object is transferred to the insurance company - a car or usable remains (spare parts and scrap metal).
At the same time, in the case of transferring a damaged car (usable remains) to the insurer, for accounting and taxation purposes, it seems appropriate to divide the compensation paid by the insurer into components:
— income from sales equal to the value of the usable remains (the cost of the damaged car);
- income covering the damage caused to the policyholder by an insured event.
This division is dictated by the presence of features of recognizing expenses (income) for tax purposes. An example of the division of compensation amounts is the resolution of the Ninth AAS dated 01.08.2011 N 09AP-16300/11 (upheld by the resolution of the Federal Antimonopoly Service of the Moscow District dated 14.10.2011 N F05-10163/11 in case N A40-10959/2011) (hereinafter referred to as the Resolution) . In the situation discussed in the Resolution, the court proceeds from the assumption that the damaged vehicle is being sold.
In this case, the policyholder receives from the insurer, among other things, income from the sale of the damaged car. Accordingly, an object of taxation for VAT and income tax arises. This income is defined as the difference between the amount received from the insurer and the amount of actual damage.
Thus, the amount of money due to the organization for the transfer of a damaged car (the value of the usable remains according to the assessment of the damaged car made by an expert of the insurer) should be considered as proceeds from the sale of the car, which for profit tax purposes is recognized as income from the sale (clause 3 of Art. 38, paragraph 1, article 39, paragraph 1, article 248, paragraphs 1, 2, articles 249, 274 of the Tax Code of the Russian Federation).
When applying the accrual method, income from the sale of goods is taken into account on the date of transfer of ownership of it to the acquirer (clause 3 of Article 271, clause 1 of Article 39 of the Tax Code of the Russian Federation).
That is, taxable income must be reflected in tax accounting on the date of signing the acceptance certificate for the damaged vehicle (usable balances).
In turn, income in the form of insurance compensation is taken into account by virtue of the first and second paragraphs of Art. 250 of the Tax Code of the Russian Federation as part of other non-operating income not directly mentioned in this article (letter of the Ministry of Finance of Russia dated October 8, 2009 N 03-03-06/1/656, see also letters of the Ministry of Finance of Russia dated November 30, 2016 N 03-03-06/ 3/70930, dated November 29, 2016 N 03-03-06/2/70437). The amount of insurance compensation received by the organization (without taking into account the cost of usable balances) should be included in non-operating income on the basis of clause 3 of Art. 250 of the Tax Code of the Russian Federation, according to which non-operating income is recognized, in particular, income in the form of amounts of compensation for losses or damages (letters of the Ministry of Finance of Russia dated September 23, 2013 N 03-03-06/1/39251, dated July 17, 2013 N 03-03-05 /27903, dated 04/02/2010 N 03-03-06/1/228, dated 06/22/2005 N 03-03-02/2, dated 03/29/2007 N 03-03-06/1/185). Recognition of the specified income is made on the date the insurer makes a decision on the insurance payment (the date of signing the act on the insured event with the calculation of the insured amount) (clause 4, clause 4, article 271 of the Tax Code of the Russian Federation).
Moreover, if we are talking about the sale of a car, then the taxpayer can reduce the income from the sale (clause 1, clause 1, article 268 of the Tax Code of the Russian Federation):
- for the residual value of depreciable property, determined in accordance with paragraph 1 of Art. 257 Tax Code of the Russian Federation;
- for the amount of expenses directly related to such a sale, in particular for the costs of valuation, storage, maintenance and transportation of the property being sold (clause 1 of Article 268 of the Tax Code of the Russian Federation).
In the event that the residual value of the depreciable property specified in paragraphs. 1 clause 1 art. 268 of the Tax Code of the Russian Federation, taking into account the costs associated with its sale, exceeds the proceeds from its sale, the difference between these values is recognized as a taxpayer’s loss, taken into account for tax purposes in the manner provided for in paragraph 3 of Art. 268 of the Tax Code of the Russian Federation: the loss received upon sale is included in the taxpayer’s other expenses in equal shares over a period defined as the difference between the useful life of this property and the actual period of its operation until the moment of sale.
Please note that a similar procedure is used to recognize a loss from the sale of depreciable property, which at the time of sale was not used in income-generating activities. On the issue of calculating depreciation on objects that are temporarily not used in the activities of an income-generating organization, but the sale of which is expected, there are clarifications according to which the temporary cessation of the use of property in income-generating activities is not a basis for excluding this property from depreciation (letters Ministry of Finance of Russia dated 06/07/2013 N 03-03-06/1/21209, dated 03/25/2013 N 03-03-06/2/9224, dated 02/28/2013 N 03-03-10/5834 (sent for information and use in progress by letter of the Federal Tax Service of Russia dated 05/22/2013 N ED-4-3/ [email protected] ), Federal Tax Service of Russia dated 04/12/2013 N ED-4-3/ [email protected] ).
Restoration of VAT upon transition to the simplified tax system
If in the course of work the subject decides to switch from the general system to a different taxation regime that eliminates the need to charge VAT, then the tax previously accepted for deduction will have to be restored. This applies to goods purchased but not yet sold to customers, as well as fixed assets and intangible assets.
The main stages of the transition procedure are listed in our article “Procedure for VAT recovery when switching to the simplified tax system (nuances)”
The transition of an organization from the general system to other (preferential) tax regimes implies the restoration of VAT on purchased goods (services and property rights) in full. If we consider fixed assets and intangible assets, then a tax is subject to restoration in an amount proportional to their residual value. You can read more in the article “VAT during the transition to the simplified tax system with OSNO: accounting and restoration of tax.”
If the transition to the simplified tax system is carried out from the general taxation system, which was combined with imputation, then VAT restoration must be made only for those goods that were not taken into account in activities subject to imputation tax and are intended for use in “simplified” activities. Read more in our material “When the transition to the simplified tax system does not require VAT restoration .
For your information:
1. There is a position according to which the entire amount received by the organization from the insurance company must be taken into account as part of non-operating income (clause 3 of Article 250 of the Tax Code of the Russian Federation), and the amount of depreciation not accrued in accordance with the established useful life must be written off as part of non-operating expenses for based on paragraphs. 8 clause 1 art. 265 Tax Code of the Russian Federation. Some experts and auditors believe that if a car cannot be restored, then its value should be written off as part of losses from emergency situations in accordance with paragraphs. 6 paragraph 2 art. 265 Tax Code of the Russian Federation. However, in general, road accidents do not qualify as emergencies. Therefore, it is incorrect to recognize expenses on this basis. We believe that in this situation, as already noted, it is possible to be guided by paragraphs. 8 clause 1 art. 265 Tax Code of the Russian Federation. So, in accordance with paragraphs. 8 clause 1 art. 265, para. 3 paragraph 7 art. 272 of the Tax Code of the Russian Federation, in the event that it is impossible to use a car after an accident to generate income, expenses for the liquidation of fixed assets decommissioned (expenses for dismantling, disassembling, removal of disassembled property), including amounts of depreciation underaccrued in accordance with the established useful life, are included in non-operating expenses and reduce the taxable profit in the reporting period in which the liquidation occurred, at a time on the date of signing by the liquidation commission of the corresponding act on the completion of work to liquidate the fixed asset (letter of the Ministry of Finance of Russia dated October 21, 2008 N 03-03-06/1/592, dated September 19 .2007 N 03-03-06/1/675, dated 01/17/2006 N 03-03-04/1/27, dated 04/08/2005 N 03-03-01-04/2/61, Federal Tax Service of Russia for the city. Moscow dated 08/11/2011 N 16-15/ [email protected] , dated 09/30/2010 N 16-15/ [email protected] ).
At the same time, to justify the costs of writing off a car in tax accounting, an organization must have documents confirming the unsuitability of the car for generating income, which are also grounds for writing off the car in accounting. That is, the costs of eliminating decommissioned assets should be recognized as part of non-operating expenses on the date of drawing up the act on the write-off of the vehicle by the commission. In this regard, the taxpayer also needs to assess the tax risks associated with recognizing the costs of liquidating a fixed asset as unreasonable, the presence of evidence of the inability to carry out routine repairs of the car, and not its liquidation.
The following must also be taken into account. Based on the first paragraph of clause 1 of Art. 256 of the Tax Code of the Russian Federation, the taxpayer has the right, through depreciation, to pay off the cost of only those objects of investment of capital expenditures that are used by him to generate income. Therefore, the organization does not have the right to continue to depreciate a vehicle until its cost is fully paid off if a decision has already been made on it as unsuitable.
Thus, the accrual of depreciation stops from the first day of the month following the month when the cost of the depreciable property was completely written off or when this object was removed from the taxpayer’s depreciable property for any reason (clause 5 of Article 259.1 of the Tax Code of the Russian Federation).
Thus, with this option for accounting for income and expenses (after the organization decides that it is impossible to use the car after an accident to generate income (taking into account the availability of supporting documents)), the organization should stop accruing depreciation from the first day of the next month. In the period before the car is transferred to the insurer, the organization may also decide to preserve the car for a period of more than three months and suspend the accrual of depreciation in accounting (clause 23 PBU6/01 “Accounting for fixed assets”, clause 63 of the Guidelines for accounting of fixed assets, approved by order of the Ministry of Finance of the Russian Federation dated October 13, 2003 N 91n). In the case of transferring a car for conservation, the object is also excluded from depreciable property in tax accounting (clause 3 of Article 256 of the Tax Code of the Russian Federation). When an object of fixed assets is re-mothballed, depreciation on it is accrued in the order that was in effect before the moment of its mothballing, and the useful life is extended for the period that the object of fixed assets is in mothballing.
2. According to another position of the organization, it is necessary to recognize as non-operating income, as in the first option, only the amount of insurance compensation (without the value of useful balances). But at the same time, the residual value of the car is written off as non-operating expenses (clause 8, clause 1, article 265 of the Tax Code of the Russian Federation). At the same time, useful balances (such as parts and assemblies of a former car obtained during its dismantling) are received and reflected as part of inventories at the current market value at a price agreed with the insurer; in this regard, non-operating income is recognized in tax accounting (clause 13 Article 250, paragraph 5 of Article 274 of the Tax Code of the Russian Federation).
At the time of signing the act of acceptance and transfer of suitable balances, income from their sale is reflected (Article 249, paragraph 3 of Article 271 of the Tax Code of the Russian Federation). And the cost of previously capitalized usable balances reduces such income on the basis of paragraphs. 2 p. 1 art. 268 and paragraph two of paragraph 2 of Art. 254 Tax Code of the Russian Federation.
At the same time, please note that the position expressed in this consultation is our expert opinion.
We were unable to find any explanations from the authorized bodies on the taxation procedure for the transactions in question.
In this regard, we recommend that organizations take advantage of the right of a taxpayer and contact the Ministry of Finance of Russia or the tax authority at the place of registration for the appropriate written explanations (subparagraphs 1, 2, paragraph 1, Article 21 of the Tax Code of the Russian Federation). If a dispute arises, the presence of personal written explanations from the financial department or tax authorities excludes the person’s guilt in committing a tax offense on the basis of paragraphs. 3 p. 1 art. 111 of the Tax Code of the Russian Federation.
Postings when restoring tax
Actions with tax previously used as a deduction when paying to the budget are reflected in accounting on accounts 19, 68, 91, etc. For more information about transactions for VAT restoration , read our article “The nuances of VAT restoration and what transactions are used in this?” .
Reflection of operations to recover VAT from advance payments is also accompanied by recording of accounting entries. You will find complete information about them in the article “Procedure for recovering VAT from advances (postings).”
