VAT on advances received: postings, examples

2024 Author: Howard Calhoun | [email protected]. Last modified: 2023-12-17 10:16

When transferring amounts for future deliveries, the seller must issue an invoice. The buyer can deduct the tax without waiting for the sale. This amendment to the Code was created in order to reduce the tax burden. How is VAT deducted from advances received in practice?

Relationship

When receiving an advance payment in full or in part for future deliveries, a business entity is obliged to charge VAT and issue an invoice. This tax amount is then deductible based on the relevant shipments. Further, it will be considered in detail how VAT is offset from advances received from the client.

The billing period is limited to five days. Exceptions are cases where the shipment was made during the specified period. But what about the buyer who transfers funds at the end of the current period if the seller does not issue an invoice? According to the interpretation of the arbitral tribunal, a payment received in the same period in which the goods were sold can be recognized as an “advance on deliveries”. In addition, for non-complianceobligations (invoicing), according to art. 120 Tax Code, the company may be held liable:

• 5 thousand rubles, if the violation occurred within one period;
• 15 thousand rubles – in several periods;
• 10% of the amount (minimum 15 thousand rubles) if the tax base was underestimated.

In the case of long-term supplies (oil, gas, etc.), invoices can be drawn up at least once a month. The document must be issued in the same period in which the prepayment was made.

Billing

The document must indicate:

• name, address, TIN of the parties to the transaction;
• number and date;
• product name;
• prepayment amount;
• tax rate;
• VAT amount.

In the case of prepayment, the invoice must indicate the tax rate as a percentage of the base. According to these data, VAT is then recorded from advances received. As for the name, in the invoice you can indicate the name of the groups of goods without detailed decoding.

Design

1. Prepayment is carried out under the contract, the buyer wants to take into account VAT on advances received.

In this case, you need to track the status of mutual settlements, clearly determine whether a particular payment belongs to the delivery. It is also worth asking the buyer to indicate the amount of the prepayment in the comments to the receipt. Such control is required because:

• Invoice is independently generated by the client in 1C, issued and printed in 2copies.
• The amount of the advance is calculated based on the data of the document "Debt Repayment". If the "Automatic" calculation method is selected, the difference will be calculated based on the balances of 62.01. After the closing of all debts, the balance will be carried over to 62.02. This amount will appear on the invoice. Therefore, before registering a document, you need to make sure that the information provided in the database is up to date.

2. The invoice was issued in only one copy.

The document "Registration of invoices for advance payment" is created, which will automatically generate balances for all non-closed prepayments. This method has its limitations. Before registering a document, make sure that:

• calculation sequence is relevant;
• no duplicate counterparties and contracts;
• remaining debts are displayed on account 62.01;
• advance balance - as of 62.02;
• no closed account balances 62.02;
• in case of changes in mutual settlements, you need to rewrite the document.

VAT accrual

The process algorithm has not changed. The base is determined either on the day of shipment, or at the time of payment. The seller must pay tax on the transferred amounts, and the buyer must pay VAT on advances received.

Example. An advance payment in the amount of 118 thousand rubles was received on the account of LLC on May 15. (including tax - 18%). The organization shipped on May 25 in the amount of 85 thousand rubles. In the accounting of the enterprise, this operation will be reflected as follows:

15.05:

• DT51 KT 62 - prepayment is reflected (118 thousand rubles);
• DT 76 KT 68 - 18 thousand rubles - VAT on advances received. Postings are generated on the basis of an invoice dated 15.05.

If a long time elapses between the payment of funds and the presentation of VAT, then the operation can be processed as follows:

DT 19 KT TS (Technical account for accounting for settlements with counterparties) - 18 thousand rubles.

DT 68 KT 19 (VAT deductible) - 18 thousand rubles.

In the reporting, the supplier's debt is reflected in the full amount. VAT appears on tax invoices.

25.05:

• DT 90 KT 41 - cost of goods sold (85,000);
• DT 62 CT 90 - sales income (118,000);
• DT 90 KT 68 - accounting for income tax (18,000);
• DT 68 KT 76 – VAT deduction from advances received (18,000);
• DT 62 "Prepayments" CT 62 "Settlements with customers" - prepayment (118,000).

This is how VAT is calculated on advances received.

Accounting for tax at the buyer

A client who has transferred an advance payment on account of deliveries is subject to deduction of the amount of tax presented by the seller on the basis of the following documents:

• accounts;
• payments confirming the transfer of funds;
• contracts.

Let's consider them in more detail. The Ministry of Finance does not provide for a special form of invoices used in relation to prepayment. Therefore, a standard sample document can be used. If the contract contains a condition on the transfer of money without specifying the exact amount,then the tax calculated on the basis of the figures indicated in the invoice issued by the seller is subject to deduction. If there is no such item at all, then the tax cannot be compensated.

VAT deduction from advances received

The Tax Code provides for the right of the taxpayer to compensation for the amounts paid. If the business uses it in relation to deductions for goods received, the amount of tax will not be underestimated.

VAT recovery from advances received occurs if the buyer transfers funds against future deliveries. You can compensate the tax in one of the following periods:

• when the amount of tax on purchased works is deductible;
• if the conditions have changed, the contract has been terminated or the prepayment amounts have been refunded.

VAT from advances received will be restored in the amount in which it was previously accepted. Here it is worth paying attention to such a moment. The refund of the VAT advance received, which was accepted with 100% prepayment for deliveries made by individual parties, occurs in the amount corresponding to the amount of tax indicated in the invoices. In the invoices themselves, the prepayment amount should not be highlighted as a separate item.

Example

Take the conditions from the previous problem. On May 15, the buyer transferred an advance payment in the amount of 118,000 rubles to the seller's account. On May 25, the seller shipped the goods on account of the funds received in the amount of 100 thousand rubles. The process of formation of VAT from advances received, transaction processing transactions are presented below.

15.05:

• DT 60 KT 51 –advance payment transfer (118,000);
• DT 68 KT 76 - reflection of the amount of tax (18,000).

25.05:

• ДТ 41 (19) КТ 60 – the goods are credited (100,000) and the amount of tax is reflected (18,000);
• ДТ 68 KT 19 - accepted for VAT deduction (18,000);
• DT 76 KT 68 – tax restored (18,000);
• DT 60 "Settlements with suppliers" CT 60 "Prepayments" - 118,000 - advance payment credited.

It is very important to correctly calculate the amount of taxes payable to the budget. Based on these data, a VAT declaration is generated. Advances received, transferred and accrued on them tax amounts directly depend on the correctness of the calculation of accounts receivable (DZ) and payables (KZ) indebtedness.

Description of the subject matter

Receivables for amounts paid for the purchase of goods are reflected in the balance sheet in the amount of funds actually transferred. Until the tax deductibility is available, these figures appear as a current asset. Such debt shows the right of the enterprise to receive the provided objects in the appropriate quantity, quality and the required configuration. Refunds can be made only in case of termination of the contract ahead of time, inability of the supplier to fulfill obligations and other similar circumstances. But in the worst situation, the enterprise can receive not only the previously paid amounts, but also compensation. Therefore, in the BU, the estimate of the remote sensing should reflect not the amount of costs, but the cost of the purchased equipment when it is posted. This figure corresponds to the amount of the prepaymentwithout VAT on advances received.

Tasks

Let's look at a few more examples of calculating tax amounts.

1. Supply of goods worth 118,000 including VAT.

• DT 08 (19) CT 60 - materials received (100,000) and accounted for by the supplier (18,000);
• DT TS (technical account for mutual settlements with counterparties) KT 68 – VAT restored (18,000);
• DT 68 KT 19 - tax accepted for deduction (18,000).

2. Reflection of an advance payment issued without accepting the right to deduct VAT.

Buyer side:

• DT 60 KT 51 – advance payment paid (118,000);
• DT 19 KT TS - accepted for VAT accounting (18,000).

From the seller's side:

• DT 08 (19) CT 60 - equipment received (100,000) and seller's account accepted (18,000);
• DT TS CT 19 – tax amount restored (18,000);
• DT 68 CT 19 - tax deductible (18,000).

Another way to process the operation.

From the seller:

• DT 51 KT 62 – prepayment received – 118,000;
• DT TS KT 68 - tax charged - 18,000.

At the buyer:

• DT 62 KT 90 - sales of products (if 62 is used as a technical account, the entry is formed in the amount of one hundred thousand rubles) - 118,000.
• DT 90 KT 68 - the amount of tax on sold products is reflected (no posting is created if account 62 appears) - 18,000;
• DT 68 CT TS - the amount of tax was restored (the transaction is not created if account 62 appears) - 18,000.

Checkssettlements

Acts may indicate amounts both with and without tax. It is better to indicate both numbers. The actual debt is non-monetary, that is, it does not include taxes. But when offsetting an advance or having complex settlements under contracts, VAT figures can be used when calculating the total debt.

Exceptions

The legislation provides for cases when the accrual and payment of VAT on advances received is not provided:

• for goods sold outside of Russia;
• for work taxed at a rate of 0%;
• for services on which no tax is charged at all;
• if the company does not pay VAT at all;
• if the duration of the production cycle exceeds six months (the list of such goods is approved by Decree No. 468).

In order not to accrue tax on prepayment for work with a long production cycle, you need to submit a document confirming the features of the technological process along with the declaration to the tax copy of the contract with the buyer.

An enterprise can take advantage of the benefit if the accountant keeps a separate record of operations with a long production cycle, VAT amounts for materials involved in this process. These requirements are established by the Russian Tax Code.

If these conditions are not met, advance tax is charged on a general basis. No deferment is granted. If the seller accrued VAT in one quarter, and provided documents for the benefit in another, he cannot reduce the tax base, change the invoice orsubmit a clarification. The procedure for maintaining complex accounting is not prescribed by law. Therefore, it is governed by the internal policy of the organization.

The disadvantage of this scheme is as follows: the amount of VAT on goods purchased for long-term production, the organization can take into account only on the day the product is sold. If the company received an advance without paying tax, then it will not be possible to recover VAT from the budget until the products are sold. Therefore, before using the benefit, you need to evaluate the economic benefits of the operation.

Conclusion

When receiving an advance payment for future deliveries, the buyer must issue an invoice and charge VAT. Based on the results of shipments, these amounts are subject to deduction. The correct calculation of amounts depends on the correct assessment of receivables and payables. The main rule is that in the balance sheet, the amounts paid for the goods must be shown separately from the tax. In addition, the deduction of VAT from advances received is the right of the buyer, and not an obligation. The amounts are calculated on the basis of invoices. And if the seller submits the invoice late, he will be fined from 5 to 15 thousand rubles. This is spelled out in the Tax Code of the Russian Federation.