Warranty repairs from the point of view of tax legislation

In accordance with the Tax Code of the Russian Federation, warranty repair services are exempt from VAT. However, certain conditions must be met for this exemption. Also, from January 1, 2019, there have been changes in the application of this benefit, and now it is possible to refuse the benefit. In this article we will look at the features of calculating VAT when providing warranty repair and maintenance services.

Who is eligible for release?

There will be no problems with applying the exemption if you are: ( or ) a manufacturer of goods; ( or ) the seller, who himself sets the warranty period if the manufacturer has not done so, or assumes warranty obligations at the end of the manufacturer’s warranty period;

( or ) an organization that directly carries out warranty repairs (service centers and workshops), or a seller (distributor, dealer), who himself repairs goods during the manufacturer’s warranty period under an agreement with him (Letters of the Ministry of Finance of Russia dated March 31, 2011 N 03-11- 06/3/40, dated 07/29/2010 N 03-07-07/53, dated 05/12/2008 N 03-07-07/53; Letter of the Federal Tax Service of Russia for Moscow dated 03/17/2009 N 16-15/023683) . At the same time, repairs are free for the consumer, and the costs are covered by the manufacturer or seller.

Moreover, if you are authorized to carry out warranty repairs and receive compensation for this, but carry out the repairs by third parties, then you still have the right to apply the exemption. This conclusion follows from the explanations of the tax authorities (Letter of the Federal Tax Service of Russia for Moscow dated June 18, 2009 No. 16-15/61634), and the court agrees with this (Resolutions of the Federal Antimonopoly Service dated January 20, 2011 in case No. A55-9351/2010, dated June 29 .2010 in case No. A55-35014/2009).

Difficulties may arise if you are authorized to carry out warranty repairs, but delegate this responsibility to a third party, who then accepts claims from customers and arranges repairs. You simply receive compensation from the manufacturer and transfer it to the organization performing the repairs. The court may consider that in such a situation you are essentially an intermediary and do not have the right to release (Clause 7 of Article 149 of the Tax Code of the Russian Federation; Resolution of the Federal Antimonopoly Service of the Moscow Region dated May 17, 2010 N KA-A40/4585-10).

Tax problems of warranty repairs

As a general rule, warranty repair services are not subject to VAT. But in order to receive the benefit, the organization must fulfill a number of conditions. In this case, questions may arise related to the separate accounting of taxable and non-VAT-taxable transactions. Certain nuances also exist with regard to income tax. But first things first.

Let us remind you that warranty repairs (warranty service) are subject to goods (results of work) for which a warranty period has been established.

The warranty period is the period during which, if a defect is detected in the product (work), the manufacturer (performer, seller, authorized organization or authorized individual entrepreneur, importer) is obliged to satisfy the consumer’s requirements (clause 6 of article 5 of the Law of the Russian Federation dated 02/07/92 No. 2300-1 “On the protection of consumer rights”, hereinafter referred to as Law No. 2300-1). Possible consumer requirements are listed in Art. 18 and 29 of Law No. 2300-1. In particular, the consumer may demand that the manufacturer (seller) eliminate defects in the product (work) free of charge. Such elimination is a warranty repair.

The warranty period may be established by:

• manufacturer of goods (performer of work);
• seller of the goods, if such a period is not established by the manufacturer.

This conclusion follows from paragraphs 6 and 7 of Art. 5 of Law No. 2300-1.

Thus, manufacturers and sellers have the right to carry out warranty repairs. At the same time, they can act both on their own and by third-party organizations (for example, specialized service centers).

VAT: we take into account the nuances

Let's consider issues related to the calculation of VAT when providing warranty repair services.

Tax to be accrued….

As a general rule, the sale of services provided without charging additional fees for the repair and maintenance of goods and household appliances during the warranty period of their operation is exempt from VAT. This requirement also applies to the sale of spare parts and parts installed during the repair process. This is provided for in sub-clause 13 clause 2 art. 149 of the Tax Code of the Russian Federation.

In other words, an organization carrying out warranty repairs can take advantage of the VAT benefit only if:

• repair or maintenance of the product is carried out within the warranty period of its operation established by the manufacturer of the product or its seller;
• There is no additional charge for such repairs (maintenance).

Please note that the company does not have the right to refuse benefits for warranty repairs. The fact is that the possibility of refusing VAT exemption is provided only for transactions listed in paragraph 3 of Art. 149 of the Tax Code of the Russian Federation (clause 5 of Article 149 of the Tax Code of the Russian Federation). While the benefit for warranty repairs is established in paragraph 2 of Art. 149 of the Tax Code of the Russian Federation.

In practice, this situation is very common. Direct warranty repairs are performed not by the manufacturer of the product or the seller, but by a specialized service center, where the store to which the buyer returned the product transfers it for repair. The question arises: are warranty repair services provided by such a center exempt from VAT? Analysis of the provisions of sub-clause. 13 clause 2 art. 149 of the Tax Code of the Russian Federation gives an affirmative answer to this question. Indeed, this standard does not contain any restrictions regarding who exactly performs the repairs. The main thing is that it is carried out within the warranty period and without charging additional fees. Thus, having fulfilled all the above requirements, any organization performing warranty repairs (manufacturer, seller, specialized service center) receives a VAT benefit.

An organization that directly provides warranty repair services (service center) may receive compensation for the cost of such repairs from the company that has assumed warranty obligations (manufacturer, seller). That is, reimbursement of the cost of parts, spare parts, wages of workers involved in repairs, etc. According to regulatory authorities, amounts of such compensation are not subject to tax. This position is reflected, in particular, in letters of the Ministry of Finance of Russia dated 02/28/2013 No. 03-07-07/5908, dated 07/29/2010 No. 03-07-07/53, Federal Tax Service of Russia dated 08/06/2012 No. ED-4-3/ [email protected]

However, the additional remuneration that the service center receives from the manufacturer (seller) does not qualify for the benefit. That is, revenue from the sale of service center services in excess of the cost of warranty repairs (parts, spare parts, salaries of workers performing repairs, etc.) is subject to VAT in the generally established manner.

By engaging a specialized contracting organization (service center) to carry out warranty repairs, the company that has assumed warranty obligations (manufacturer, seller) can itself purchase the necessary spare parts and components and transfer them to the contractor on a toll basis. It should be remembered that when transferring materials for processing on a toll basis, the ownership of them does not pass from the toller (owner) to the contractor, therefore this operation is not considered a sale (Article 39 of the Tax Code of the Russian Federation, clause 1 of Article 220 of the Civil Code of the Russian Federation). This means that it is not subject to VAT (Article 146 of the Tax Code of the Russian Federation).

It is worth paying attention to this point. Clause 6 of Art. 5 of Law No. 2300-1 provides that the manufacturer has the right to accept an obligation in relation to defects in the goods discovered after the expiration of the warranty period established by him (additional obligation). In turn, the seller has the right to accept a similar obligation in relation to defects in the goods discovered after the expiration of the warranty period established by the manufacturer (clause 7 of article 5 of Law No. 2300-1). Services for the repair of products performed after the expiration of the warranty period for them (post-warranty repairs) are subject to VAT in accordance with the generally established procedure. Indeed, in this case, one of the conditions for tax exemption will not be met - repair (maintenance) of the product is carried out within the warranty period of its operation.

...and to the deduction

When acquiring ownership of spare parts and components for warranty repairs, as well as taking into account the work (services) of third parties performed as part of warranty repairs, the manufacturer (seller) of goods does not have the right to deduct “input” VAT on them. The fact is that, as mentioned earlier, warranty repair services are exempt from tax (clause 2 of article 171 of the Tax Code of the Russian Federation). And, accordingly, one of the conditions for crediting the “input” tax - assets acquired to carry out transactions subject to VAT - is not met in this case.

It does not matter how the organization carries out warranty repairs: on its own or through specialized service centers. The only thing that matters is that we are talking about transactions not subject to VAT.

Thus, the amount of “input” VAT on spare parts and components used in the process of warranty repairs, as well as on work (services) performed as part of such repairs, the organization must include in the cost of the relevant assets (subclause 1, clause 2 and clause 4 Article 170 of the Tax Code of the Russian Federation).

In practice, the same types of spare parts (components) can be used both for warranty repairs (VAT-free operations) and for post-warranty repairs and other VAT-taxable operations.

Of course, the organization has the right to deduct VAT presented by suppliers of assets used as part of post-warranty repairs and other taxable operations (clause 4 of Article 170 of the Tax Code of the Russian Federation).

Let us recall that an organization carrying out both taxable and non-VAT-taxable transactions has the right to apply a deduction of “input” tax only if there is separate accounting of VAT amounts on purchased goods (works, services) used in certain operations. In the absence of such accounting, the tax is not accepted for offset and is not included in the expenses taken into account when taxing profits (clause 4 of Article 170 of the Tax Code of the Russian Federation).

But, as a rule, when purchasing spare parts (components), it is not yet known how much of them will be spent on warranty repairs, and how much on post-warranty repairs (other operations subject to VAT).

In such a situation, the organization, in our opinion, can act in one of the following ways.

Method 1: having capitalized the relevant materials, deduct the entire amount of “input” VAT. After the spare parts (components) are used for warranty repairs, the organization must restore the “input” VAT on this part of the purchased materials. This must be done in the tax period in which the spare parts (components) were used for warranty repairs. Subclause allows you to do this. 2 p. 3 art. 170 Tax Code of the Russian Federation. This method is suitable for those organizations that carry out warranty repairs quite rarely, and use the received materials mainly within the framework of VAT-taxable transactions.

Method 2: having taken into account spare parts and components, attribute the entire amount of “input” VAT to account 19 “Value added tax on acquired assets” (to a separate sub-account, for example “VAT for distribution”), but to deduction (to the debit of account 68 , subaccount “VAT Calculations”) do not accept this tax. As materials are to be used in VAT or non-VAT transactions, the organization must:

• or include the corresponding tax amounts in the value of assets;
• or set them off from the budget.

In any case, the chosen procedure must be reflected in the accounting policy for tax purposes.

Let us remind you that it is possible not to distribute “input” VAT only in one case: if for the quarter the share of expenses for the acquisition, production and (or) sale of goods (work, services, property rights), the sale of which is exempt from VAT, does not exceed 5% of the total the amount of total expenses for the acquisition, production and (or) sale of goods (work, services, property rights). In this case, the entire amount of “input” VAT presented by suppliers in a given quarter can be deducted. This is stated in paragraph. 9 clause 4 art. 170 Tax Code of the Russian Federation. Thus, if the share of costs for warranty repairs in the total amount of production (sales) costs does not exceed 5% for the quarter, then the organization has the right to deduct the entire amount of “input” VAT on these costs.

Example

CJSC Aerostar produces refrigeration equipment. In August 2013, the organization received from the supplier spare parts and components for the production of refrigerators in the amount of 236,000 rubles, including VAT of 36,000 rubles.

In September 2013, the organization accepted refrigerators for warranty repairs for off-balance sheet accounting at a cost of 300,000 rubles agreed upon by the parties.

During the third quarter of 2013, the received materials were used as follows:

— spare parts and components worth RUB 50,000. (excluding VAT) were spent for warranty repairs. They were transferred on a toll basis to the specialized contracting organization Luch LLC;

— materials worth 150,000 rubles. (excluding VAT) were used in the production of new refrigerators.

According to the accounting policy of Aerostar CJSC, when taking into account materials, some of which can later be used in VAT-free operations (warranty repairs), the organization deducts the entire “input” VAT on them. And then, as warranty repairs are carried out, the tax amount is restored.

The share of warranty repair costs in total production costs in the third quarter of 2013 exceeds 5%.

According to the agreement with Luch LLC, Aerostar CJSC compensates the contractor for warranty repair costs in the amount of 7,000 rubles, VAT is not assessed.

Additional remuneration for Luch LLC is RUB 94,400, including VAT RUB 14,400.

The organization creates a reserve of expenses for warranty repairs in accounting.

The accountant of Aerostar CJSC made the following entries:

Debit 002

— 300,000 rub. — equipment was accepted for registration for warranty repairs;

Debit 10, subaccount “Materials for distribution” Credit 60

— 200,000 rub. — spare parts and components have been capitalized;

Debit 19, subaccount “VAT for distribution” Credit 60

— 36,000 rub. — reflected “input” VAT on materials received;

Debit 68, subaccount “Calculations for VAT” Credit 19, subaccount “VAT for distribution”

— 36,000 rub. — “input” VAT is accepted for deduction;

Debit 10, subaccount “Materials in activities not subject to VAT” Credit 10, subaccount “Materials for distribution”

— 50,000 rub. — materials for warranty repairs were transferred to the contractor;

Debit 19, subaccount “VAT on non-taxable transactions” Credit 68, subaccount “Calculations for VAT”

— 9000 rub. — VAT on spare parts, previously accepted for deduction, has been restored;

Debit 96 Credit 19, subaccount “VAT on non-taxable transactions”

— 9000 rub. — the amount of restored VAT is included in the cost of warranty repairs;

Debit 96 Credit 10, subaccount “Materials in activities not subject to VAT”

— 50,000 rub. — materials written off for warranty repairs;

Debit 96 Credit 60

— 7000 rub. — compensation of the contractor’s expenses is reflected;

Debit 96 Credit 60

— 80,000 rub. — additional remuneration of the contractor is reflected;

Debit 19, subaccount “VAT on non-taxable transactions” Credit 60

— 14,400 rub. — reflected “input” VAT;

Debit 96 Credit 19, subaccount “VAT on non-taxable transactions”

— 14,400 rub. — included in the cost of VAT;

Debit 10, subaccount “Materials in activities subject to VAT” Credit 10 “Materials for distribution”

— 150,000 rub. — reflects the cost of materials to be transferred to production;

Debit 20 Credit 10 “Materials in activities subject to VAT”

— 150,000 rub. — materials were transferred to production;

Credit 002

— 300,000 rub. — equipment written off upon completion of warranty repairs.

Income tax

In tax accounting, an organization bearing warranty obligations can take into account the costs of warranty repairs (warranty service) in one of the following ways (at its own choice):

• by creating a reserve for warranty repairs;
• upon the occurrence of costs.

The chosen method must be fixed in the accounting policy for tax purposes (clause 2 of Article 267 of the Tax Code of the Russian Federation).

Expenses with reserve...

Only those organizations that use the accrual method have the right to create reserves in tax accounting. Organizations using the cash method do not create reserves. The procedure for creating a reserve for warranty repairs and warranty service is established by Art. 267 Tax Code of the Russian Federation. In this case, tax expenses include contributions to the reserve. Such deductions are included in other expenses associated with production and sales (subclause 9, clause 1, article 264 of the Tax Code of the Russian Federation).

An organization can make contributions to the reserve for each sale of goods with warranty obligations (clause 3 of Article 267 of the Tax Code of the Russian Federation). But in practice this is very inconvenient. Therefore, it is better to form a reserve taking into account how the organization reports income tax: monthly or quarterly. The frequency of contributions to the reserve must be fixed in the accounting policy for tax purposes.

The amount of deductions to the reserve is determined by multiplying the proceeds from the sale of goods (works) for which a guarantee was provided for the reporting period (excluding VAT) by the maximum amount of deductions. In turn, this maximum amount (in percentage) is calculated by dividing the amount of expenses for warranty repairs for a certain period by the amount of revenue from the sale of goods (work) with warranty obligations for the same period. As a general rule, the specified period is the three previous years. If the organization sells the goods (work) for which a guarantee is provided for less than three years, then the indicators are taken for the actual period of sale of the guaranteed goods (work).

But if the organization did not previously assume warranty obligations, then the maximum amount of contributions to the reserve is determined as the sum of expected expenses under the plan for fulfilling warranty obligations and estimated repair costs.

Such rules follow from the totality of the provisions of paragraphs 3 and 4 of Art. 267 Tax Code of the Russian Federation.

All actual expenses associated with the fulfillment of warranty obligations are not included in tax costs, but are written off against the created reserve.

If during the tax period the reserve is not fully used (the amount of actual expenses is less than the amount of the reserve), then the balance of the reserve is carried over to the next year. The amount of the reserve created next year must be adjusted (reduced) by the amount of the balance of the reserve for the past year. But if this balance exceeds the amount of the reserve created in the next year, the difference is included in the non-operating income of the past year (clause 5 of Article 267 of the Tax Code of the Russian Federation).

However, an organization may decide to stop selling goods (carry out work) with warranty obligations. And, accordingly, no longer create a reserve for warranty repairs starting in the new year. In this case, the balance of the previously created and unused reserve is included in non-operating income at the end of the guarantee period (clause 6 of Article 267, clause 7 of Article 250 of the Tax Code of the Russian Federation).

If, at the end of the year, there is an overexpenditure of the reserve (the amount of actual expenses turns out to be greater than the amount of the reserve), the difference between the actual expenses and the amount of the created reserve is included in other expenses (clause 5 of Article 267 of the Tax Code of the Russian Federation).

...and without

If the organization does not create a reserve for warranty repairs (warranty service), then actual costs are included in other costs associated with production and sales (subclause 9, clause 1, article 264 of the Tax Code of the Russian Federation).

Using the accrual method, these costs are recognized in tax accounting:

• in the reporting period when they were made, regardless of the fact of payment, if the organization carries out repairs on its own (clause 1 of Article 272 of the Tax Code of the Russian Federation);
• on one of the following dates (depending on the provisions of the accounting policy): either on the date of settlements in accordance with the terms of concluded agreements, or on the date of presentation to the organization of documents serving as the basis for settlements, or on the last day of the reporting (tax) period (subclause 3 Clause 7 of Article 272 of the Tax Code of the Russian Federation), if repairs are carried out with the involvement of service centers.

Under the cash method, actual expenses for warranty repairs (both on our own and with the involvement of service centers) are recognized only after they have been paid (clause 3 of Article 273 of the Tax Code of the Russian Federation).

As already mentioned, when performing warranty repairs with the involvement of a specialized organization, the manufacturer (seller) can compensate it for repair costs. The contracting organization includes the amount of such compensation as non-operating income (Article 250 of the Tax Code of the Russian Federation). However, this does not mean that the company will have to pay income tax on this transaction. After all, expenses for warranty repairs are included in tax expenses (subclause 9, clause 1, article 264 of the Tax Code of the Russian Federation). And if the amount of compensation is equal to the amount of actual costs, the profit from such an operation will be zero.

How much is the cost of warranty repairs not subject to VAT?

If you directly perform warranty repairs and receive compensation for this, then, as a rule, the compensation is already included in the cost of warranty repairs, and you are not subject to VAT on all compensation received. If you receive compensation for warranty repairs, and then use it to cover the costs of the organization directly carrying out the repairs, then you have the right to an exemption only to the extent of reimbursement of the cost of repairs, as well as the cost of spare parts. Amounts of remuneration and other amounts received in excess of this value are subject to VAT taxation (Letter of the Ministry of Finance of Russia dated July 29, 2010 N 03-07-07/53; Letters of the Federal Tax Service of Russia for Moscow dated June 18, 2009 N 16-15/61634, dated 03/17/2009 N 16-15/023683). And although there were cases when it was possible to challenge this in court (Resolution of the Federal Antimonopoly Service of the Moscow Region dated December 10, 2007 N KA-A40/12621-07), such a conclusion is based on the law. After all, the reward in such a situation is not a payment for warranty repairs, but for organizing its implementation.

simplified tax system

If an organization applies a simplified tax system and pays a single tax on income, then do not take into account the costs of warranty repairs when calculating the tax base (clause 1 of Article 346.14 of the Tax Code of the Russian Federation).

If an organization pays a single tax on the difference between income and expenses, the costs of warranty repairs reduce the tax base (subclause 25, clause 1, article 346.16 of the Tax Code of the Russian Federation). Reduce the tax base as expenses for warranty repairs arise and are paid (clause 2 of Article 346.17 of the Tax Code of the Russian Federation). For example, if an organization carries out repairs on its own, then include the cost of spare parts in the calculation as they are replaced and paid to the supplier (subclause 3, clause 1, article 346.16, clause 2, article 346.17, clause 2, article 346.16, clause 1 Article 252 of the Tax Code of the Russian Federation), and employees’ salaries - as they are paid (clause 2 of Article 346.17 of the Tax Code of the Russian Federation).

If an organization purchases spare parts (components) to carry out warranty repairs, then the amount of input VAT must be taken into account as part of expenses (subclause 8, clause 1, article 346.16 of the Tax Code of the Russian Federation). For more information about this, see How to use the simplified tax system to take into account input VAT paid to suppliers.

Documentary evidence of warranty services

To confirm the right to an exemption, the following documents are needed: ( if repair the product yourself - a warranty card (purchase agreement, technical documentation), a customer service book, a work acceptance certificate signed by the owner of the faulty product, etc. That is, if from the documents you have it can be determined that the repairs were carried out precisely during the warranty period, then in the event of claims from the tax authorities, the court will most likely side with you (Resolution of the Federal Antimonopoly Service of the Moscow Region dated 04/21/2011 N KA-A40/2964- 11; Ninth AAS dated February 26, 2008 N 09AP-1135/2008-AK); ( if ) you organize repairs - an agreement stipulating the obligation to carry out warranty repairs, invoices and certificates of work performed from service centers, as well as documentary evidence that the repair is under warranty (for example, copies of warranty cards) (Resolution of the Federal Antimonopoly Service of the North-West District dated 29.05 .2008 in case No. A56-14318/2007; FAS TsO dated 07/01/2010 in case No. A09-9713/2009). In one of the legal disputes, the organization proved that the repair was covered under warranty by setting out an electronic document flow scheme with the dealer.

What documents confirm the provision of warranty services?

In order to confirm the rights to VAT exemption, an organization will need the following documents:

• If the company independently carries out warranty repairs, then the supporting documents are: warranty card (purchase agreement, technical documentation), customer service book, work acceptance certificate signed by the owner of the faulty product, etc. Information that will be required to receive the benefit — confirmation that the repair was carried out during the warranty period.
• If the company independently carries out warranty repairs, then the supporting documents are: an agreement stipulating the obligation to carry out warranty repairs, invoices and certificates of work performed from service centers, as well as documentary evidence that the repair is a warranty repair (for example, copies of warranty cards).

Errors that occur in accounting

The difficulty in accounting for repair operations under warranty by the manufacturer and contractor entails the likelihood of errors.

Question No. 1. In what period is VAT restored on spare parts if the supplier’s tax amounts were previously legally accepted for deduction by the contractor performing warranty repairs?

Restoration of the tax and payment of previously deductible VAT are carried out during the period of transfer of spare parts from the warehouse to the installation for repairs - tax-free operations.

Question No. 2. Are there rules clearly defined by law that define the procedure for maintaining separate accounting in the presence of VAT-taxable and non-VAT-taxable transactions?

The legislation does not establish a procedure for maintaining separate accounting of income and expenses for calculating VAT. The principles of separate accounting, allowing to calculate VAT and take into account incoming amounts as deductions, must be developed by the enterprise and enshrined in the accounting policy.

Accounting for warranty repairs from the seller

The obligation of the seller (manufacturer) of equipment to carry out warranty repairs is established by law. An enterprise that provides a guarantee and pays the contractor for repair costs must create reserves in accounting. The reserve is taken into account until the warranty expires.

An example of accounting for transactions at a manufacturer

Selmash LLC produces equipment with a warranty period. The amount of the reserve for 2021 amounted to 780,000 rubles. The service center's expenses for repairs under warranty amounted to 920,000 rubles, of which 320,000 rubles are compensation for work. The following entries are made in the manufacturer's accounting:

1. The amount of the accrued reserve is reflected: Dt 20 Kt 96 in the amount of 780,000 rubles;
2. Expenses are taken into account in the amount of the cost of installed spare parts: Dt 96 Kt 10 in the amount of 320,000 rubles;
3. The costs of the service center are taken into account: Dt 96 Kt 76 in the amount of 600,000 rubles;
4. The amount of costs exceeding the reserve amount is reflected: Dt 20 Kt 76 in the amount of 140,000 rubles;

In accounting, the company applies the requirements of PBU 8/2010. A reserve for repairs is created for all types of equipment for which a manufacturer has provided a warranty.

Accounting for spare parts during warranty repairs

Service centers performing warranty repairs use spare parts from various sources. Depending on the delivery conditions, the rules for accounting for spare parts are determined. Enterprises that use only purchased spare parts for various types of repairs often determine the cost ratio by the proportion of the cost of repairs. The share of warranty repair activities in the total volume allows us to determine the amounts not taken into account in the VAT deduction.

Let's consider the execution of transactions when spare parts come from the manufacturer and are purchased by the dealer independently. The procedure for conducting accounting operations is fixed in the accounting policy of the enterprise.

Spare parts must be accounted for in a separate sub-account opened to the account or accounted for off the balance sheet. Accounting for the balance of spare parts is possible as a transfer on a toll basis, while the recipient does not have ownership rights. Parts must not be sold at retail or used for routine repairs.

VAT on accounting for defective spare parts received as a result of repairs

After replacing spare parts, failed defective parts must be disposed of or restored to their consumer qualities. The service center can sort parts based on an expert assessment, repair them, and then sell them. Service companies:

• They enter into an agreement with the manufacturer for the right to dispose of failed spare parts after they are replaced.
• They register spare parts as received free of charge, included in accounting as other income, and in tax accounting as non-operating income.
• The cost of the spare part for registration is determined based on the examination performed.

When selling spare parts, VAT is charged in accordance with the general procedure. Input VAT is not deductible due to its absence, with the exception of tax received from suppliers of materials used in repairs.

Maintaining separate accounting for taxable and non-VAT-taxable transactions

When a company carries out several types of repairs using OSNO, it is necessary to select spare parts, the installation of which does not require payment of VAT during warranty repairs. Tax deduction amounts accrued by the supplier on the sale of spare parts are restored with simultaneous payment to the budget.

Enterprises providing services subject to and exempt from VAT are required to keep separate records of income, expenses and liabilities. To determine the need for separation of indicators, the 5 percent rule is taken into account:

• If the share of expenses for non-taxable transactions for the tax period did not exceed 5 percent of the enterprise’s total expenses, separate accounting can be avoided (clause 4 of Article 170 of the Tax Code of the Russian Federation).
• Accounting for expenses to determine the five percent threshold is carried out within the quarter - the tax period for calculating VAT.
• When incurring warranty repair costs within 5%, the company can deduct the entire amount of input VAT.

A number of manufacturers fully provide dealers with spare parts and materials. Separate accounting of parts and materials is not required when the manufacturer specifically supplies spare parts used for warranty repairs. VAT on other costs for taxable and non-taxable transactions is carried out with separate accounting.