Recovering advance VAT is a process that arises in a situation where one of the parties to a transaction has to return the amount of previously refunded tax. That is, the restoration of VAT is an increase in tax transfer funds for payment in the reporting period. The restoration criteria are regulated by clause 3 of Art. 170 of the Tax Code of the Russian Federation, which contains a complete list of situations when such an operation should be initiated. Let's talk about cases when recovering VAT from an advance payment becomes necessary and how to take it into account.
Recovered VAT - what is it?
The question of VAT restoration arises in relation to tax previously taken into account in deductions. This needs to be done in several situations (clause 3 of Article 170 of the Tax Code of the Russian Federation), the most common of which are:
- changes in tax conditions;
- change in the situation with the advance payment.
The main condition for the restoration of VAT: first, the tax is accepted for deduction, and then, due to some circumstances, it turns out that all of it (or part of it) must be paid to the budget. In this case, the required amount of tax is restored (accrued for payment) and reflected in section 3 of the declaration either in 1 line (080) or in two lines (090 or 100 and in the final 080). The recovery of VAT on advances issued is recorded in two of its lines: 080 and 090.
For information on tax recovery situations not related to advances issued, read the material “The nuances of VAT recovery and what entries are used?” .
Filling out the declaration
The VAT return is a mandatory reporting form that is submitted by all organizations and individual entrepreneurs working for OSNO.
In the VAT return, the VAT deduction due to the returned advance payment is indicated in line 120, section 3 (according to clause 38.8 of the Procedure). This rule is taken into account if, for example, the advance was received in the first quarter and returned in the second.
The VAT return is submitted electronically before the 25th day of the month following the reporting quarter under clause 5 of Art. 174 of the Tax Code.
VAT is paid to the budget monthly in three equal installments for 3 months after the end of the reporting quarter until the 25th (according to paragraph 1 of Article 174 of the Tax Code). If the resulting amount of tax payable to the budget is not divided into three parts, then a larger share is paid in the last month.
Thus, when the advance payment is returned to the buyer, the amount of VAT that was accrued on a partial advance payment and transferred to the budget can be deducted. To justify receiving a deduction, you need to register the invoice issued for the advance payment in the purchase book with o. To do this, in column 7 of the purchase book, which every VAT payer is required to maintain, the details of the document confirming the return of the advance payment are indicated. The operation code is written as “22”. The VAT return displays the VAT amount on line 120 of the third section.
Is it necessary to restore tax on advances received?
When receiving an advance payment, in most cases the seller is obliged to calculate the tax on it for payment to the budget (clause 1 of Article 154 of the Tax Code of the Russian Federation), and later, when making a shipment, against this advance payment, take all or part of the amount of the tax paid from the advance tax as deductions (clause 8 Article 171 and Clause 6 Article 172 of the Tax Code of the Russian Federation). In other situations (when the advance is returned to the buyer or the overdue debt on it is written off), VAT restoration will also not be required. In the 1st case, it can be taken as a deduction on the date of return (clause 5 of Article 171 of the Tax Code of the Russian Federation), and in the 2nd case it must be written off as expenses not taken into account in the calculation of income tax.
Thus, for advances received, the picture always turns out to be the opposite of the main condition for recovery: first, the tax is calculated for payment, and then taken as a deduction or written off. That is why there will never be a situation of VAT restoration on these payments.
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Transaction type code in the purchase book
The content of the article
The purchase book is maintained quarterly and filled out by the taxpayer for each tax period. When filling it out, it is necessary to take into account Government Decree No. 1137 of 2011.
When returning an advance to a buyer, the seller must record this transaction in the purchase book and make all necessary adjustments in accounting and management reporting related to the return. This fact is reflected in column 7 of the purchase book. Here are the details of the document that confirms the return of this prepayment.
The seller is obliged to register the invoice in the purchase book no later than one year after the buyer refuses to supply. This is indicated in paragraph. 2 clause 22 of Appendix 4 to Government Decree No. 1137.
Additionally, the taxpayer should confirm the right to receive a deduction using documents that indicate termination of the contract (for example, an additional agreement or unilateral refusal to fulfill the contract) and the return of money to the buyer.
Conditions for deducting tax on advances issued
When calculating the tax on the advance payment received, the seller issues an invoice for it and sends 1 copy of it to the buyer. Based on this document, the buyer has the right to take into account the amount of tax allocated in it as deductions (clause 12 of article 171 of the Tax Code of the Russian Federation). Although he may not do this, since deductions are not an obligation, but are made voluntarily (clause 1 of Article 171 of the Tax Code of the Russian Federation). It is better to consolidate the taxpayer’s position regarding deductions for advances issued (whether they will be applied or not) in some document (for example, in the VAT accounting policy).
However, these 2 circumstances (payment and invoice) are not enough for the buyer to deduct it. Additional conditions for carrying out such an operation follow from other provisions of the Tax Code of the Russian Federation:
- a condition on the possibility of transferring an advance payment must be included in the supply agreement (clause 9 of Article 172 of the Tax Code of the Russian Federation);
- The invoice for the advance payment must be dated within the 5-day period allotted for issuing such documents (clause 3 of Article 168 of the Tax Code of the Russian Federation), and have all the required details for it (clause 5.1 of Article 169 of the Tax Code of the Russian Federation).
Acceptance of deductions from the buyer will be reflected in the following posting (for each individual document):
Dt 68/2 Kt 76/VA,
Where:
68/2 - subaccount for accounting for settlements with the budget for VAT on account 68;
76/VA - subaccount for accounting for VAT on advances issued in account 76.
Procedure for recovering VAT from advances
VAT recovery on an advance payment is made in the following situations (subclause 3, clause 3, article 170 of the Tax Code of the Russian Federation):
- the delivery has been completed against which an advance payment has been made;
- the supply contract is terminated or its terms are changed and in connection with this the advance payment is returned to the buyer.
See also “Prepayment under a terminated contract was transferred to a new one - the buyer recovers the advance VAT .
The Russian Ministry of Finance adds one more to the list of these situations - the write-off of overdue debt on an advance payment that was not returned by the supplier under an unfulfilled contract (letter of the Russian Ministry of Finance dated August 17, 2015 No. 03-07-11/47347). The need to restore the tax in this letter is explained by the fact that the advance transfer transaction, for which the tax was taken as a deduction, ultimately turned out to be unrelated to VAT. That is, the requirements of paragraphs. 1 and 2 tbsp. 171 of the Tax Code of the Russian Federation on the possibility of applying deductions only to transactions subject to this tax. However, in the list of reasons for the restoration of VAT contained in paragraph 3 of Art. 170 of the Tax Code of the Russian Federation, there is no such basis. So, if you wish, you can try to argue with the position of the Russian Ministry of Finance.
For whichever of the listed reasons the restoration is made, it is carried out in the tax period when the corresponding event occurs (subclause 3, clause 3, article 170 of the Tax Code of the Russian Federation). At the same time, the sales book reflects the data of the invoice for the advance payment for which the restoration is made, and the tax amounts and tax base related to it. The deduction on the delivery invoice is carried out in the usual manner, but this document must reflect the number of the payment document for the transfer of the advance on account of the supply.
Depending on the ratio of the advance amount and the cost of the related supply, the following situations may arise:
- The advance and delivery amounts are the same. Then the same amount that was taken as deductions is subject to restoration. The same will be true for cases of return of the advance and write-off of debt on it.
- The amount of the advance is less than the cost of delivery, and the contract does not contain additional conditions on the offset of the advance against its payment. The entire amount of the deduction made on the advance payment is restored.
- The amount of the advance payment is greater than the cost of delivery, and the contract does not contain additional conditions regarding the offset of the advance payment against its payment. VAT restoration is done for the amount of tax that is reflected in the supply document (letter of the Ministry of Finance of Russia dated July 1, 2010 No. 03-07-11/279).
- The amount of the advance payment may or may not coincide with the amount of delivery, but the contract contains a provision for payment of only part of the delivery from the advance payment issued. Then the tax is restored only in that part that corresponds to the amount of offset of the advance payment for the delivery (letter of the Ministry of Finance of Russia dated November 28, 2014 No. 03-07-11/60891). To avoid any discrepancies, it is recommended that the supplier indicate in the shipping documents exactly what amount of the advance has been credited towards this specific delivery.
For information on a document that combines a shipping document and an invoice, read the article “Universal transfer documents.”
Refund transactions
- A report on identified discrepancies, drawn up in the TORG-2 form (for imported goods - TORG-3 form)
. This document is drawn up if, upon shipment of the goods and after payment, the customer identifies deviations in the quality or quantity of products, as well as if inconsistencies are detected in the shipping documents. - Invoice (form TORG-12)
, which is used to issue a return if a defective product is detected, or the product does not comply with the approved state or contractual standard.
For organizations and individual entrepreneurs working on the simplified tax system, the return of an advance from a supplier does not entail tax consequences. Despite the use of the cash method, when transferring the prepayment, no expenses arise, since materials, goods, services have not yet been received, etc. Therefore, the returned advance is not recorded in KUDiR, but should be recorded in the accounting (in the bank statement) a note clarifying the meaning of the transfer of money received. Each gift voucher and discount coupon has a unique number.
Gift vouchers and vouchers cannot be redeemed for cash or give rise to cash claims. Products purchased with a gift certificate or coupon are subject to a general exchange or refund of the coupon if the product is returned. They can be used during their stated validity period. Gift vouchers and coupons are not associated with other coupons or promotions. This item does not apply to affiliate products.
An advance or prepayment is a payment that is received by the supplier (seller) before the date of actual shipment of products or before the provision of services (clause 1 of Article 487 of the Civil Code). If the supplier (performer) has not fulfilled its obligations within the period established by the contract, then it must return the funds received from the buyer (customer). How to reflect such a refund of advance payment from the supplier in the buyer’s accounting and tax records?
Accounting entries for VAT recovery from advance payment
The VAT recovery posting will always be the same for each individual invoice:
Dt 76/VA Kt 68/2,
Where:
68/2 - subaccount for accounting for settlements with the budget for VAT on account 68;
76/VA - subaccount for accounting for VAT on advances issued in account 76.
The results of VAT recovery for specific advance invoices will vary depending on the ratio of the amount of the advance and the cost of supply associated with it:
- for the first two cases (the amounts of the advance and delivery are the same or the amount of the advance is less than the cost of delivery), with this posting the amount of tax on the advance, listed in subaccount 76/AB, will be closed completely;
- in the 3rd and 4th cases (the amount of the advance is greater than the cost of delivery or the contract contains a condition on partial offset of the advance towards payment for the supply), in subaccount 76/AB after the restoration of VAT there will be a balance of unrecovered tax.
Pros and cons of deducting VAT on advances issued
The positive aspects of the use of such deductions occur with significant amounts of advances issued and manifest themselves as follows:
- A large deduction amount can not only significantly reduce the total of the declaration drawn up for the period of its application, but also make it result in the amount of tax reimbursement from the budget.
- A deduction for an advance on account of several deliveries for it is made one-time, ahead of time and in a larger amount than deductions would be made for each of the deliveries separately. At the same time, VAT restoration occurs in parts and can be extended over several tax periods.
On the plus side, there are also conditions for payment of only part of the delivery using the transferred advance payment. In this case, deductions for the advance payment issued and for the delivery document will occur earlier and will be taken in full, and the VAT restoration will be made only in part of these amounts and will be extended over time.
The following points will be negative:
- increasing the volume of accounting operations and document flow;
- there is no point in using deductions for advances if we are talking about small amounts and the period for transferring the advance often coincides with the period of shipment for it.
Read about the rules for issuing invoices for advance payments here.
Registration of SF supplier
To register an incoming invoice from a supplier, you must indicate its number and date at the bottom of the Receipt document form (act, invoice) and click the Register .
The Invoice document received is automatically filled in with the data from the Receipt document (act, invoice) .
Find out more about accepting VAT for deduction when purchasing OS.
Results
The question of recovering VAT on advances paid to suppliers arises if the taxpayer takes tax deductions on invoices issued by the supplier for prepayment. The provision for advance payment must be included in the supply agreement. VAT on advances issued is recorded in a separate subaccount of account 76.
Sources: Tax Code of the Russian Federation
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