VAT when writing off accounts payable: issues and solutions

Accounts payable arises when the company fails to fulfill its obligations under the contract. In case of incoming purchases, accounts payable are formed when the supplier does not pay for the supply of goods or the provision of work / services. When selling, accounts payable is formed upon receipt of an advance from the buyer, but non-performance of the shipment of goods (works, services).

Upon expiration of the limitation period, which, according to Art. 196 of the Civil Code of the Russian Federation is three years, accounts payable are recognized as overdue and are subject to writing off to income.

Debt cancellation also occurs on other grounds, for example, in connection with the liquidation of a company, exclusion from the Unified State Register of Legal Entities by the decision of the tax authority in connection with its recognition as invalid.

Debt write-off occurs in the reporting period in which the statute of limitations has expired (the last date of the reporting period). If there is an unwritten overdue debt, it is possible that there will be claims from the Federal Tax Service Inspectorate and prosecution due to the understatement of the taxable base. We recommend that you conduct an inventory of accounts payable on a quarterly basis and write off overdue debts in a timely manner.

The documentary basis for writing off overdue debts is an inventory act, an order of the director and an accounting statement.

Let us consider the procedure for accounting for VAT when writing off accounts payable in two situations, both for the seller and for the buyer.

Upon receipt of an advance payment from the buyer, the obligation arises to calculate VAT on the advance (clause 1 of article 168 and clause 4 of article 164 of the Tax Code of the Russian Federation) and presentation of the amount of VAT from the advance to the buyer. In this case, an advance invoice is drawn up and registered in the sales ledger.

Advance VAT is deducted:

• from the date of shipment of goods (performance of work, rendering of services) (clause 8 of article 171, clause 6 of article 172 of the Tax Code of the Russian Federation);
• in the event of a change in the conditions or termination of the contract and return of advance payments (clause 5 of article 171 of the Tax Code of the Russian Federation).

The tax code does not provide for the provision of a VAT deduction from the advance, if the shipment did not take place and the advance payments were not returned.

A similar conclusion is stated in the letters of the Ministry of Finance of Russia dated 07.12.2012 No. 03-03-06 / 1/635, dated 10.02.2010 No. 03-03-06 / 1/58, dated 25.02.2009 No. 03-07-10 / 04, as well as in the resolution of the Ninth AAC dated 01.12.2011 No. 09AP-30187/11.

When writing off accounts payable in connection with the receipt of an advance, non-operating income arises when calculating income tax. According to paragraphs. 2 p. 1 of Art. 248 of the Tax Code of the Russian Federation, the amount of taxes presented to the buyer of goods (works, services, property rights) is excluded from the amount of income. Thus, the amount of debt without VAT amounts from the advance is written off to the structure of non-operating income.

The Tax Code does not provide for the inclusion of VAT on the advance in the composition of non-operating expenses when writing off accounts payable (see the letter of the Ministry of Finance of Russia dated 07.12.2012 No. 03-03-06 / 1/635, dated 10.02.2010 No. 03-03 / 06/1 / 58).

Consider an example of reflecting correspondence in accounting and tax accounting:

• D 51 "Settlement account" К 62 "Settlements with customers" - 1 180 rubles, including VAT 180 rubles. - received an advance payment from the buyer (BU and NU);
• D 76.АВ "VAT from advance" К68 "VAT" - 180 rubles. - VAT charged on the advance (BU and OU);
• D 62 “Settlements with customers” K 91 “Other income” - 1,180 rubles. - the amount of accounts payable has been written off for accounting purposes;
• D 62 "Settlement with customers" K 91 "Non-operating income" - 1,000 rubles. - written off the amount of accounts payable minus VAT for tax accounting purposes;
• D 91 "Other expenses" К 76.АВ "VAT from the advance" - VAT was written off from the advance at the expense of expenses for accounting purposes.

Brief conclusion:

- VAT on the advance calculated at the time of receipt of funds is not deductible;

- VAT from the advance is not subject to write-off at the expense of non-operating expenses for the purpose of calculating income tax;

- the amount of written off accounts payable is subject to inclusion in non-operating income minus VAT.

VAT charged on the purchase of goods (works, services) is deducted if the following conditions are met:

• goods (works, services) are taken into account, which is confirmed by the relevant documents (clause 1 of article 172 of the Tax Code of the Russian Federation);
• goods (works, services) are supposed to be used in activities subject to VAT or for resale (clause 2 of article 171 of the Tax Code of the Russian Federation);
• an invoice was received (clause 2 of article 169, clause 1 of article 172 of the Tax Code of the Russian Federation).

Thus, the input VAT, subject to the above conditions, is accepted for deduction without the fact of payment.

It is a right, not an obligation, to deduct VAT on incoming purchases. This means, perhaps, the occurrence of two situations on accounts payable to be written off: first - VAT is accepted for deduction, second - VAT is not accepted for deduction.

If VAT is accepted for deduction, the question arises about the need to restore VAT when writing off accounts payable.

Clause 3 of Art. 170 of the Tax Code of the Russian Federation contains a closed list of cases when it is necessary to restore VAT accepted for deduction (see resolutions of the Federal Antimonopoly Service of the Moscow District of 11.05.2011 No. F05-3483 / 2011, FAS of the Ural District of 29.12.2010 No. F09-10952 / 10-C3, FAS of the Central District of March 10, 2010 No. A35-8336 / 08-C8, etc.). This clause does not provide for the recovery of VAT when writing off accounts payable to the supplier, which was previously accepted for deduction.

Thus, there is no need to restore the previously accepted VAT.

If VAT was not accepted for deduction, then this amount can be taken into account in expenses for the purposes of income tax on the basis of paragraphs. 14 p. 1 of Art. 265 of the Tax Code of the Russian Federation, which indicates that the costs in the form of tax amounts to the supplied inventories, works, services when writing off accounts payable on the basis of paragraph 18 of Art. 250 of the Tax Code of the Russian Federation refer to non-operating expenses.

Consequently, the written off accounts payable is included in income together with VAT, which can be accounted for in the same reporting period in expenses, if it was not previously accepted for deduction.

Consider an example of reflecting correspondence in accounting and tax accounting:

Situation one: input VAT is accepted for deduction:

• D 10 "Materials", D 20,26,23,25, 44, etc. "Costs" K 60 "Suppliers" - 1,000 rubles. - purchased materials, works, services (BU and NU);
• D 19 "Incoming VAT" К 60 "Suppliers" - 180 rubles. - reflected the input VAT (BU and OU);
• D 68 "VAT" К 19 "Incoming VAT" - 180 rubles. - 180 rubles. - input VAT is accepted for deduction (BU and OU);
• D 60 "Suppliers" К 91 "Other income / non-operating income" - 1,180 rubles. - the amount of accounts payable was written off, taking into account input VAT.

There is no need to recover the input VAT!

Situation two: input VAT was not accepted for deduction:

• D 10 "Materials", D 20,26,23,25, 44, etc. "Costs" K 60 "Suppliers" - 1,000 rubles. - purchased materials, works, services (BU and NU);
• D 19 "Incoming VAT" К 60 "Suppliers" - 180 rubles. - reflected the input VAT (BU and OU);
• D 60 "Suppliers" K 91 "Other income / non-operating income" - 1 180 rubles. - the amount of accounts payable was written off, taking into account the input VAT (BU and OU);
• D 91 "Other expenses / non-operating expenses" К 19 "Incoming VAT" - 180 rubles. - written off the amount of input VAT, not accepted for deduction, to be included in expenses for income tax purposes.

Brief conclusion:

- input VAT accepted for deduction is not subject to restoration to the budget;

- the amount of accounts payable to be written off is subject to writing off as non-operating income, including VAT;

- if the input VAT was not accepted for deduction, the amount of the input VAT must be included in the non-operating expenses for calculating income tax.