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july 15, 2021
VAT for Beginners, or How to Tell About VAT in 8 Minutes
SberSolutions blog on
By Tatiana Tereshko
Head of SberSolutions Financial Outsourcing Methodology Department
It's going to be difficult, but we'll try.

Companies working with VAT are always in demand in the market. Therefore, if you want to go to a new level in business, sooner or later you will have to move to the traditional taxation system. We have prepared an overview of practice and theory that will be needed for newcomers in the scope of VAT. We will tell you about the features of bookkeeping and tax accounting, highlight typical mistakes, prepare for the submission of reports and the formation of electronic

A separate 21 chapter of the Tax Code of the Russian Federation is devoted to Value-Added Tax, and the essence of the tax is revealed most clearly by the formula for its calculation.
Payable VAT = Output VAT – Input VAT + Recovered VAT
It turns out that a taxpayer shall pay to the budget only the tax from the difference between incomes and expenses. This is because VAT, included in the cost of expenses, has already been paid by its suppliers.

The tax base for calculating the output VAT is not only incomes from sold goods, works or services, but also the cost of property donated and the object of construction and installation works. "Import" VAT is levied on goods imported into the territory of the Russian Federation.

In bookkeeping accounting, an accountant will need the following entries to record the output

  • Debit 62 Credit 90 – it shows revenue from the sale of goods, works, services or property, whereas the confirming documents will be a waybill (act) or an universal transfer document for a client-legal entity and a receipt for a retail buyer;
  • Debit 90 Credit 68 – VAT was accrued. At this moment the client is issued with a VAT- invoice, a record in the Sales Ledger is made, and the retail buyer can see the line "including VAT" in the receipt.
Input VAT is indicated in VAT-invoices, issued to you by suppliers. However, not all VAT- invoices are suitable for VAT recovery; they are summed up only on those expenses, which were incurred for the production of sold goods and other need of an organisation, aimed on profit obtainment.

  • Debit 10 Credit 60 – suppliers' materials for the production of goods were entered into books according to a waybill;
  • Debit 19 Credit 60 – VAT was allocated for deduction according to a VAT-invoice, received from the supplier;
  • Debit 68 Credit 19 – the amount, claimed for deduction, is recorded in the Purchase Ledger.
Recovered VAT is a part of input VAT, which shall be returned by companies to the budget in certain situations.
  • Debit 19 Credit 68 – VAT, previously accepted for deduction, was recovered;
  • Debit 91.2 Credit 19 – the recovered amount of VAT was written off to other expenses.
At the beginning of activity or for some reasons already in the process of work, any taxpayer applying the general taxation system can ask for exemption from VAT in accordance with p.1 art.145 the Tax Code of the Russian Federation. For this, revenue, excluding VAT, for the last 3 months should not exceed 2 million roubles, and the products should not include excise goods.
We would recommend you to immediately establish VAT accounting from the first days of work, in order not to worry about the results of cameral and field tax audits. At any time, you can audit the transactions involved in the calculation of VAT, and put accounting on a "plane track".
From the formula for calculating VAT, it becomes clear that there are three ways to reduce the tax payable.
  1. By reducing incomes. A developing business cannot consider such a method as an option.
  2. Through the use of preferential tax rates. But their effect does not apply to all goods and not to all operations. The 0% rate is suitable for exported goods. 10% is levied on the sale of food products and goods, products for children, periodicals, books, medical products.
  3. By increasing the input VAT.

If payroll expenses constitute a large share in the cost of finished products, there're critically few input VAT-invoices. Due to this reason the firms on the sale of input "paper VAT" continue to exist.

«Paper VAT» — is a tax evasion scheme, when a company in a chain of relationship uses fictitious deals with fly-by-night companies. Although it didn't actually receive any goods or services, the fictitious transaction is recorded in the documents by increasing the input VAT and, therefore, by decreasing the total amount of payable tax.

The tax authorities are closely monitoring this and identify the so-called breaks in VAT chains.
To simplify the tracking of transactions, VAT reporting is submitted only in electronic format, and the FTS uses the ASK VAT-2 software package, which continues to be improved every year.
Do not despair if you think that in your situation there are no legal ways to optimize VAT, SberSolutions know how to save you - we will analyze the activity, draw up an action plan, give recommendations and help to implement them at work.
Specific features of reports
It is necessary to submit reports to the tax authorities for VAT payable and refundable on a quarterly basis by sending an electronic tax return that includes Purchase and Sales Ledgers. Regardless of whether there were VAT-taxable transactions in the reporting period, you will still have to submit a report. Be careful, the tax return form will be updated from 3 Q 2021

Filling out a tax return should be treated very responsibly. Since July 2021, there have been many reasons why the sent document will be considered as non-submitted, if:

  • the electronic signature of an unauthorized, disqualified or deceased person was used;
  • there was used a signature of a person, on whom exists a mark on inaccuracy of data, or according to the data from the USRLE it ceased to exist;
  • a violation of the control ratios is found.
There're 12 sections inside the tax return, excluding the title page. Each has its own purpose, and there's no need to fill the lists, not relating to your activity. In general, all taxpayers shall fill, except for the title page and the 1st page, the section 3 with calculation of the tax base and payable tax, in the section 8 Purchase Ledger on the received VAT-invoices, and in the section 9 Sales Ledger on VAT-invoices, issued by your company.

According to the results of a cameral audit the tax inspector may have questions, to which you shall obligatory provide explanations in the electronic format.
In order to be confident in transactions and contractors, use SberSolutions legal services subscription.
Electronic VAT-invoices
The quality of a tax return depends on the reliability of primary accounting documents: a VAT- invoice, a waybill, a universal transfer document, agreements, acts of performed works, invoices and etc.

Would you like to recover VAT from the budget? Learn how to fill out VAT-invoices and check them after suppliers. In the absence of at least one detail, it will be possible to achieve the recognition of deduction only in the court proceeding.

Meanwhile, paper originals are gradually giving way to the electronic version of a VAT- invoice. It is an independent document with legal force. The submission and receipt of documents is performed through telecommunication channels in the scope of electronic documents flow between the seller and the buyer. Such an exchange is not only environmentally friendly, but also convenient for remote accounting work.

Issuing and receiving electronic VAT-invoices has been made publicly available since May 2012 SberSolutions help its clients to implement electronic documents flow and speed up the work of internal services of an organisation and communication with counterparties.

There is no need to collect signatures and wait for a courier to send documents to a client. It is enough to fill out the approved form, sign a VAT -invoice with a qualified electronic signature of an authorized person and send it through the electronic documents flow operator. In response, you will receive an e-signed notice of receipt from the buyer. Correctional and corrective documents are formed in a similar way.
Typical errors while working with VAT
When applying an indirect tax on incomes, two types of errors arise: those related to filling out tax returns and to incorrect accounting of transactions and deals.

Let's review which hidden dangers are encountered in the preparation of quarterly tax returns.

  1. No online accounting department will check the correctness of recording of the transaction type code.
  2. In the Purchase Ledger the amount of received VAT-invoices shall be recorded in full. Even if the taxpayer claims only a part of VAT deduction.
  3. Dates and VAT-invoices numbers shall be the same for all parties of the transaction.
  4. In sections 8 and 9, the amounts are recorded with kopecks, and in section 3 the indicators are rounded according to the rules of mathematics to the nearest rouble. Thus, there may be discrepancies, but only within 1 rouble.
  5. Errors within goods return and correction of VAT-invoices registers.
The second row of errors arises when receiving and processing primary accounting documents.

The tax authorities are not always satisfied with the quality of the claimed deductions. They see relationships with fly-by-night firms everywhere, or expenses that are not aimed at activities subject to VAT.

Forgetfulness is very common in the accounting, when restoring advance VAT, which was previously accepted for deduction.

If errors are found in filling out or recognizing the transaction as fictitious, the tax authorities will refuse to deduct VAT, and you will have to pay it to the budget.

A separate block of errors is caused by non-compliance with the deadlines. You need to monitor not only the timeliness of the submission of tax returns and the date of payment, but also the expiration date of VAT deductions. It is possible to reduce VAT payable by deductions specified in the tax return no later than 3 years from the date of acceptance of goods for accounting.

Choosing the work with VAT, a businessman has to work at once on two fronts:
  • monitor the quality of internal documents;
  • exercise due diligence in the selection of suppliers.
    SberSolutions won't leave entrepreneurs alone to deal with the legislation. We have extensive experience of working not only with Russian, but also with foreign companies. SberSolutions experts will conduct an audit, provide tax and accounting services, as well as prepare and submit all required reports.

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