Tax legislation gives individual entrepreneurs and certain types of organizations the right to exemption from VAT. So, article 145 of the Tax Code provides for tax exemption subject to the following conditions:
- firstly, the revenue over the past 3 months should not be more than two million rubles, excluding VAT;
- secondly, only those organizations and entrepreneurs that sell non-excisable goods, i.e. do not sell fuels and lubricants, tobacco and alcohol products.
However, the right to exemption can be used by IPs that sell excisable goods, but keep separate records on transactions for the sale of excisable and excisable goods.
Taxpayers should be aware that upon exemption the state will still have to return the amounts of this tax that were previously deductible for services, goods or work purchased to carry out operations that are taxed but not used for these operations.
Exemption from VAT IP: procedure for obtaining the right
To exercise their right to VAT exemptions, entrepreneurs must first notify their tax, located at the place of their registration. The notification form is established by the Ministry of Finance. Documents giving the right to release must be attached to this document. It is necessary to provide for organizations an extract from the balance sheet, from the sales book, accounting of expenses incurred and income received and business transactions for entrepreneurs, a copy of the journal of issued and received invoices.
Entrepreneurs who switched to a common system must provide an extract from the book of expenses and income as supporting documents for the right to exempt from VAT.
The above listed documents should be submitted no later than the 20th day of the month from which the right to release appeared.
VAT exemption: termination
The taxpayer may voluntarily refuse or forcibly lose the right to exemption from VAT.
In making this decision, the entrepreneur should consider that this regime will have to be used for at least one year. And after this period, you can provide a tax notice on the desire to refuse exemption from tax or on the decision to extend this mode of operation for another year. Documents indicating that the revenue for the last quarter did not exceed 2 million rubles should be attached to the notification.
This notice, together with supporting documents, should be provided no later than the 20th day of the month that follows the calendar 12th month of the law. If this is not done, then the taxpayer will be fined.
The entrepreneur may lose the right to exemption from VAT. This can happen if any conditions for its receipt are violated (revenue of more than 2 million or trade in excisable goods). The loss of exemption rights will pose a number of problems and issues for the taxpayer that will be related to the restoration of taxes not paid to the budget, the application of fines and the payment of interest.
IP VAT Exemption: Benefits
An individual entrepreneur, exercising his right to exemption from VAT, acquires the opportunity to receive additional profit. For example, with a product price before the exemption of 236 rubles, a taxpayer can receive the same money, but without taking into account value added tax.
True, there are some features. For some IPs that also work without VAT, it may become unprofitable to cooperate with other companies, as they will lose the opportunity to accept VAT for deduction when purchasing products.