Many newly registered entrepreneurs have a question: “Can entrepreneurs work with VAT?”. There are many nuances of applying this tax, including by individual entrepreneurs. If you try to answer the question briefly, you should definitely say: "Yes! They can." But in what cases - it is worth considering in more detail.
IP on OSNO
According to the legislation of the IP, VAT is levied, as well as organizations, in the case when they use the basic tax liability.
Individual entrepreneurs are tax payers in respect of their actions performed with the aim of making a profit, that is, as a result of commercial activity. As well as enterprises, individual entrepreneurs, the VAT payer must register with the tax authority and at this moment has the right to choose the simplified tax system as the tax system by submitting an appropriate application. If such an application is not filed by an individual entrepreneur on time, he automatically becomes obliged to pay tax and remains at OSS.
IP on UTII
An entrepreneur can also avoid payments if he becomes a payer of UTII and Unified Social Tax, but only to the extent of the employment that is the basis for applying UTII. If an individual entrepreneur of the Russian Federation conducts several types of activities, he will have to conduct separate accounting for each and may be for some VAT payers.
An exception
Moreover, even those individual entrepreneurs who pay UTII in a situation of importing products and product groups to the territory of the Russian Federation from abroad are obliged to pay tax on such goods.
USN for IP
If an individual entrepreneur is on a simplified tax system, but for 3 calendar months his profit exceeds 2 million rubles, he automatically loses the opportunity to use a simplified tax system and becomes a payer of value added tax.
Thus, an individual entrepreneur will be able to use the exemption from the need to pay, having insignificant turns. As soon as its revenue exceeds the statutory limit of two million, the individual entrepreneur is automatically transferred to OSNO and becomes a VAT payer.
Such rules are provided by the simplified tax system for individual entrepreneurs and organizations. He will be able to return the possibility of applying the tax exemption only in the next calendar year if he sends a statement to the inspection and encloses papers that can confirm that he has the opportunity to use the standard tax protection system. These documents are:
- sales book;
- copy of the book of accounting for income and expenses;
- copy of the invoice journal.
If according to these documents the revenue for any three cumulative months of the reporting period did not exceed two million rubles, the question of whether the entrepreneurs can work with VAT will be resolved negatively. The individual entrepreneur regains the opportunity to use the simplified taxation system for the next 12 months and, therefore, ceases to be a VAT payer. The application and the required papers must be submitted to the inspection no later than October 20 of this year in order to provide an opportunity for simplified taxation for the next year.
Sales of excisable products
When trading excisable products, IE pays the value added tax of the Russian Federation, regardless of the tax regime it is in. In following tax laws, such products for IP are:
- tobacco products;
- cars and motorcycles with an engine capacity of more than 150 liters. from.;
- gasoline, diz. fuel, engine oils;
- aviation kerosene, natural gas.
Despite the fact that alcohol is also included in the list of excisable products, it makes no sense to mention it when talking about IP, since since 2014 IP is forbidden to trade in alcohol, regardless of what type of taxation they are on. This rule is enshrined in law.
Value added tax, benefits
The law provides for a number of business options that are not subject to VAT. Accordingly, if an individual entrepreneur conducts any of these activities, he does not need to pay tax. VAT exemptions are divided into mandatory, which cannot be applied. In the case of such activities, the question of whether the entrepreneurs can work with VAT will be resolved negatively. But there are so-called tax preferences, namely, voluntary benefits, whether or not the taxpayer can apply them.
Mandatory benefits
The obligatory non-use of VAT includes the following business options:
- Lease of buildings for temporary use to foreign states or their residents.
- Trade, manufacturing of vital medical products, components, according to the list approved by law.
- The provision of services for medical diagnosis, prevention, treatment and rehabilitation, this list does not include veterinary clinics and cosmetology clinics.
- The provision of services for the care of those in need of care, pregnant women, the disabled, the elderly and children.
- Passenger traffic by city, suburban and interurban road, rail, river and sea transport, except for taxis and minibuses.
- The provision of services and production of works provided by funeral agencies.
VAT preferences
Voluntary benefits may be used by the individual entrepreneur or not at his discretion. Not always taking advantage of the opportunity to not use VAT is advisable for the entrepreneur, some taxes in Russia give their advantages.
Often, large counterparties taxed under the DOSA do not enter into agreements with enterprises and entrepreneurs exempt from VAT. Because such cooperation will deprive them of the opportunity to exercise their right to apply a deduction for acquired products. Sometimes, in order to attract profitable counterparties, an entrepreneur deliberately refuses to exempt VAT. In the areas of entrepreneurship below, this situation may occur. VAT preferences apply to:
- Production and trade in religious products. This, for example, religious literature, objects of worship.
- The provision of services and the production of goods produced and sold by an individual entrepreneur with a disability, or in situations where the number of disabled employees working with the entrepreneur, in total exceeds 80 percent.
- The manufacture and trade of handicraft goods, consisting in special lists of local authorities.
- Insurance of various types.
- Law Offices.
- Sale of tickets for movie shows, concerts, entertainment events.
- The work of developers, trade in residential premises or shares in them.
VAT rates
If an individual entrepreneur turns out to be a VAT payer, he will have to pay tax to the budget at one of the three approved rates. There are taxes in Russia that have several options for rates, VAT is one of them. In most cases, the VAT rate is 18%. It is valid in all situations, unless otherwise specified by law.
0% rate
0% is applied when exporting products outside the country in the export regime, as well as in relation to a number of activities:
- transportation of oil and gas outside the borders of the Russian Federation through pipelines;
- passenger transportation by commuter rail or air, when one of the destinations is located in the Republic of Crimea;
- customs transportation services;
- products imported to the territory of the Russian Federation by representative offices of foreign states duly accredited in Russia provided that they are used in the interests of diplomatic missions and families of diplomats for personal needs.
10% rate
The 10% rate applies to an exhaustive list of products, which include:
- essential food items;
- products made for children;
- all printed periodicals, except those containing an erotic or advertising aspect;
- medicines and medical products, except for vitally important ones, completely exempted from VAT;
- breeding cattle.
All other products and services not included in the above groups are subject to VAT at the rate of 18%.
Pros and cons of applying VAT
For entrepreneurs, the use of VAT carries much more minuses than pluses. Among them, it is worth noting such significant negative points as:
- The difference in the methods of recognition of income and expenses for personal income tax and VAT. If organizations, paying income tax, can choose the method of recognition of income and expenses and thus bring together the accounting for two taxes, the IP does not have such an opportunity. The tax legislation clearly states that income and expenses for personal income tax purposes must be applied for payment, and for VAT purposes - for shipment. That is, such a situation will actually develop when in different accounting registers the IP will have different data at the end of the reporting quarter. This significantly confuses and complicates the work of accounting.
- Mandatory electronic VAT reporting, introduced since 2014 for enterprises of all forms of ownership, will also complicate the work of the accounting service and the individual entrepreneur. If tax declarations according to the simplified taxation system and other special. modes can still be handed over on paper, the application of VAT automatically entails additional costs of money and time. It will be necessary to conclude an agreement on the transmission of data via telecommunication channels with special. the operator, make an electronic digital signature of the entrepreneur, install additional software, ensure the availability of the Internet at the workplace of the accountant or entrepreneur, which, most likely, will require the conclusion of an agreement with a communication service provider and additional costs.
- The complexity and cumbersomeness of tax returns also do not facilitate the work. The VAT declaration will have to be submitted quarterly, at the same time and pay tax. In addition, the inspection more closely monitors the reporting of enterprises and individual entrepreneurs paying VAT. This is due to a large number of violations in the field of VAT taxation.
Benefits of VAT
The advantages of using VAT by an individual entrepreneur include perhaps the more willing cooperation of large customers with VAT payers due to the possibility of applying deductions. This is especially true of government contracts, large contracts in strategic areas of the economy.
If an individual entrepreneur plans to participate in such activities, the amount of contracts may cover all the above disadvantages. In addition, the fact of applying VAT allows the entrepreneur to take into account the input VAT himself as a tax deduction, interacting with VAT payers not only on sales transactions, but also on purchase transactions.
VAT tax return
VAT return for IP exists in several ways. It:
- VAT return for IP on OSNO.
- VAT return for SP for special. taxation regimes.
- VAT return on indirect taxes.
In the first situation, a standard VAT return is filed. Since 2014, it must be submitted only in electronic form. In the situation of detecting errors after the submission of the declaration, the inspectors should be sent an update immediately when these errors are detected. A declaration is submitted quarterly by the 20th day, with the option that the amount of revenue net of VAT for the last quarter was not more than one million. In other cases, the declaration is sent to the tax authority every month also by the 20th day.
VAT declaration when being on special. taxation regimes are sent to tax authorities in the option of selling excisable products or in the option of conducting several types of activities. One of which is subject to special. mode, and the other (others) are not. Such a declaration is also filed electronically by the 20th day.
An indirect tax declaration is filed when trading products in the customs union zone. That is, when exporting products to the territory of Belarus. Such a declaration shall be submitted to the inspection after the import of products together with the application for import. In the variant, when an individual entrepreneur works with organizations of Belarus, the question of whether an individual entrepreneur can work with VAT is decided positively. A declaration is filed before the 20th day after posting the products to accounting. This type of declaration cannot be adjusted. In case of detection of errors and shortcomings, another application for import is submitted.