We face VAT tax every time we purchase products in stores and other places. Very often in the cash receipt you can see a separate line “VAT amount 10%” or “VAT amount 18%”, and now “VAT amount 20%”.
The issues of calculating and applying tax for a long time have always been very relevant in the accounting and preparation of the declaration.
In the framework of this article, we will consider the question of how VAT is deciphered and what rates are applied today when calculating tax by enterprises.
The concept
Do you understand how the acronym stands for VAT? It is in this matter that should be dealt with first of all.
The abbreviation VAT (VAT) stands for value added tax. It means the amount that the seller must pay in favor of the state from the difference between the cost of products at which the end user purchased it and the price that the seller paid to the wholesale buyer.
How is VAT decrypted? The three letters so popular around the world are explained as follows: value added tax. We all go to the shops for groceries or other goods and involuntarily see these letters in the price tags. However, in the end, we do not produce this product and do not sell it through outlets, we just buy it for our needs. VAT is a part of the funds that make up the value added tax of products or services allocated to the state budget. If the company has not created this added value, in other words, the final cost of the product is less than the initial price, then there are no VAT obligations. It should be noted that this is the most powerful source of replenishment of financial resources of the state budget.
How is VAT decrypted in accounting? Another important question that needs to be answered. Accounting involves not only the reflection of operations in tax registers, but also on accounting accounts. These postings are necessary for the correct reflection in the accounting of tax amounts during various operations.
In accounting, account 68 and account 19 are used. The credit of account 68 is used to record the VAT calculated and the amount paid is reflected in the debit. 19 accounts reflect the input tax amount received from suppliers. These amounts are not yet reimbursed from the budget.
Payment
To understand what it is - VAT, how this tax is deciphered, we will consider the basics of its calculation.
To find the amount that will go to the state budget, you must initially determine the tax base and tax deductions. The difference between the calculated VAT and the deduction will be equal to the amount that companies must transfer to the treasury. The cost of any product (C) consists of cost (A) and tax amount (B), in other words:
C = A + B.
In this case, the tax itself is calculated by multiplying the price of the product (A) at the interest rate (K) for tax and dividing by 100:
B = A * K / 100.
Consider an example. Imagine that the cost of the product is 700 rubles, the VAT rate is set at 18%, then it will be equal to 126 rubles. In other words:
700 * 18/100 = 126.
The final price will be equal: 700 + 126 = 826 rubles.
In some cases, you can calculate VAT when the final price of the product (C) and the tax rate are known:
B = C / (100 + K) * K.
For example, C = 300 rubles, and K = 18%, then:
B = 300 / (100 + 18) * 18 = 45.76 rubles. - such an amount will be credited to the state budget.
If you need to perform a large number of calculations and operations, then no one is immune from errors in the calculations. For such cases, there are online calculators.
Tax feature
To consider how the VAT is deciphered, we characterize its main features. This type of tax is applied in many advanced countries of the world, as well as in our country. With us it was first introduced since 1992. The enrollment of this tax in the budget, as well as its payment are regulated by polynomial regulatory documents. However, typically, there is one peculiarity that can mislead almost all taxpayers.
Those who are familiar with municipal affairs know that the so-called duty can be direct or indirect. Value added tax refers to the second option, that is, to the indirect taxation system.
To put the essence of VAT in simple words, it all boils down to the fact that only businessmen are subject to this taxation. However, in the end, it is the people of the country who pay this tax when making purchases in stores or when ordering the necessary services.
Among other features, the following can be distinguished:
- tax is levied only once, as a result of which the final cost of production is reduced;
- for exporters there is a chance to free themselves from paying this tax;
- almost always, before any product gets from the manufacturer to the end user, it goes through several intermediaries;
- Through a tax payment scheme, the government reduces the risk of tax evasion.
VAT for services
What is the bet in this case? Are you used to having a tax on goods? But services are also tax deductible. The default rate is 20%. A number of services are tax deductible. These include:
- medical services;
- disabled person care services;
- child support services;
- passenger transportation services;
- funeral services;
- depository services and others.
Historical fact
Previously, such a tax was a sales tax, which did not take into account the amount of funds paid by the seller for the purchase of goods. But the application of such a tax contributed to the multiple taxation of the same product in the process of its production, storage, delivery, sale. At the same time, the cost of goods was inflated for the end user. This situation does not contribute to the development of the economy, provokes inflation, and encourages participants in the implementation process to evade tax obligations in various ways.
In this situation, VAT was proposed instead of sales tax. Initially, the proposal on the possibility of applying VAT was made by the head of the Directorate for Taxes and Dues of the French Ministry of Economy, Maurice Loret in 1954.
He suggested paying the amount of VAT for each participant in the production and implementation process only from the value added to the product. So, this amount will be added to the cost of the seller to purchase the goods.
Thus, the introduction of VAT has led to:
- to reduce the tax burden;
- to a more complete collection of taxes, since if one person evades the payment of tax, then the other links will pay off obligations for him.
Since 1930, there has been a sales tax in the USSR. After the reform, during the NEP period, the excise tax system was restored, which did not last long, and the value added tax was returned. The subjects of taxation were organizations and entrepreneurs of various sectors of the economy. Accordingly, the object of taxation is directly proportional to the turnover of companies. At that time, there was a mechanism that allowed to receive a large amount of this tax, which ensured the stability and stability of the state budget.
In 1992, a new type of taxation was introduced in the form of VAT. The order of its calculation was described in Art. 21 of the Tax Code. As a result, today the share of this tax in the budget structure of Russia ranges from 30 to 40%, which is a significant indicator.
Tax rate. Nuances
Consider what VAT rates are currently in effect.
Now this type of tax can be attributed to those that do not have a single rate. Very often, when making calculations at enterprises, questions arise of using those or other values. The situation will be complicated by the fact that from 01.01.2019 in Russia there is a new VAT rate of 20% instead of 18%.
A rate increase of up to 20% caused a lot of ambiguity regarding the transition period. The new rate is used for goods that are shipped from the date of 01/01/2019.
A rate of 20% on VAT in Russia existed earlier in the period from 1993 to 2004. In the period from 1992 to 1993, the rate rose to a value of 28%. In 2004, the rate was reduced to 18%.
It should be noted that food is still taxed at a rate of 10%. For air travel to Crimea, Sevastopol and the Far Eastern Federal District, the rate for services is limited to 0% until 2025.
Application of possible rates. 2019 year
Consider what VAT rates apply in 2019.
The scale for today is as follows: 0.10.20%. There are also rates: 20 / 120.10 / 110, 16.67%.
The main possible VAT rates for 2019 are shown below.
Bid amount | Until 2019 | What VAT to indicate in 2019? How many percent? | VAT rates and on which products are applied? |
20 % | Was 18% | It became 20% for goods taxed earlier than 18% | Most of the goods and operations in our country |
10 % | Was 10% | 10% left | Only for food, children’s, medical goods, socially significant products |
0% | Was 0% | 0% left | Export and international shipping |
16.67% | Previously 15.25% | It became 16.67% | To implement the company as a property complex |
The table below describes the distinguishing features of the rates 20/120 and 10/110.
Bet size | Features | Notes |
20/120 | It can be used in a situation characterized by the fact that the tax base includes VAT (for example, advances, tax withholding by an agent) | At 20% |
10/110 | It can be used in a situation where the tax base includes VAT (for example, advances, withholding tax by an agent) | At 10% |
Reflection of bid in transitional documents
A feature is the calculation of rates in the transition period.
In the situation of concluding contracts until 2019, it is possible to apply a rate of another 18%. There are no exceptions to the law at the new rate; in the situation of the conclusion of long-term contracts until 01.2019, a rate of 20% is used for all goods. In this case, there is no need to renegotiate the agreement and make changes.
Below, we’ll look at some explanatory points regarding the application of rates in 2019.
Characterization of the situation | What should be the VAT? | Tax amount |
Products purchased in 2018 and sold in 2019. | Input VAT applies to deduction at a rate of 18% | 20% VAT |
The product was released in 2018, and payment for it took place in 2019. | VAT 18% | 20% VAT is accrued only for those goods shipped in 2019. VAT does not need to be adjusted |
100% prepayment made in 2018, and products shipped in 2019. | VAT from advance 18/118 | VAT 20%, deductible advance tax at a rate of 18/118. The resulting difference is recorded in an additional agreement with the buyer |
Prepayment in parts was received in 2018, products were shipped in 2019, the other amount of payment was made in 2019. | VAT at the rate of 18/118 | VAT 20%. From the first advance, accept VAT deductible at a rate of 18/118. The resulting difference is recorded in an additional agreement with the buyer |
Calculation Examples
Consider examples of applying VAT rates.
Example 1. Suppose that in 2018 the seller accepted the amount of finance from the client in the amount of an advance payment for the product of 100%. It is planned to release the goods in the first month of 2019. In the previous period, the rate was 18%, in 2019 it will be 20%. This means that VAT is calculated from the advance amount at a rate of 18/118.
On the day the goods are dispensed, the deduction applies the amount of tax that was previously calculated from the amount of the advance. The deduction rate is 18/118 for products that were shipped, the amount is invoiced using the rate of 20%. At this rate, it is necessary to pay deductions to budgetary bodies. It should be noted that the seller received the money earlier at a rate of 18%, then he reimburses the 2% difference from his pocket.
Example 2. Let the company LLC Svetlana receive from the buyer an advance payment in the amount of 118 tons (100% payment). An invoice has been issued. Advance received on November 20, 2018
The release of the goods is scheduled for 2019.
The amount of VAT surcharge in the amount of 2 tons The amount of VAT surcharge in the amount of 2 tons received from the buyer on the date of December 25, 2018
The seller draws up a corrective invoice for the amount of the advance received in 2018.
A sample invoice is provided below.
Criterion | What is the VAT rate applicable? | Tax, i.e. | Price of goods, i.e. |
Before change | 18/118 | 18 | 118 |
After change | 18/118 | 18,305 | 120 |
Growth adjustment | - | 0,305 | 2 |
Transitional period with VAT surcharge in 2019
We give one more example of calculations. Let the surcharge be made by the buyer after 01/01/2019. In this case, the payment can be accepted as a VAT surcharge, it is not credited to the prepayment of goods (VAT must be paid at a rate of 20/120). In this case, the seller generates an invoice for adjustment to the client for the amount of the difference between the value of the tax amount for the invoice, which was drawn up earlier taking into account the rate of 18/118, and the tax was calculated taking into account the surcharge.
Take the same company LLC "Svetlana". The difference is that the client paid the amount in January 2019 in the form of an additional payment.
The amount of surcharges was received by the seller, who carries out the adjustment of the invoice, which is reflected in the table below.
Criterion | Rate,% | The amount of tax, i.e. | Price of goods, i.e. |
Before change | 18/118 | 18 | 118 |
After change | 20/120 | 20 | 120 |
Correction (increase) | - | 2 | 2 |
When goods are shipped in 2019 on account of an advance payment, the seller calculates VAT, taking into account the rate of 20% of the value of sales (100 TR) in the amount of 20 TR and accepts a deduction of VAT in the amount of 20 TR
Conclusion
In the framework of this article, we examined how VAT is deciphered and what rates are currently applicable for this tax.
The rate does not apply to fixed values, it varies depending on the types of products, work, services. As part of this article, various options for applying VAT rates were considered. The legislation itself is also constantly changing. Therefore, companies need to carefully monitor changes in laws and regulations to avoid accrual errors and claims from tax authorities.