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Time of the VAT-taxable transaction: which date should be taken as the basis?
According to Article 166.1 of the Tax Code, unless otherwise provided by this Article, the time of a taxable transaction is the time when payment is made for the goods supplied (works performed and services rendered). Payment is considered to have been made at the following times:
for activities other than those specified in Article 16.1.8 of the Tax Code, where a cash register must be used: for cash payments, when the cash is received; for non-cash payments, when the funds are credited to the taxpayer’s bank or other payment account, an account over which the taxpayer may have control, or an account to which the taxpayer has the right to receive the relevant funds;
in the case of mutual settlements, when the obligation is cancelled or discharged;
for receivables arising from the supply of goods (works, services), when the limitation period expires;
in the case of payments in kind or barter transactions, when the assets are received (exchanged);
in the case of a gratuitous supply, when the supply is made;
when a right of claim is assigned, when the right of claim relating to the assigned amount is transferred.
This legislative requirement is explained by expert Emin Sattarov. One of the most common mistakes in accounting practice concerns determining the time when a VAT liability arises. While the accrual method applies to profit tax, the main rule for VAT is the payment principle. In other words, the mere fact that goods have been supplied does not, by itself, create a VAT liability — the decisive factor is the time of payment.
1. General rule (Article 166.1 of the Tax Code)
The time of a taxable transaction is the time when payment is made. Payment is considered to have been made in the following cases:
Cash and non-cash payments (Article 166.1.1 of the Tax Code). For cash payments, the relevant time is when the cash is received; for non-cash payments, when the funds are credited to a bank or other payment account. An important detail is that the funds do not necessarily have to be credited directly to your account. Funds credited to an account over which you have control, or to an account to which you have the right to receive those funds, are also considered payment.
Activities requiring the use of a cash register (Article 166.1.1-1 of the Tax Code). For the types of activities specified in Article 16.1.8, the date is determined separately: regardless of whether the payment is made in cash or non-cash form, the date on which the cash register receipt is issued is taken as the relevant date. In other words, in retail trade, it is the date of the receipt, rather than the date on which the transfer reaches the bank account, that matters.
Mutual settlements (Article 166.1.2 of the Tax Code). The relevant time is when the obligation is cancelled or discharged. Even where there is no actual movement of cash, a mutual set-off is treated as payment.
Receivables (Article 166.1.3 of the Tax Code). The relevant time is when the limitation period expires. This point is often overlooked in practice: even if the buyer never makes the payment, a VAT liability automatically arises when the limitation period expires.
Payments in kind and barter transactions (Article 166.1.4 of the Tax Code). The relevant time is when the assets are received.
Gratuitous supplies (Article 166.1.5 of the Tax Code). The relevant time is when the supply is made.
Assignment of a right of claim (Article 166.1.6 of the Tax Code). The relevant time is when the right of claim relating to the assigned amount is transferred.
2. Special cases
Where Article 159.5 of the Tax Code applies (Article 166.2 of the Tax Code), the time of the transaction is considered to be the day on which the relevant event occurs: supply of goods for non-commercial purposes, loss, shortage, deterioration, write-off before full depreciation, or theft. Therefore, a shortage identified during an inventory count is also subject to VAT, and the relevant date is the day on which the event occurred.
Where Article 159.6 of the Tax Code applies (Article 166.3 of the Tax Code), if VAT registration is cancelled, the time of the transaction is considered to be the day immediately preceding the date on which the cancellation takes effect. This rule also applies to outstanding receivables. Upon deregistration, calculations must be made both for remaining inventory and outstanding receivables.
3. Where the buyer provides a loan (Article 166.4 of the Tax Code)
If, instead of paying for the goods, the buyer provides a loan to the seller (except for loans provided by credit institutions and persons conducting banking operations):
if the loan is provided after the goods have been supplied, the time of the transaction is the time when the loan is provided (Article 166.4.1);
if the loan is provided before the goods are supplied, the time of the transaction is the time when the goods are supplied (Article 166.4.2).
This provision is a mechanism designed to prevent actual payment from being concealed under the name of a loan.
4. Installment payments and advances (Articles 166.5 and 166.6 of the Tax Code)
If two or more payments are made for a single transaction, each payment is treated as a separate transaction in the amount of the relevant payment. If payment is made before the goods are supplied, the time of the transaction is considered to be the time when the payment is made. Note that the provision prohibiting the issuance of an electronic invoice for advance payments is no longer in force.
5. What does “payment” mean? (Article 166.7 of the Tax Code)
For the purposes of this Article, payment means the payment of the VAT-exclusive value of goods, works and services or the VAT amount itself. Therefore, even the transfer of only the VAT amount to a deposit account is an event that determines the time of the transaction.
Thus, Article 166 of the Tax Code is essentially built around one question: which date should be reflected in the VAT return? Incorrectly determining the date may result in an overstatement of tax in one reporting period and an understatement in another, potentially leading to interest and financial penalties. Particular attention should be paid to this Article in relation to receivables for which the limitation period has expired, inventory discrepancies, and the cancellation of VAT registration.
According to Article 166.1 of the Tax Code, unless otherwise provided by this Article, the time of a taxable transaction is the time when payment is made for the goods supplied (works performed and services rendered). Payment is considered to have been made at the following times:
for activities other than those specified in Article 16.1.8 of the Tax Code, where a cash register must be used: for cash payments, when the cash is received; for non-cash payments, when the funds are credited to the taxpayer’s bank or other payment account, an account over which the taxpayer may have control, or an account to which the taxpayer has the right to receive the relevant funds;
in the case of mutual settlements, when the obligation is cancelled or discharged;
for receivables arising from the supply of goods (works, services), when the limitation period expires;
in the case of payments in kind or barter transactions, when the assets are received (exchanged);
in the case of a gratuitous supply, when the supply is made;
when a right of claim is assigned, when the right of claim relating to the assigned amount is transferred.
This legislative requirement is explained by expert Emin Sattarov. One of the most common mistakes in accounting practice concerns determining the time when a VAT liability arises. While the accrual method applies to profit tax, the main rule for VAT is the payment principle. In other words, the mere fact that goods have been supplied does not, by itself, create a VAT liability — the decisive factor is the time of payment.
1. General rule (Article 166.1 of the Tax Code)
The time of a taxable transaction is the time when payment is made. Payment is considered to have been made in the following cases:
Cash and non-cash payments (Article 166.1.1 of the Tax Code). For cash payments, the relevant time is when the cash is received; for non-cash payments, when the funds are credited to a bank or other payment account. An important detail is that the funds do not necessarily have to be credited directly to your account. Funds credited to an account over which you have control, or to an account to which you have the right to receive those funds, are also considered payment.
Activities requiring the use of a cash register (Article 166.1.1-1 of the Tax Code). For the types of activities specified in Article 16.1.8, the date is determined separately: regardless of whether the payment is made in cash or non-cash form, the date on which the cash register receipt is issued is taken as the relevant date. In other words, in retail trade, it is the date of the receipt, rather than the date on which the transfer reaches the bank account, that matters.
Mutual settlements (Article 166.1.2 of the Tax Code). The relevant time is when the obligation is cancelled or discharged. Even where there is no actual movement of cash, a mutual set-off is treated as payment.
Receivables (Article 166.1.3 of the Tax Code). The relevant time is when the limitation period expires. This point is often overlooked in practice: even if the buyer never makes the payment, a VAT liability automatically arises when the limitation period expires.
Payments in kind and barter transactions (Article 166.1.4 of the Tax Code). The relevant time is when the assets are received.
Gratuitous supplies (Article 166.1.5 of the Tax Code). The relevant time is when the supply is made.
Assignment of a right of claim (Article 166.1.6 of the Tax Code). The relevant time is when the right of claim relating to the assigned amount is transferred.
2. Special cases
Where Article 159.5 of the Tax Code applies (Article 166.2 of the Tax Code), the time of the transaction is considered to be the day on which the relevant event occurs: supply of goods for non-commercial purposes, loss, shortage, deterioration, write-off before full depreciation, or theft. Therefore, a shortage identified during an inventory count is also subject to VAT, and the relevant date is the day on which the event occurred.
Where Article 159.6 of the Tax Code applies (Article 166.3 of the Tax Code), if VAT registration is cancelled, the time of the transaction is considered to be the day immediately preceding the date on which the cancellation takes effect. This rule also applies to outstanding receivables. Upon deregistration, calculations must be made both for remaining inventory and outstanding receivables.
3. Where the buyer provides a loan (Article 166.4 of the Tax Code)
If, instead of paying for the goods, the buyer provides a loan to the seller (except for loans provided by credit institutions and persons conducting banking operations):
if the loan is provided after the goods have been supplied, the time of the transaction is the time when the loan is provided (Article 166.4.1);
if the loan is provided before the goods are supplied, the time of the transaction is the time when the goods are supplied (Article 166.4.2).
This provision is a mechanism designed to prevent actual payment from being concealed under the name of a loan.
4. Installment payments and advances (Articles 166.5 and 166.6 of the Tax Code)
If two or more payments are made for a single transaction, each payment is treated as a separate transaction in the amount of the relevant payment. If payment is made before the goods are supplied, the time of the transaction is considered to be the time when the payment is made. Note that the provision prohibiting the issuance of an electronic invoice for advance payments is no longer in force.
5. What does “payment” mean? (Article 166.7 of the Tax Code)
For the purposes of this Article, payment means the payment of the VAT-exclusive value of goods, works and services or the VAT amount itself. Therefore, even the transfer of only the VAT amount to a deposit account is an event that determines the time of the transaction.
Thus, Article 166 of the Tax Code is essentially built around one question: which date should be reflected in the VAT return? Incorrectly determining the date may result in an overstatement of tax in one reporting period and an understatement in another, potentially leading to interest and financial penalties. Particular attention should be paid to this Article in relation to receivables for which the limitation period has expired, inventory discrepancies, and the cancellation of VAT registration.