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2 new cases regarding the replacement of VAT
2 new cases regarding the replacement of VAT
According to the amendment to Article 175.1 of the Tax Code, mutual compensation of financial obligations arising from the value of the goods (works, services) provided or payment of the transaction value for transactions carried out through the notary's deposit account to the bank deposit account opened by the notary shall be considered as the time of compensated VAT. is done. Tax experts interpret this requirement of the legislation.
2 cases are regulated in the amended article. The first case is the mutual compensation of the financial obligations arising from the value of the provided goods (works, services). According to Article 166.1.2 of the Tax Code, when mutual settlements are made, the time when the obligation is canceled or paid is the time when taxable transactions for VAT are carried out. But compensation of VAT for the other party was not established in the legislation. Therefore, Article 175.1 of the Tax Code was amended.
Example 1: On March 2, 2024, a taxpayer who is a VAT payer presented furniture equipment worth 5,000 manats to the other party who is a VAT payer. The counterparty periodically provides cleaning services to the taxpayer who provides the furniture. On April 15, 2024, both taxpayers agree to cancel the obligation of 2,000 manat as a result of mutual settlement between them. In this case, the date of mutual compensation of taxpayers' financial obligations arising from the value of the provided goods (works, services), i.e. April 15, 2024, will be considered as the time of compensated VAT.
The second case is the payment of the cost of the transaction for transactions carried out through the notary's deposit account to the bank deposit account opened by the notary.
Example 2: When acquiring real estate, the VAT payer transfers the payment to the notary's deposit account, not to the other party's account. Compensation in this case was not regulated by Article 175 of the Tax Code. After the change, the date when the VAT payer pays the cost of the transaction to the bank deposit account opened by the notary during the purchase and sale of real estate will be considered as the time of VAT compensation.
It should be noted that although in practice both cases were conducted in the manner mentioned above, the process was regulated from a legal point of view by amending Article 175.1 of the Tax Code from January 1, 2024.
But is it allowed to offset the VAT payments of representation or staff accommodation and food expenses?
Norms and procedure for deducting from income expenses for representation expenses, housing and food expenses related to employees, as well as medical and preventive meals given to employees whose working conditions are harmful, difficult and working underground, milk and other products and means equivalent to it, added to the Tax Code will be determined by the body (institution) determined by the relevant executive authority.
As a result of the changes made to Article 175.3 of the Tax Code, allowing compensation of expenses based on the norm mentioned in the decision of the Cabinet of Ministers is noted as an exceptional case.
Example 3: In February 2024, the taxpayer paid 5,000 manats (without VAT) for housing expenses of employees. That amount is within the norms determined by the relevant decision of the Cabinet of Ministers. In this case, the taxpayer has the right to compensate VAT in the amount of 900 manats for making payments taking into account the requirements of Article 175 of the Tax Code:
5000 x 18% = 900 manats.
According to the amendment to Article 175.1 of the Tax Code, mutual compensation of financial obligations arising from the value of the goods (works, services) provided or payment of the transaction value for transactions carried out through the notary's deposit account to the bank deposit account opened by the notary shall be considered as the time of compensated VAT. is done. Tax experts interpret this requirement of the legislation.
2 cases are regulated in the amended article. The first case is the mutual compensation of the financial obligations arising from the value of the provided goods (works, services). According to Article 166.1.2 of the Tax Code, when mutual settlements are made, the time when the obligation is canceled or paid is the time when taxable transactions for VAT are carried out. But compensation of VAT for the other party was not established in the legislation. Therefore, Article 175.1 of the Tax Code was amended.
Example 1: On March 2, 2024, a taxpayer who is a VAT payer presented furniture equipment worth 5,000 manats to the other party who is a VAT payer. The counterparty periodically provides cleaning services to the taxpayer who provides the furniture. On April 15, 2024, both taxpayers agree to cancel the obligation of 2,000 manat as a result of mutual settlement between them. In this case, the date of mutual compensation of taxpayers' financial obligations arising from the value of the provided goods (works, services), i.e. April 15, 2024, will be considered as the time of compensated VAT.
The second case is the payment of the cost of the transaction for transactions carried out through the notary's deposit account to the bank deposit account opened by the notary.
Example 2: When acquiring real estate, the VAT payer transfers the payment to the notary's deposit account, not to the other party's account. Compensation in this case was not regulated by Article 175 of the Tax Code. After the change, the date when the VAT payer pays the cost of the transaction to the bank deposit account opened by the notary during the purchase and sale of real estate will be considered as the time of VAT compensation.
It should be noted that although in practice both cases were conducted in the manner mentioned above, the process was regulated from a legal point of view by amending Article 175.1 of the Tax Code from January 1, 2024.
But is it allowed to offset the VAT payments of representation or staff accommodation and food expenses?
Norms and procedure for deducting from income expenses for representation expenses, housing and food expenses related to employees, as well as medical and preventive meals given to employees whose working conditions are harmful, difficult and working underground, milk and other products and means equivalent to it, added to the Tax Code will be determined by the body (institution) determined by the relevant executive authority.
As a result of the changes made to Article 175.3 of the Tax Code, allowing compensation of expenses based on the norm mentioned in the decision of the Cabinet of Ministers is noted as an exceptional case.
Example 3: In February 2024, the taxpayer paid 5,000 manats (without VAT) for housing expenses of employees. That amount is within the norms determined by the relevant decision of the Cabinet of Ministers. In this case, the taxpayer has the right to compensate VAT in the amount of 900 manats for making payments taking into account the requirements of Article 175 of the Tax Code:
5000 x 18% = 900 manats.