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Can the non-deductible VAT amount be deducted from income?
Can the non-deductible VAT amount be deducted from income?
A company that is a simplified tax payer purchases goods from a company registered for VAT and subsequently sells those goods to another VAT-registered company. However, due to its status as a simplified tax payer, it is not entitled to claim VAT refunds. When selling the goods, the company charges AZN 1,180 as the base price plus a trade margin.
I would like to know whether the VAT amount paid can be treated as an expense and deducted from income at the end of the fourth quarter.
According to the State Tax Service under the Ministry of Economy, based on Article 175.1 of the Tax Code, unless otherwise specified in that article, the amount of VAT eligible for refund is considered the VAT amount paid into the VAT deposit account for non-cash payments made under electronic tax invoices issued to the taxpayer (excluding direct cash payments to the bank account of the supplier of goods, works, or services), as well as payments made within that deposit account.
In response to the inquiry, it was stated that simplified tax payers are not entitled to claim VAT refunds. If VAT is paid by the taxpayer when acquiring goods or services and this VAT cannot be refunded under the provisions of the Tax Code, the VAT amount is added to the cost of those goods or services. If the expenses incurred for the mentioned goods or services are related to the generation of income, those expenses are considered deductible from the taxpayer’s income.
A company that is a simplified tax payer purchases goods from a company registered for VAT and subsequently sells those goods to another VAT-registered company. However, due to its status as a simplified tax payer, it is not entitled to claim VAT refunds. When selling the goods, the company charges AZN 1,180 as the base price plus a trade margin.
I would like to know whether the VAT amount paid can be treated as an expense and deducted from income at the end of the fourth quarter.
According to the State Tax Service under the Ministry of Economy, based on Article 175.1 of the Tax Code, unless otherwise specified in that article, the amount of VAT eligible for refund is considered the VAT amount paid into the VAT deposit account for non-cash payments made under electronic tax invoices issued to the taxpayer (excluding direct cash payments to the bank account of the supplier of goods, works, or services), as well as payments made within that deposit account.
In response to the inquiry, it was stated that simplified tax payers are not entitled to claim VAT refunds. If VAT is paid by the taxpayer when acquiring goods or services and this VAT cannot be refunded under the provisions of the Tax Code, the VAT amount is added to the cost of those goods or services. If the expenses incurred for the mentioned goods or services are related to the generation of income, those expenses are considered deductible from the taxpayer’s income.