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Does a technical discrepancy in VAT payments prevent offsetting?
Does a technical discrepancy in VAT payments prevent offsetting?
The company providing services to us issued VAT-inclusive electronic invoices amounting to 5,900 AZN on March 5 and 11,800 AZN on March 20. Due to a technical error, the entire amount indicated in the first invoice was transferred to the customer’s deposit account as VAT. As a result, an overpayment occurred in the principal amount, and taking this overpayment into account, the VAT amount for the subsequent invoice dated April 20 was reduced accordingly during payment.
As a result, all obligations related to both the principal amounts and VAT for both electronic invoices were fully fulfilled. The only difference is that the distribution of VAT across the invoices was reflected differently — more VAT was paid for the first invoice and less for the second.
Is it possible to offset the payments made for both electronic invoices in the VAT return for the relevant month? Could this technical discrepancy lead to any tax violations or financial penalties in the future?
The State Tax Service under the Ministry of Economy stated that the offsetting of VAT when determining payments to the state budget is regulated by Article 175 of the Tax Code. According to this article, VAT paid on the purchase of goods (works, services) for taxable transactions is subject to offset if the transaction value is paid from the buyer’s bank or other payment account to the supplier’s account, and the VAT amount is paid to the VAT deposit account.
At the same time, under Article 175.1.1 of the Tax Code, the time of VAT offset is considered to be the moment when the full payment of the value of goods (works, services) and the corresponding VAT amount under the electronic invoice is made for transactions deemed to have been carried out during the reporting period.
Based on this, if during the relevant reporting period the value of goods (works, services) and the corresponding VAT amount under the received electronic invoices are paid in accordance with the requirements of Article 175, the VAT amount may be offset in that reporting period.
Additionally, it is recommended to apply to the tax authority at your place of registration with supporting documents and a detailed explanation of the actual circumstances to accurately determine the tax obligations for the mentioned transactions.
Basis: Article 175 of the Tax Code.
The company providing services to us issued VAT-inclusive electronic invoices amounting to 5,900 AZN on March 5 and 11,800 AZN on March 20. Due to a technical error, the entire amount indicated in the first invoice was transferred to the customer’s deposit account as VAT. As a result, an overpayment occurred in the principal amount, and taking this overpayment into account, the VAT amount for the subsequent invoice dated April 20 was reduced accordingly during payment.
As a result, all obligations related to both the principal amounts and VAT for both electronic invoices were fully fulfilled. The only difference is that the distribution of VAT across the invoices was reflected differently — more VAT was paid for the first invoice and less for the second.
Is it possible to offset the payments made for both electronic invoices in the VAT return for the relevant month? Could this technical discrepancy lead to any tax violations or financial penalties in the future?
The State Tax Service under the Ministry of Economy stated that the offsetting of VAT when determining payments to the state budget is regulated by Article 175 of the Tax Code. According to this article, VAT paid on the purchase of goods (works, services) for taxable transactions is subject to offset if the transaction value is paid from the buyer’s bank or other payment account to the supplier’s account, and the VAT amount is paid to the VAT deposit account.
At the same time, under Article 175.1.1 of the Tax Code, the time of VAT offset is considered to be the moment when the full payment of the value of goods (works, services) and the corresponding VAT amount under the electronic invoice is made for transactions deemed to have been carried out during the reporting period.
Based on this, if during the relevant reporting period the value of goods (works, services) and the corresponding VAT amount under the received electronic invoices are paid in accordance with the requirements of Article 175, the VAT amount may be offset in that reporting period.
Additionally, it is recommended to apply to the tax authority at your place of registration with supporting documents and a detailed explanation of the actual circumstances to accurately determine the tax obligations for the mentioned transactions.
Basis: Article 175 of the Tax Code.