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Procedure for adjustment of the value added tax taxable turnover
Procedure for adjustment of the value added tax taxable turnover
Tax expert İsmail Bagirov comments on the subject. Article 163.1 of the Tax Code states that this article applies to the taxable transactions of suppliers, contractors, and service providers in the following cases:
163.1.1. when a transaction is fully or partially cancelled, including full or partial return of goods;
Example 1: A taxpayer supplied goods worth 23,600 manats including VAT in March. In April, the buyer returned goods worth 5,900 manats including VAT. In this case, the seller must reduce VAT by 900 manats, while the buyer must restore the previously credited 900 manats VAT to the state budget.
163.1.2. when the nature of the transaction changes;
Example 2: A taxpayer contributed an asset purchased with VAT into the company’s charter capital. Since such transactions are VAT exempt, the taxable turnover must be adjusted and VAT payable increased by 3,600 manats.
163.1.3. when the agreed compensation changes due to price reduction or other reasons;
Example 3: Company A sold goods worth 1,180 manats including VAT in May. In June, the price was reduced to 944 manats. Therefore, the VAT amount is reduced by 36 manats.
Example 4: Company A sold goods worth 11,800 manats including VAT to Company B. Later, both parties agreed to reduce the value to 9,440 manats. As a result, the July VAT return reflects a turnover reduction of 2,360 manats.
163.1.4. when circumstances arise after issuing an electronic invoice that justify adjustment of the taxable turnover.
Example 5: Company A mistakenly overstated the value of goods in the electronic invoice. The error was discovered in June. Accordingly, the seller reduces VAT by 18 manats, while the buyer restores the same amount to the budget.
According to Article 163.2 of the Tax Code, if a taxpayer incorrectly states the VAT amount in an electronic invoice or VAT return, the adjustment must be made in the reporting period when the change occurred.
Example 6: “A” LLC incorrectly calculated VAT in the electronic invoice. After correction, the seller decreases VAT by 33.6 manats, while the buyer restores the same amount to the budget.
As seen, electronic invoices determine the seller’s taxable turnover and the buyer’s deductible turnover. If grounds for adjustment are identified, both parties are required to make the relevant corrections.
Tax expert İsmail Bagirov comments on the subject. Article 163.1 of the Tax Code states that this article applies to the taxable transactions of suppliers, contractors, and service providers in the following cases:
163.1.1. when a transaction is fully or partially cancelled, including full or partial return of goods;
Example 1: A taxpayer supplied goods worth 23,600 manats including VAT in March. In April, the buyer returned goods worth 5,900 manats including VAT. In this case, the seller must reduce VAT by 900 manats, while the buyer must restore the previously credited 900 manats VAT to the state budget.
163.1.2. when the nature of the transaction changes;
Example 2: A taxpayer contributed an asset purchased with VAT into the company’s charter capital. Since such transactions are VAT exempt, the taxable turnover must be adjusted and VAT payable increased by 3,600 manats.
163.1.3. when the agreed compensation changes due to price reduction or other reasons;
Example 3: Company A sold goods worth 1,180 manats including VAT in May. In June, the price was reduced to 944 manats. Therefore, the VAT amount is reduced by 36 manats.
Example 4: Company A sold goods worth 11,800 manats including VAT to Company B. Later, both parties agreed to reduce the value to 9,440 manats. As a result, the July VAT return reflects a turnover reduction of 2,360 manats.
163.1.4. when circumstances arise after issuing an electronic invoice that justify adjustment of the taxable turnover.
Example 5: Company A mistakenly overstated the value of goods in the electronic invoice. The error was discovered in June. Accordingly, the seller reduces VAT by 18 manats, while the buyer restores the same amount to the budget.
According to Article 163.2 of the Tax Code, if a taxpayer incorrectly states the VAT amount in an electronic invoice or VAT return, the adjustment must be made in the reporting period when the change occurred.
Example 6: “A” LLC incorrectly calculated VAT in the electronic invoice. After correction, the seller decreases VAT by 33.6 manats, while the buyer restores the same amount to the budget.
As seen, electronic invoices determine the seller’s taxable turnover and the buyer’s deductible turnover. If grounds for adjustment are identified, both parties are required to make the relevant corrections.