A VAT deduction is not a benefit, but a mechanism due to the nature of the tax itself. It is indirect - it is transferred by the seller to the budget, and then included in the price of products sold by him. At the same time, each supplier is a buyer, as it acquires materials, raw materials, equipment, goods and services necessary for its activities. So, like any buyer, he pays his suppliers the price of goods and services mentioned tax. It is also called the "entrance". Here is its amount and can, under certain conditions, be deductible.
What does it mean to accept VAT deductible
Subtracting input tax means reducing the amount of your tax liability. In other words, the amount of the claimed deduction is subtracted from the amount of accrued VAT. The basis for this is the invoice in which the tax amount is allocated. In the incoming invoices, that is, in those that the organization or individual receives from its suppliers, the amount of input tax appears. When fulfilling all the requirements, it can be deducted. In outgoing invoices, that is, those that the subject exposes upon sale, accrued tax is allocated. The amount of tax payable will be the difference between them:
- VAT payable = VAT accrued - VAT deductible.
Thus, deductible tax reduces the amount of tax to be paid to the budget in the reporting period. If the deduction is greater than the accruals, the amount of VAT to be returned from the budget will arise.
Before we talk about the procedure for accounting for VAT, accepted for deduction, and posting in accounting, consider its conditions and other nuances.
Is a deduction required?
Please note that applying a deduction is a taxpayer’s right, but not an obligation. If for some reason he considers it inappropriate to reduce the tax payable, he may not claim a deduction. For example, this is often practiced in order to avoid a “negative” tax, that is, the amount to be returned from the budget. The fact is that this process is accompanied by a serious tax audit, and not every company or individual entrepreneur will voluntarily do this.
To prevent this, the deductible input tax may not be accepted in the current period. This operation can be transferred to any other period within the next three years. Another option is to declare in the current period only part of the input tax deductible, and leave the rest for the following periods. This method is also permitted by law.
When tax is allowed to deduct
The legislation establishes certain conditions under which VAT can be set off. To begin with, this is allowed only to organizations and entrepreneurs that are recognized as payers of this tax. All other entities do not deduct input tax even when they are forced to pay it. For example, when invoicing with the specified separate line the tax amount.
For the same entities to whom deductions are allowed, the following conditions must be fulfilled:
- goods and services for which tax is deductible should be capitalized, that is, taken into account;
- they are used to carry out activities that fall under VAT;
- there is an invoice issued by the supplier when purchasing these goods (services), and the amount of VAT is highlighted in it.
VAT deducted: postings
To reflect the tax in accounting, account 19 is applied. As for the VAT accepted for deduction, account 68 is involved in postings, since this is a relationship with the tax budget. To understand that we are talking about the tax in question, usually to account 68 open the appropriate sub-account.
How accounting reflects the input tax and its deduction, we explain by example. LLC "Camomile" applies the basic taxation system. To carry out its trading activities in the reporting period, it purchased goods from suppliers in the amount of 236,000 rubles, including VAT of 36,000 rubles.
First of all, input VAT is reflected in the debit of account 19:
- Dt 19 - Kt 60 (Settlements with suppliers) - for 36,000 rubles.
If a decision is made to set off the input tax, then the amount is recorded for its amount:
- Dt 68 - Kt 19 - for the amount of tax, which it was decided to set off.
The above record is the posting “VAT accepted for deduction”.
If, in the reporting period, Romashka LLC accrued VAT in the amount of less than 36,000 rubles, then it is not advisable to claim a deduction, otherwise a tax will be refunded, that is, refunded from the budget, it can be left for another quarter or partially claimed for the amount of the tax charged.
The above account is used to deduct VAT for any value. For example, if LLC Romashka were to manufacture and purchase materials, the posting “VAT accepted for deduction” would be similar.
Non-deductible tax
However, input tax may not always be deductible. Above we mentioned the conditions that must be met, but sometimes this does not happen. For example, along with the main activities subject to VAT, an organization conducts operations that are not taxable. In this case, no deduction tax is accepted. If, for example, we are talking about materials, then this accounting entry will be made:
- Dt 10 - Ct 19 - in the amount of non-deductible VAT.
What does such wiring mean? VAT not deductible is included in the cost of materials.
Since not only materials but also other values can be acquired, account 19 in this posting can correspond with other accounts. For example, if goods are purchased, then the wiring will take the form: Dt 41 - Kt 19.
The non-deductible tax on assets that will be used to ensure the organization’s work can be written off by posting: Dt 29 - Kt 19.
If the organization carries out an additional type of activity, non-taxable VAT, then the tax on assets acquired for it can be written off as follows: Dt 23 - Kt 19.
It happens that the amount of tax in the documents is allocated, but the invoice is lost or was not received. Then the tax can be written off to other expenses: Dt 91 - Kt 19.
Recovery of previously deducted tax
It happens that VAT on acquired assets is first deductible, but then it has to be restored. A typical example is getting a prepayment. If the supplier accepts deduction of advance tax, then after shipment he must restore this amount. A posting is made on the restoration of VAT previously accepted for deduction: Dt 60 - Ct 68.
The second example is an entity with a special tax liability transitioning to a simplified tax regime. He should restore the tax on balances of goods and fixed assets, if it was accepted for deduction. In such circumstances, it is advisable to make the following record: Dt 91 - Kt 68.
Thus, the recovered tax is accumulated on the credit of account 68 and increases the organization's liabilities to the budget.
findings
So, when VAT is accepted for tax deduction, the transaction has the form:
- Dt 68 (subaccount for VAT) - Kt 19.
Moreover, it does not matter where the deductible tax came from. It is worth considering that VAT can not always be deducted - for this, certain conditions must be met. If a deduction tax is not accepted, it usually increases the value of the acquired items. There are also cases where previously deducted VAT must be restored.