The agreement on the supply of goods acts as a transaction, which in this case is performed by individuals or legal entities solely with the aim of causing civil consequences. Such an agreement is called conservative, for its creation, an agreement between the parties on all existing terms of the transaction is sufficient. When does the transfer of ownership of the goods occur in such legal relations?
How does this regulate the law?
As for the supply contract, it comes into force only when the parties are able to agree on the quantity and quality of products. But the conditions about its cost, the deadline for payment and transfer are secondary.
According to the generally recognized norms of the Civil Code of the Russian Federation, supply agreements, as well as cooperation of legal entities with ordinary citizens, must be executed in writing. But a supply transaction is considered entrepreneurial if the agreement itself has a special subject composition, or when at least one of the parties acts as an entity with the official status of an entrepreneur. Among the features of a commercial transaction, both the use of simple forms of its conclusion and the clear wording of the basic conditions, which are formed by the rules of official agreements or merger transactions, are distinguished.
Transfer of ownership of goods under a supply contract
Consider the basic methods for the emergence of ownership of goods delivered. As a rule, they are divided into derivatives and initial ones. In particular, the latter include those in which the ownership right is formed regardless of the desire of the previous owner. But to derivatives - those in which the right of ownership is formed at the request of the previous owner. In turn, according to the criteria of succession, the original methods of creating the right of ownership may include those in which the right of possession may arise even on a thing that previously did not belong to anyone. But to derivatives - those in which the right of ownership is formed in succession.
I must say that with the presence or absence of the transfer of rights and obligations from one to another, the legislator associates certain notarial consequences.
The transfer of ownership of the goods under the supply agreement usually directly depends on the moment of its official transfer to the buyer. Although the agreement may include quite another. Examples of this may be as follows:
- the moment of unloading units of goods to the first transporter;
- the time of delivery of the goods to the buyer;
- moment of transfer of money;
- other conditions.
Thus, the formal transfer of property to the buyer in such a situation can be considered delayed in relation to the usual sequence of transfer of ownership of goods in the Civil Code of the Russian Federation.
And most importantly, do not forget that the transfer of property means not only the actual delivery of a particular product, but also the official transfer of property to a specified person. A competent understanding of the moment of transfer of ownership of the goods during the disposal of property is of great importance, since from a certain moment the following legal consequences occur:
- the recipient becomes the owner of all three advantages of the owner;
- the recipient passes the risk of loss or breakdown of the thing;
- debt collection or seizure may be made on the property of a person;
- the owner takes all the costs of maintaining the property.
How does this happen with imported goods?
In the case of the acquisition of imported products, legal relations automatically relate to foreign trade. These transactions are governed by Federal Law No. 164, adopted in 2003. According to the above legislative act, the acquisition of goods from abroad is possible through one of three methods:
- in connection with the conclusion of a supply contract directly with a foreign party;
- in collaboration with a Russian intermediary;
- in collaboration with a foreign intermediary.
The right to transfer ownership of the imported goods should be directly stipulated in the contract. Its criteria may be a specific date or location of the product. If the contract does not contain such indications, the legal relationship is regulated by the legislation of the party with which the contract is most closely associated. Article 1211 of the Civil Code recognizes this right of the seller's country. In addition, these relationships are governed by the Incoterms Code of Practice.
Features of tax legislation
As already established, the transfer of ownership of goods under the Civil Code of the Russian Federation is regulated simply. However, such legal relations are inextricably linked with tax. How does such legal regulation take place?
In the current period, the main source of regulation of tax relations in our country is the Tax Code of the Russian Federation (Tax Code). In addition to the Tax Code of the Russian Federation, the sources regulating relations in this area include the provisions and instructions developed by the Ministry of Finance of the Russian Federation and the Inspectorate of the Ministry of Taxes of the Russian Federation. Certain provisions of the code are explained using letters from the Federal Tax Service and the Ministry of Finance of the Russian Federation, as well as other regulatory legal acts. However, the letters do not have the force of law, can be used as recommendations and are a reflection of the opinion of the agency that wrote them.
To determine the procedure for levying income tax, the deferred order applicable in the transfer of ownership of goods acquires practical importance. On 01.01.2006, amendments to the Tax Code of the Russian Federation entered into force (the changes are reflected in Law No. 158-FZ of December 6, 2005), according to which, when calculating the value added tax, the previously adopted specificity upon transfer of ownership does not affect the procedure for calculating VAT under contracts delivery. Article 167 of the Tax Code of the Russian Federation, when establishing the tax base for calculating VAT (including in relation to the sale) refers to the need to apply the earlier of the following dates:
- dates of transfer of rights to property, goods, services;
- the date of transfer (partial transfer) of funds for the upcoming transfer of property rights, including the delivery of goods.
If the rights to the goods have been transferred, and the simultaneous transportation and shipment of the goods has not been made, for the purposes established by the main 21 of the Tax Code, such a change of ownership of the goods is equivalent to its actual shipment.
The main attention here deserves consideration of the tax consequences of calculating income tax with a deferred procedure for transferring ownership of the goods after payment.
The regulation of tax relations related to the procedure for the proper calculation and payment of corporate income tax is established in Chapter 25 of the Tax Code.
What are the main difficulties?
Taxation problems are complex and have priority in the current activities of the state. The legislator introduced more than one hundred and thirty amendments to the Tax Code of the Russian Federation over the past 8 years.
When applying the accrual methodology, Article 271, Clause 3 of the Tax Code of the Russian Federation considers the date of actual sale of goods, defined in Art. 39 p. 1 of the Tax Code., Date of receipt of real cash from sale. The chargeable transfer of goods with the change of ownership is taken into account. In this case, the actual payment for the goods and the actual receipt of the property or money in the payment account is not taken into account.
If the supply contract provides for the preservation of the ownership of the goods by the seller until the actual payment of the goods or other circumstances, as well as a change of ownership in the contract, the buyer loses the opportunity to dispose of the goods, including by transferring it to third parties, unless the purpose and properties of the goods otherwise other conditions are provided by law or in the contract. This is established in article 491 of the Civil Code of the Russian Federation (Civil Code).
In the absence of payment for the goods within the time period stipulated by the contract or in the absence of other circumstances of the change of ownership of the goods, the seller has the right to demand the return of the goods (the transfer of ownership of the goods does not occur), unless otherwise provided by the contract.
According to Art. 223 of the Civil Code, ownership of the new owner arises from the moment of transfer of the thing, in the absence of other conditions in the law or contract. This gives the right to indicate the condition of a special moment when changing the owner and in the supply contract. However, one should not confuse the legal nature of the change of ownership and the moment the party transfers the goods established in Art. 458 of the Civil Code of the Russian Federation. In the first case we are talking about property law, and in the second - about the fulfillment of an obligation. In both cases, the procedure for transferring ownership of the goods may vary.
Fulfillment of the obligation by the seller does not always coincide with the change of ownership of the thing: from seller to buyer. The terms of the contract may provide for a delay in the change of ownership of the goods for a certain period, provided for the return of the thing back to the seller. There is no implementation in this case. When concluding a contract, it is important to remember that at one’s own discretion, the moment of a change of ownership and the transfer of ownership of the goods can only change in relation to a strictly individualized thing. At the same time, the buyer must also comply with this condition without changing one product for another upon receipt. When a buyer replaces or mixes a product with a similar one (for example, in containers, containers), the condition for changing the moment of transfer of ownership of the goods (imported or domestic) becomes void. The ownership of the goods in this case passes at the time of its transfer, and the return of the goods will be its implementation.
What are the clarifications about the practice?
The opinion and recommendations of the Ministry of Finance on the transfer of ownership after payment for the goods and taxation when it is deferred are as follows.
Currently, there are two versions of estimates and consequences of this operation regarding tax payments before confirming the right to own a particular product and, accordingly, paying income tax on its sale.
Recognition of income from the date specified in the contract
The Ministry of Finance comments on its opinion on this letter as follows: paragraph 1 of Art. 39 of the Tax Code of the Russian Federation on the work and services of organizations or individual entrepreneurs provides that the sale of goods or services is carried out as follows.
Sales of products until the complete approval of the absolute right of possession of person N on behalf of K is made, starting from payment by person K for person N to the final approval of the agreement on property rights. This is a legal fact confirming the absolute right to sell goods or any services by person N. Thus, the shipment of goods and the transfer of ownership here usually coincide.
According to paragraph 2 of Article 39 of the Tax Code, the place and date of sale of goods (or any services) are established. Thus, the payment of taxes by the party acquiring the goods begins after the approval of ownership of the goods, organization or services.
Article 271 of the Tax Code of the Russian Federation, in turn, reports the following. If the transfer of ownership is entered in the supply contract when the goods are delivered at the moment of receiving it by person Н from person К, then income from it and, accordingly, tax are charged from the day the goods arrive on the territory of person N.
The seller has no right to put another date on income. The term specified in the supply contract is the only one and is not subject to change.
Article 30 of the Civil Code (paragraphs 2 and 3) also govern the following. If the dates of conclusion of the contract and its execution do not coincide and there is no exact delivery date, then such deliveries of products must be in separate batches. So that the cooperating parties do not have disputes about the delivery time, you need to familiarize yourself with the rules provided for in Art. 314 of the Civil Code of the Russian Federation and Art. 457 of the Civil Code of the Russian Federation.
So, you need to understand that the delivery time of products is the most important point in the agreement of the parties. Taxation on the sale of goods begins on the basis of this contract. The right to transfer ownership of goods arises precisely from this moment. There are, of course, exceptions - voluntary recognition of the taxpayer income from the sale of goods, before the established rights to the sale or any other services.
Another opinion
There is also the second position of the Ministry of Finance on this issue, according to which the recognition of income at the date of shipment is supposed. Proceeds from the sale of goods are taxed if full payment has been made upon conclusion of an agreement on the transfer of rights to sale.
Knowing this, you should understand that the proceeds from the sale of goods are taxed on the basis of the date in the settlement documents and the transfer of the goods to the buyer. This rule reflects the actual relationship of the seller and the buyer (for example, the purchase and sale of a car) and the competent execution of the contract of sale and transfer of ownership of the goods in the documents.
The tax inspectorate warns: the inclusion of a deferment in the terms of the contract is not enough, it is necessary to comply with additional requirements on this issue, according to paragraph 7 of the Information letter of the Presidium of the Supreme Arbitration Court of the Russian Federation dated December 22, 2005 No. 98.
A detailed explanation is described in the position of the Ministry of Finance. The buyer must take measures for the full individual use of the goods, the owner of which he became. Otherwise, he will not be able to fully dispose of the goods (sale, rental, and so on). Documents confirming the individual use and transfer of ownership of the goods must be stored separately.
The seller of the goods needs to control the integrity and availability of the goods at the buyer before the deadline for full ownership of the goods by the buyer. Such precautions will help to avoid the additional tax for the seller in the event of a sale or any actions that generate income from the use of the goods by the buyer. In addition, this will help to avoid additional paperwork and disagreement between the buying and selling parties.
What does this look like in an example?
A certain LLC “X” (hereinafter referred to simply as the seller), acting on the basis of the concluded contract, supplied some material values to the buyer. Additional agreements to this agreement determine that the goods become the property of the buyer immediately after full payment. This corresponds to article No. 491 of the Civil Code. The transfer of ownership of the goods here is considered so. At the time of the seller’s tax audit, the goods already shipped were only partially paid, but have already been transferred to the buyer's warehouse. The tax authority ignored that the seller did not receive the funds for the goods in full and calculated income tax and penalties, although income from sales was considered not yet received.
Relying on the contract and its additional agreements, as well as on clauses and articles of tax legislation, the seller in this case has the right to apply to the court immediately after a tax audit.
In view of the huge number of such cases, the Supreme Arbitration Court of the Russian Federation considered it necessary to write a letter explaining the interpretation of tax legislation in similar situations. In Letter No. 98 of December 22, 2005and instructions were given to the Arbitration Courts in similar cases, the procedure for their consideration and the specifics of applying certain chapters and paragraphs of the Tax Code.
The court did not question the legality and possibility of a special procedure for the transfer of goods and rights to them under the contract, but in order to be able to not pay income tax before it is actually received - the receipt of funds for the goods, the seller and the buyer should observe certain conditions, which were not observed.
The first mistake was that neither the seller nor the buyer took measures to delimit the goods from all other material values of the buyer from the moment of shipment to the completion of mutual settlements.
Detailed explanation
From the position of the tax authorities, it turns out that the date of expenses will depend on the particulars of accounting for goods in a particular business entity, but the date of receipt of income in this case (the goods were not individualized during shipment and subsequent storage) will be equal to the date of shipment itself, despite the clauses of the contract, it applications, articles of both the tax and civil codes and the fact that the goods are not sold and the income from which tax must be paid is not received or partially received. Thus, the seller pays income tax out of pocket.
In addition, the seller could not and did not exercise any control over the safety of his goods, could not be sure that the goods were with the buyer, which means that the features of the contract for tax purposes are not taken into account. The court agreed with this tax position.
Further, in the Letter of the Supreme Arbitration Court of the Russian Federation, the supplier’s rights to demand the return of the shipped values are specifically mentioned if they have not been paid in full by the prescribed time. For this, a ban is provided for the buyer regarding the ability to dispose of goods, alienate them, and resell them. It turns out that there is a connection between this ban and the tax obligations of the existing supplier. If the supplier does not want to pay tax on future profits immediately after shipment, then he must ensure that the goods are not only delimited, individualized from the buyer's other property, but also monitor the safety of the goods until they are paid in full. As soon as this happens, the countdown begins on the transfer of ownership of the goods.
How physically it can be done locally, the Court did not explain.
What does this mean?
It’s technically possible that the seller has the right to request documents from the buyer that the goods are safe in the warehouse, literally in safekeeping and reflected accordingly on the balance sheet of the enterprise.
In addition, it is necessary to draw up a document stating that the product is individualized and separated from other property. This document should be done by both parties. The presence of additional documents, the time of their submission and the procedure for execution must be indicated in the supply contract or in its annexes.
Details must also be complete and in accordance with Article 9 of the Federal Law No. 129 “On Accounting”, or rather, must have the title of the document and the dates of its preparation, signing, the content of the business transaction and its measuring instruments in cash or in kind, full names with details of participating organizations, responsible officials for the business transaction and their signatures.
An example of such a name: "Act of inventory of goods received under contract No. X for safekeeping." All such nuances, as well as special clauses of the contract and its annex, which describes the control over the condition of the goods, will be additional, but insufficient arguments and evidence of the seller’s rightness.It is clear that virtually complete control over the goods can only be carried out subject to constant, full access to the desired territory of the buyer by the supplier.