In March the supplier received a preliminary payment for the goods, and in June he/she returned it to the buyer (payer of the value added tax; hereinafter – VAT) because of the impossibility of fulfilling the contractual obligations. At the same time, the tax invoice (hereinafter – TI), drawn up on the date of the first event, is blocked by this time. When is it possible to register the adjustment calculation (hereinafter – AC) to this TI? What are the VAT consequences for both counterparties?
When AC can be registered
The procedure for adjusting VAT is regulated by Art. 192 of the Tax Code of Ukraine (hereinafter – TCU). If the supplier returns the amount of prepayment of goods/services, the amount of tax liabilities and tax credit of the supplier and the buyer should be subject to an appropriate adjustment made on the basis of AC to the TI previously drawn up.
In addition, it should be taken into account that the return of the prepayment by the buyer affected the reduction of the amount of compensation for the cost of goods to their supplier. Given the requirements of para. 192.1 of TCU, in this case, the supplier draws up AC to TI, and the registration of a reducing AC is the buyer’s obligation.
It should be noted that this is the way in case if TI is registered in the Unified Register of Tax Invoices (hereinafter – URTI). However, the registration of TI was suspended in this situation. Accordingly, it will be possible to register AC to this TI only after it is unlocked and registered in the URTI.
Even if the buyer submits AC for registration, he/she will first have an automatic pre-registration check. This is required by para. 12 of the Procedure for maintaining the Unified Register of Tax Invoices, approved by the Cabinet of Ministers on December 29, 2010, No. 1246. The information in the URTI contained in the TI being corrected should be checked. That is, the data of AC are checked with the data of the TI, which was registered in the URTI.
Since in this case the TI was blocked and, consequently, it was not registered, in this case, the AC to it would not be allowed to register it. This should be reported by a receipt for the non-acceptance of the AC for registration in the URTI. Such a receipt is generated and sent to the VAT payer in electronic form during the operational day.
First, the seller should register the TI and only then the buyer will be able to submit a decreasing AC for registration.
VAT consequences for the buyer
In this case, the buyer should not worry, because he/she did not lose anything and returned the money back. In addition, he/she has nothing to adjust, because the tax credit for the operation for advance payment transfer to the supplier did not get into the VAT declaration, because the TI was not registered.
After registration of the TI in the URTI, the buyer does not need to submit a clarifying calculation to the VAT return for March. The buyer should reflect the tax credit for this TI in line 10.1 of the VAT return in the reporting period in which the TI is registered. At the same time, in line 14 of the same declaration, he/she will reflect adjustment of the tax credit for the same amount of VAT, but with the sign “-”. To reduce the tax credit, the tax authorities do not require a wait to register the adjustment calculation.
VAT consequences for the seller
Unlike the buyer, the seller is obliged to include the VAT amount specified in the TI to the tax liability for the relevant reporting period (March), regardless of the fact of its registration. Now he/she has something to lose: he/she remained without money and is not able to adjust the tax obligations without AC registered.
Therefore, it is in the interests of the seller to submit an unlocking package of documents as soon as possible and to register the TI. Only then the buyer will be able to register with the AC to it, and the seller, based on the AC registered, will finally reduce its tax obligations (reflect them with a “-” sign in line 7 of the VAT return for the corresponding month, in which the AC will be registered). After 1095 days, the system will not miss the tax invoice, as well as the adjustment calculation to the registration.
Article 192 of the TCU does not limit the payers in the timing of the VAT adjustment. Thus, if the AC remains unregistered after 1095 days, the seller will lose the chance to reduce tax liabilities.
