Imagine the situation: a seller and a buyer (both − legal entities in the general system of taxation) concluded a contract for delivery of goods, according to which the buyer will receive a certain monetary incentive payment (bonus) from the seller by the results of sales. How should it be reflected in accounting?
Accounting rules
We have two different transactions: one is the sale of goods, the other − receiving of services.
The seller reflects income from the sale of goods in the accounting in consideration of value added tax (hereinafter − VAT) by conducting: debit subaccount 361 “Payments with domestic buyers” with a loan subaccount 702 “Revenues from the sale of goods”. And he/she writes down the cost of goods sold simultaneously with recognition of income: debit subaccount 902 “Cost of goods sold” − credit subaccount 281 “Goods in storage”.
In turn, bonuses are motivational payments paid by the seller for the marketing services provided by the buyer. In the account of the seller, these amounts are reflected in the cost of sales − by debit account 93 “Sales costs” with a loan subaccount 631 “Payments with domestic suppliers”. After all, according to para. 19 of Accounting Standards 16 “Expenses”, sales costs include such costs associated with the sale of products as advertising expenses and market research (marketing). In addition, it should be remembered that sales costs are costs associated with operating activities that are not included in the cost of goods sold (para. 17 of Accounting Standards 16).
Accordingly, the buyer, who purchased the goods for further sale and will receive bonuses for promotion of goods in the market, there is an income on the amount of bonuses. The amount of such remuneration is included in other operating income of the buyer (para. 7 of Accounting Standards 15 “Revenue”).
In the accounting of both counterparties, these operations should be reflected on the basis of a confirmatory primary document − an act on the provision of services.
Taking into account the above, under the contract of sale of goods, which provides for the payment of the bonus, the seller has an income for the goods sold and at the same time the cost of the amount of bonus, which he/she must pay to the buyer. The payer has a payable on the received but unpaid goods, and simultaneously accounts receivable on the accrued but not received bonus. We should find out if it is possible in this case to arrange the offsetting of debts or whether the buyer can pay a bonus for the goods received.
Terms of offsetting counterclaims
The possibility of offsetting counter claims is provided in Art. 601 of the Civil Code of Ukraine. In accordance with this norm, the obligation is terminated by the counting of countervailing homogeneous claims, the term of which has come to an end, as well as requirements which term of execution is not established or determined by the moment when the claim is made.
That is, a number of conditions are required for termination of obligations.
Firstly, the deposit is possible provided that the obligations are counter-parties. That is, for the offset there is a necessary and sufficient presence of two obligations. At the same time, the person acting as the lender for the first obligation must be debtor for the other, and vice versa, the debtor under the first obligation must be a creditor for another of them.
Secondly, the claims subject to credit must be homogeneous, in this case − monetary.
Thirdly, the offset is possible only on condition that the deadline for the fulfilment of the obligation has come, or the term of execution is not established or determined by the moment of submission of the claim.
Taking into account the above mentioned requirements, offset is quite possible in this case. As a rule, such offsetting shall be made by an act on the enrolment of countervailing homogeneous claims and may be made, either at the request of one of the parties, or by a bilateral agreement between the parties.
Taxation of bonus offers
In addition, do not forget that, in accordance with the requirements of para. 185.1 of TCU, the subject to VAT taxation is transactions for the supply of both goods and services. Consequently, marketing services are subject to VAT on general grounds − at a rate of 20%.
As a seller acts as the recipient of services, he/she will be entitled to a tax credit only if a tax invoice composed by the buyer to be registered in the Unified Register of tax invoices (hereinafter − URTI) (if the buyer is registered as a VAT payer).
It should be recalled that the obligation to compile and register the tax invoice for marketing services in URTI assigned to the buyer of goods – VAT payer. To fulfil the requirements of paras. 187.8, 201.1 of TCU it is he/she who has to make a tax invoice on the date of the occurrence of tax liabilities (that is, on the date of receipt of a reward in the form of a bonus from the seller of goods or on the date of signing the act of the services provided) and to register it in URTI in the established term by para. 201.10 of TCU.
