Federal law No 303-FZ of August 3, 2018 «On Amendments Made to Legislative Acts of the Russian Federation Laws on Taxes-and-Duties» will increase the base rate of VAT from 18% to 20% from January 1, 2019.
The general rule for contracts that straddle different reporting periods (for example payment for goods made in one period and shipment of the goods in another) is that the VAT base will be determined on the earliest of the 2 dates:
- shipment date,
- prepayment date.
With regard to such contracts, Emerging Markets Group would like to draw your attention to additional details regarding VAT calculation during the VAT transition period between 2018 and 2019:
- If prepayment is received and shipment is made before January 1, 2019, the prepayment VAT shall be calculated at the effective rate of 18 % (items 3, 4 of the art. 164 of Tax Code of the Russian Federation);
- If prepayment is received and goods (works, services) are realized in 2019, the VAT shall be calculated at the rate of 20%;
- If prepayment is received in 2018 (and VAT calculated at the rate of 18/118) and realization is made in 2019 at the VAT rate of 20 %, the final cost of goods (works, services) considering VAT payable by the customer shall be increased by 2%. This fact will be reflected in tax invoices and delivery notes.
We therefore recommend that you check agreements with suppliers and introduce amendments concerning VAT amounts (if necessary) to avoid possible negative consequences such as losses and disputes with customers about the final cost of goods (works, services).