VAT vouchers for the previous periods filed in with violations of the established order are again in the focus of attention of the tax authorities
We draw your attention that the issue of lawfulness of formation of the tax credit on the basis of “defective” VAT vouchers, received with delay, is becoming actual again.
In practice the sellers frequently write out VAT vouchers for the one tax period but in fact pass them to buyers in the other tax period. As a result buyers receive VAT vouchers with delay – in the other tax period.
According to para. 198.6 of Article 198 of the Tax Code in case if the taxpayer does not include the VAT amount on the basis of received VAT vouchers to the tax credit in the respective reporting period, this right is kept for them within 365 days from the date of VAT voucher execution. Considering the abovementioned provision, buyers may include the VAT amounts under the delayed VAT vouchers to the tax credit within 365 days from the date of their issue.
The lawfulness of such approach is also confirmed in the Generalized tax consultation “On certain issues on reflection of VAT vouchers, issued in the previous periods, in the tax accounting of VAT of reporting period and formation of the tax credit on the basis of such vouchers” approved by the Order of the State Tax Service of Ukraine No. 127 dated February 16, 2012. Everything seems to be clear, but what to do when the VAT voucher of the previous periods is executed with violation?
According to sub-para. 11 of para. 201.10 of Article 201 of the Tax Code in case the seller of goods/ services violates the order of filling and/ or the order of registration of VAT voucher in the Unified Register, the buyer of these goods/ services has the right to attach a complaint against such seller to the VAT return for the reporting tax period, which is the ground for including of the VAT amounts to the tax credit.
In practice buyers can submit the complaint against the seller for violation of the order of completion only after receiving of the VAT voucher so far as only then it is possible to define whether it is completed in accordance with the requirements of the tax legislation or there is a violation of requirements on completion/registration of VAT voucher by the seller.
Impossibility to submit the complaint against the seller prior to the receipt of the VAT voucher is proved by its form (Annex 8 to the VAT return approved by the Order of the Ministry of Finance of Ukraine No. 1492 dated November 25, 2011), completion of which requires to indicate the VAT voucher requisites and description of seller’s violation of the completion procedure and/ or registration procedure of VAT voucher.
Previously the tax authorities argued that the buyer of goods/ services has the right to attach the complaint against the seller to the VAT return for that reporting tax period in which the VAT voucher has been completed. In case the complaint against the seller is submitted with regards to the VAT vouchers issued in the other periods than the period, in which the VAT return is submitted (i.e. in the previous periods), the buyer has no right to a tax credit under such VAT vouchers.
Proceeding from the analyses of norms of the Tax Code (para. 198.6 and para. 201.10) it follows that the aforementioned position of the tax authorities is groundless and the buyer has the right to form the tax credit and at the same time to complain against the seller within 365 days from the moment of the VAT voucher issue.
The lawfulness of such approach to the implementation of the provisions of the Tax Code is confirmed by the administrative courts as well. Particularly, it is evidenced by Ruling of the Kirovograd Circuit Administrative Court of Appeal of April 22, 2013 in case No. 811/974/13-а, Determination of the Vinnytsya Administrative Court of Appeal of March 21, 2013 in case No. 802/163/13-а.
The District Administrative Court of Kyiv in its Regulation of March 12, 2013 in case No. 826/2127/13-а stated the following:
Proceeding from the analysis of the aforementioned legal norms the court comes to a conclusion that the complaint against the supplier shall be submitted together with the tax return in that reporting period, in which the taxpayer include VAT amount to the tax credit”.
It would seem that the issue has been finally regulated by the “positive” letter of the State Tax Service of Ukraine No. 6451/7/15-3117-10 dated November 17, 2011, which states that “the complaint against the supplier shall be submitted only with the tax return for that reporting period, in which the taxpayer has included the VAT amount to the tax credit”.
But the State Tax Service of Ukraine by its letter No. 9455/6/71-12/15-3117-16 dated November 21, 2012 has withdrawn the previous “positive” letter from the places of use and at the moment provides consultations of the opposite content stating that the buyer of the goods/ services has the right to add the complaint against the seller to the tax return for the reporting period in which such VAT voucher has been completed. Proving the abovementioned the tax authorities refer to the para. 201.6 of Article 201 of the Tax Code of Ukraine according to which VAT voucher is a tax document which is simultaneously reflected in the tax liabilities and in the register of the issued VAT vouchers of the seller and in the register of the received VAT vouchers of the buyer.
We are to note that such position of the tax authorities does not comply with the principles of VAT taxation and contradicts the norms of the Tax Code as far as tax legislation does not contain the limitations of the taxpayer right on submission of complaint against the seller only in the period of the VAT voucher completion, but it just establishes the rule of submission of the complaint in the period when VAT amount is included to the tax credit, and the taxpayer has 365 days for this from the date of VAT voucher issue.
Nevertheless, the tax authorities again begin to carry out cameral tax audits of VAT returns and complaints against the sellers attached thereto and reject the right for the tax credit with regards to the “defective” VAT vouchers of the previous periods disputing inter alia the completeness of the primary documents submitted together with such complaint according to sub-para. 11 of para. 201.10 of Article 201 of the Tax Code.
As a preventive measure against the another “know-how” of the tax authorities we suggest to submit the complaint on refusal of the seller of goods/ services to provide VAT voucher in case if the VAT voucher has not been received prior to the VAT return submission.
We are to note that such complaint (the column 7 of the relevant table) shall contain the number and the date of the document which confirms the fact of refusal. Such document may be the copy of a letter evidencing the buyer’s request to the seller for provision of VAT voucher, and, a letter (if it is available) with the refusal of the seller to provide it.
Letter of request shall be composed in a free form of the oriented content:
“Following the provisions of para. 201.10 of Article 201 of the Tax Code of Ukraine, [the name of the buyer] would like to ask [the name of the seller] to provide the VAT voucher on goods/services supply (on the amount of money transferred as a prepayment (advance payment)) from [date of supply/advance payment].
In case of failure to provide the respective VAT voucher until 10th of [month, year] (the month following the month of supply/advanced payment fulfillment) [the name of the buyer] will have to use the right provided by the sub-para. 11 of para. 201.10 of Article 201 of the Tax Code and to submit the complaint against [the name of the seller] for the refusal to provide the VAT voucher, what is the ground for carrying out of documental unscheduled audit of [the name of the seller]”.
The above commentary presents the general statement for information purposes only and as such may not be practically used in specific cases without professional advice.