Accrual and refund of VAT on the purchase and sale of real estate: what do legal entities and individuals need to know?

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Published: 12/05/2017

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Many legal entities purchase real estate as an investment. Registration of the transfer of ownership of an apartment will be no different from cases when it is acquired by an individual. However, there are a number of features that need to be taken into account, including in tax matters.

• Restrictions when buying an apartment
• Taxes
• Documentation
• Nuances of registration of shared ownership

Are sales transactions taxable?

Value added tax is not always paid when buying and selling real estate. Speaking about VAT, it should be understood that it is calculated, and therefore subject to reimbursement, only on transactions in which one or both parties are legal entities. Individuals pay personal income tax only if the sale of the premises is carried out within the first five years after acquiring ownership of the property.

Residential real estate transactions:

• VAT is subject to VAT if a residential building is sold that has not been put into operation.
• Not subject to VAT on the sale of completed objects - apartments, rooms, houses, shares in premises.

When buying and selling commercial real estate, VAT is paid on the amount received from the sale.

In the Russian Federation, the VAT rate from January 1, 2019 is 20%. Depending on the situation, it can be calculated from profit or revenue.

Documentation

When purchasing residential real estate, a legal entity will require the following package of documents:

• Charter of the enterprise.
• Certificate from the Unified State Register of Legal Entities.
• The decision of the participants of a legal entity on whether or not a transaction belongs to the category of major ones.
• A document confirming the consent of the parties to the purchase and sale of real estate.
• A power of attorney or other document (order, decision) authorizing the right to carry out a transaction on behalf of a legal entity.

Who pays and when?

In accordance with Chapter 21 of the Tax Code of the Russian Federation, payment of VAT is assigned to the seller in cases where ownership rights to the goods sold are transferred . When selling real estate, the fact of the transaction is secured by an agreement on the transfer of rights, which is registered in Rosreestr. The costs of paying value added tax are borne by the party that received funds for the sale of the object.

As for the deadline for paying VAT, there are often many disagreements with it. The difficulty lies in the fact that, according to the law, ownership rights arise only at the time of state registration of the purchase and sale transaction.

In fact, the transition date is recognized as the day when the corresponding entry is made in the Unified State Register. But the final registration procedure takes a lot of time, sometimes up to several months. At the same time, the accountant faces a dilemma when exactly to make calculations and transfers.

To resolve the dispute, an additional clause 16 was added to Article 167 of the Tax Code of the Russian Federation. It contains clear instructions that the tax calculation date is the day of bilateral signing of the transfer deed for the property.

Risks

Problems for individuals buying real estate from companies arise if the transaction is declared invalid for any reason. This is possible when it was committed without the consent of the company participants or by a person who did not have any authority to do so. Result: the parties are obliged to return to each other everything received under the transaction (the buyer - the apartment, and the seller - the money).

To avoid such negative consequences, it is advisable to carefully check the documents on the transaction and perhaps even entrust this procedure to a notary. The property being sold may well turn out to be received by the legal entity from another company (for example, as collateral or transferred as payment for goods).

If the former owner decides to challenge the transaction, the individual may also suffer . When a company's assets are sold already at the bankruptcy stage, an arbitration manager appointed by the court can challenge them if he considers such transactions illegal, aimed at siphoning off income.

Another problem is related to the fact that an apartment owned by a company may have the status of non-residential premises and changing it will require additional costs.

Important ! When buying an apartment from a legal entity, you need to check a number of documents: from the state registration certificate to the owners’ permission for the transaction. But in fact, the risks of transactions with legal entities are no higher than those that may arise in relationships with individual sellers.

At what point should I take it for deduction?

The Tax Code of the Russian Federation provides for the possibility of reducing the tax base by the amount of tax deduction established by law. You can receive a deduction only if you follow a number of rules :

1. The purchased object is used for operations that are subject to VAT.
2. The buyer has an invoice from the seller.
3. The purchased property is included in the organization's accounting records.

If the required conditions are met, only one question arises when the calculation can be made. The VAT tax deduction is theoretically also applicable from the date of actual transfer of rights, but the opinions of different departments on this issue are divided:

• The Ministry of Finance believes that it is necessary to deduct VAT only after the object has been placed on the balance sheet of the enterprise, that is, after entering information into the Unified State Register of Real Estate.
• The courts take a different point of view and believe that it can be resorted to after the funds for the property have been transferred.

The last paragraph of the requirements for the use of a tax deduction indicates that it can be applied no earlier than the property right is registered in the Unified State Register of Real Estate.

Results

Regardless of the taxation regime, organizations or individual entrepreneurs, when purchasing state property or leasing it, become tax agents. However, in order to acquire the status of a tax agent when making transactions with state property, it is also necessary to comply with certain conditions discussed in the article.

In what cases can an organization or individual entrepreneur be recognized as a tax agent and what obligations arise in this case, read the article “Who is recognized as a tax agent for VAT (responsibilities, nuances).”

You can learn about how a tax agent fills out a VAT return from the following articles:

• “How to correctly fill out a VAT return for a tax agent?”;
• “How can a tax agent fill out Section 2 of the VAT return correctly?”.

You can find more complete information on the topic in ConsultantPlus. Free trial access to the system for 2 days.

Accounting

Paragraph 1 of Article 167 of the Tax Code of the Russian Federation establishes the deadlines for calculating the tax base. They are determined for real estate according to the following parameters:

• Time of transfer of rights to real estate.
• Payment of full or partial amount of funds for the future transfer of rights.

The day that comes earlier in time is taken into account for calculation. It is important that an invoice is issued within the first five days after payment or transfer of the buyer's rights.

At the moment of transfer of ownership of the object, the seller writes it off from the “Fixed Assets” account, and the buyer puts it on his balance sheet. Accrual of depreciation payments stops on the 1st day of the month following the period of actual transfer.

Return Policy

The tax legislation of the Russian Federation gives a hypothetical right to receive a property deduction to any taxpayer. Both individuals and legal entities can take advantage of the deduction, subject to a number of conditions.

The state reimburses previously collected taxes in the form of:

• Personal income tax, if we are talking about individuals.
• VAT for legal entities.

You can use the granted privilege by performing a number of required actions.

Is reimbursement possible for individuals?

For individuals, there is no such thing as a VAT refund when registering the purchase and sale of real estate. VAT is not calculated or collected from citizens who do not have legal status. They pay personal income tax of 13% (for residents) and 30% (for non-residents).

When purchasing housing, an individual has the right to return the personal income tax paid over the last two years, but not more than the maximum established amount. In accordance with the Tax Code of the Russian Federation, citizens can get back :

• Personal income tax on 2 million rubles spent on the purchase of property.
• Personal income tax on 3 million rubles, which were accrued as interest for the use of mortgage funds.

The benefit is available only to those persons who have officially worked for the last two years and paid taxes to the budget.

Features of calculation by legal organizations

A legal entity will receive a VAT refund if the following conditions are met:

1. There is documentary evidence of the transaction. An invoice, acceptance certificate, purchase and sale agreement, etc. are provided.
2. The transaction is real and was carried out exclusively for use in business activities and making a profit.
3. The goods have been capitalized, that is, the property has been accepted into balance sheet account 01 “Fixed Assets”.
4. The transaction has no dark spots along the entire process of execution, including counterparty links.

To receive a VAT refund, you must meet all the stated criteria at once.

Tax agent – ​​buyer of treasury property

When purchasing state or municipal property, the duties of a tax agent arise only if the following conditions are simultaneously met (paragraph 2, paragraph 3, article 161 of the Tax Code of the Russian Federation):

• the seller (transferring party) is a state authority or local government authority;
• the property constitutes the treasury of the Russian Federation, a constituent entity of the Russian Federation or a municipal entity, i.e. is not assigned the right of economic management or operational management to a specific state or municipal institution (enterprise);
• This operation is recognized as an object of VAT taxation in accordance with paragraphs. 1, 2 tbsp. 146 Tax Code of the Russian Federation;
• the buyer is a legal entity or an individual entrepreneur (letters of the Ministry of Finance of Russia dated August 2, 2010 No. 03-07-14/55, dated December 14, 2009 No. 03-07-14/114). Individuals who are not engaged in entrepreneurial activities are not assigned the duties of tax agents, and VAT is paid to the budget by sellers of the specified property (decision of the Constitutional Court of the Russian Federation dated July 19, 2016 No. 1719-O (given in paragraph 14 of the Review of Legal Positions sent by a letter from the Federal Tax Service of Russia dated 12/23/2016 No. SA-4-7/ [email protected] ), letters of the Ministry of Finance of Russia dated 11/08/2012 No. 03-07-14/107, Federal Tax Service of Russia dated 07/13/2009 No. ШС-22-3/ [email protected] , Resolution of the Presidium of the Supreme Arbitration Court of the Russian Federation dated April 8, 2014 No. 17383/13).

Procedure

The procedure for VAT refund is regulated by Art. 176 Tax Code of the Russian Federation . It involves the following steps:

1. Collecting a package of documents that will confirm the need for a refund. It primarily includes an invoice, as well as a purchase and sale agreement, payment certificates and an extract from the sales and purchase books.
2. Entering data into the tax return. It contains information about the full cost of the purchased property, and also provides a calculation of the amount of VAT to be refunded.
3. Submitting papers to the Federal Tax Service.

The following steps are taken by the tax authority:

1. A desk verification of the declared information is carried out. Three months are allotted for its implementation.
2. Based on the results of the inspection, a decision is made to return the funds or refuse it.
3. The taxpayer is sent a corresponding written notice. If any violations are identified, the taxpayer is given 30 days to eliminate them and challenge the refusal to refund.
4. The refunded amount is transferred to the recipient's account.

The money is transferred within five days from the moment the decision on VAT refund is made.

Difficult issues and bottlenecks

VAT refund, although it is a taxpayer’s right, is often intimidating due to the complexity of the procedure. Of particular concern to legal entities is the desk audit, which is carried out by the Federal Tax Service to establish the legality of the transaction and verify its real value.

To avoid complications, it is important that the seller does not disappear after the sale. The reliability of the selling party, as well as its relationship with the buyer, is checked first . Other factors are also important, for example, whether the seller pays VAT, whether he is authorized to conduct transactions, etc. These difficulties can only be avoided with a careful approach to the acquisition of property.

Another common problem when refunding VAT is confirming the source of income. You should be prepared for the need to collect and provide evidence that the funds spent on the purchase were obtained legally. During the audit, documents will be requested not only for the organization itself, but also for its counterparties.

Payment of VAT on sales and purchases, as well as its reimbursement, depends on a number of factors. Legal entities can reduce their expenses only if a number of legal conditions are met.

Features of real estate transactions of organizations with the participation of citizens

An agreement for the purchase and sale of an apartment, including by proxy, with individuals or legal entities, as mentioned above, is always drawn up in writing. Notarization is required only when minors are involved in the transaction or a share is purchased. The text of the agreement is drawn up independently or with the assistance of a lawyer , notary or other persons.