The tax legislation of the Russian Federation provides for a flexible approach to taxation for entrepreneurs and enterprises, provides them with various tax breaks, which, if properly applied, can significantly reduce the cost of payments to the budget.
Who is eligible for VAT exemption
Tax Legislation provides for tax breaks for certain categories of VAT taxpayers. In particular, when applying the simplified taxation system, the payment of all additional taxes, including VAT, is canceled, which are replaced in such cases by a single tax established by law.
A company that has received exemption from VAT does not charge or pay value added tax, does not keep a book of purchases and sales, does not issue and does not take into account invoices, and is not obliged to submit a VAT return. This right can be exercised by enterprises and organizations that are on the general taxation system, subject to certain conditions. In order for an enterprise to be able to take advantage of this privilege, it must meet certain requirements:
- the company's revenue for the three previous months does not exceed 2 million rubles. excluding VAT;
- the company should not be engaged in the production and sale of excisable goods, including fuels and lubricants, alcoholic and tobacco products.
In some cases, individual entrepreneurs receive the right not to pay VAT on manufactured and sold goods, subject to keeping separate records for the sale of excisable goods, for which this right does not apply.
What are the benefits of this benefit
To receive this benefit, an organization must apply to the tax office with an appropriate application and attachment of supporting documents. On the basis of the presented book of income and expenses, an extract from the balance sheet of the enterprise, the journal of business transactions for individual entrepreneurs, the journal of registration of issued and paid invoices, the tax inspector decides whether to allow the enterprise to use this privilege or deny this right.
The company has the right to use the received benefit from the beginning of the year following its provision. This right must be confirmed annually, otherwise the benefit will automatically expire. If, during the inspection of the Federal Tax Service Inspectorate, it is found that the organization has lost the right to use the VAT exemption, but at the same time did not pay this tax to the budget, the company is subject to a penalty for tax evasion, the unpaid amount of tax is charged, and penalties are charged.
In reality, not all organizations that are entitled to it enjoy this privilege. In most cases, this is inconvenient for them, since many partners in these cases refuse to cooperate with a company that is not a VAT payer. The fact is that when making trade and monetary transactions with it, they lose the right to return the paid VAT, and this is financially unprofitable for large companies. In most cases, the right to VAT exemption is enjoyed by companies that are the final link in the chain of producers, namely, retailers.
