Agency agreements: nuances of execution and benefits for business

Pros for the agent himself

1. Reducing the cost of purchasing goods. By concluding an agency agreement, you receive the goods from the supplier for free. You will transfer the proceeds from sales to the supplier, and he will pay you a commission.
2. Reducing the tax burden on the simplified tax system. Under an agency agreement, income is only your remuneration, and not all the money that went through the account. For example, you place an advertisement - the client pays money, most of which you transfer to Yandex. It is not profitable to pay tax on the entire amount, so enter into an agency agreement and take into account only your remuneration in taxes.

What are the features of an agency agreement?

Attracting a subagent . If the principal does not prohibit, the agent may engage a subagent to execute orders. This is another person who will act in the interests of the principal, but not on his behalf. The agent will, as before, be responsible under the agency agreement (Article 1009 of the Civil Code). The principal may include in the contract a condition obliging the agent to find a subagent to carry out the instructions. The agent and subagent agree on mutual settlements independently.

Tax optimization . An agency agreement can be considered by the Federal Tax Service as a way for the principal to reduce the tax base. For example, if the principal works on a simplified basis and cannot deduct VAT. In order to cooperate with counterparties who want to receive VAT deductions, the principal can enter into transactions through an agent on OSNO. The Federal Tax Service may perceive this as an attempt to evade VAT. Therefore, we recommend that you assess the risks and consider whether an agency agreement is needed for cooperation.

Similar claims are made by companies that included in their income tax expenses the costs of paying remuneration under an agency agreement to a shell company.

One company entered into an agency agreement with another and instructed it to find buyers for a land plot. A buyer was found, the plot was sold, and the agent received a remuneration of 22 million rubles. The principal took this amount into account in income tax expenses and asked the state for a VAT deduction. The Federal Tax Service suspected a dirty trick and conducted an on-site inspection. Based on its results, it turned out that the agent was a one-day company, never provided agency services, and the initiator of the purchase and sale transaction of the plot was the buyer. He had never heard of the agent's existence. The Federal Tax Service fined the company and assessed additional taxes. The principal tried to challenge the decision, but the court sided with the tax authorities (decision of the AS MO in case No. A41-69826/16).

Accounting for agent remuneration . Acting as an intermediary, the agent passes large sums through himself in transit. In fact, this is the income of the principal, so when calculating tax, take into account only the agency fee in income. If the principal works with VAT, and the agent acts on his own behalf, he will have to issue invoices for buyers and report on income tax. Copies of invoices must be sent to the principal - he will issue the same invoice on his own behalf, and a copy will be sent to the agent. This is necessary to record both invoices in the invoice journal.

Three people are involved in the agency agreement

1. Principal - hires an agent and instructs him to sell or buy a product or service.
2. Agent - carries out the instructions of the principal as an intermediary between the seller and the buyer.
3. Seller or buyer - depends on whether the agent is buying or selling.

It's easier to understand with examples.

You have an online store. To deliver the goods, you contact the courier service. In this situation, you, the principal, hire an agent - a courier who delivers the goods to the buyer and receives payment.

You become a principal, even when receiving payment using electronic money (Yandex.Money, PayPal, etc.). After all, the buyer does not pay you directly; the intermediary - the payment system - intervenes in the matter again.

Sometimes the principal instructs the agent not to sell, but to buy the goods. For example, you, the principal, hire a realtor - agent to buy an apartment. This situation also applies to agency transactions.

The agent works on his own behalf or on behalf of the principal

The agent carries out the assignment in two ways - on his own behalf or on behalf of the principal.

In the first case, the agent introduces himself by his own name and draws up all documents in his name, as if there were no principal at all. The client may not even know that he is working with an intermediary, and will turn to the agent with questions and complaints.

In the second case, the agent draws up all documents in the name of the principal and, as an independent entrepreneur, does not participate in the transaction. This is equivalent to working under a power of attorney, and the agent has no obligations to the client.

The agent receives compensation from the principal

The agent's income is the remuneration he receives from the principal. There are a lot of options for calculating it, from simple to complicated. Therefore, we recommend that you pay attention to this clause in the contract. Here are some ways to determine your reward:

1. A specific amount per transaction. This is a reliable option since you know the amount of the reward in advance. But this is not always beneficial for the agent, since he will not be able to earn more than the agreed amount.
2. Percentage of the transaction. This is more profitable for the agent and motivates him to sell more. For example, according to the terms of the contract, the agent will receive 10% from each coffee maker sold. If an agent sells 5 coffee makers for 10,000 rubles, his revenue will be 5,000 rubles.
3. A markup on the price of a product or service. The principal sets the minimum price at which the agent can sell the goods, but does not limit it to the maximum. This method motivates the agent to sell at a higher price. For example, the principal instructs to sell a coffee maker for at least 10,000 rubles. The agent sets his price - 12,000 rubles. After selling the coffee maker, he will transfer 10,000 to the principal and keep 2,000 rubles for himself. This will be his reward.

In addition to the amount of remuneration, the agent and the principal agree on the timing of its payment. There are also several options here:

1. The principal pays the agent before the work is completed.
2. The agent transfers the proceeds from sales minus his remuneration to the principal.
3. The principal pays the agent after the contract is executed. If no deadline is specified in the contract, the principal pays the remuneration within a week after receiving the report from the agent.

Civil Code of the Russian Federation Part 2

CHAPTER 52. AGENCY

Article 1005. Agency agreement

1. Under an agency agreement, one party (agent) undertakes, for a fee, to perform legal and other actions on behalf of the other party (principal) on its own behalf, but at the expense of the principal or on behalf and at the expense of the principal.

Under a transaction made by an agent with a third party on his own behalf and at the expense of the principal, the agent acquires rights and becomes obligated, even if the principal was named in the transaction or entered into direct relations with the third party for the execution of the transaction.

In a transaction concluded by an agent with a third party on behalf and at the expense of the principal, the rights and obligations arise directly from the principal.

2. In cases where an agency agreement concluded in writing provides for the general powers of the agent to carry out transactions on behalf of the principal, the latter, in relations with third parties, does not have the right to refer to the agent’s lack of appropriate powers, unless he proves that the third party knew or should have known about the limitation of the agent's powers.

3. An agency agreement may be concluded for a specific period or without specifying its validity period.

4. The law may provide for specific features of certain types of agency agreements.

Article 1006. Agency remuneration

The principal is obliged to pay the agent remuneration in the amount and in the manner established in the agency agreement.

If the agency agreement does not provide for the amount of agency remuneration and it cannot be determined based on the terms of the agreement, the remuneration is payable in the amount determined in accordance with paragraph 3 of Article 424 of this Code.

If there are no conditions in the agreement on the procedure for paying the agency fee, the principal is obliged to pay the fee within a week from the moment the agent submits a report for the past period, unless a different procedure for paying the fee follows from the essence of the agreement or business customs.

Article 1007. Restrictions by an agency agreement on the rights of the principal and agent

1. An agency agreement may provide for the obligation of the principal not to enter into similar agency agreements with other agents operating in the territory specified in the agreement, or to refrain from carrying out independent activities in this territory that are similar to the activities that form the subject of the agency agreement.

2. An agency agreement may provide for the agent’s obligation not to enter into similar agency agreements with other principals, which must be executed in a territory that fully or partially coincides with the territory specified in the agreement.

3. The terms of the agency agreement, by virtue of which the agent has the right to sell goods, perform work or provide services exclusively to a certain category of buyers (customers) or exclusively to buyers (customers) located or residing in the territory specified in the agreement, are void.

Article 1008. Agent's reports

1. During the execution of an agency agreement, the agent is obliged to submit reports to the principal in the manner and within the time limits provided for by the agreement. If there are no relevant conditions in the contract, reports are submitted by the agent as he fulfills the contract or upon expiration of the contract.

2. Unless otherwise provided by the agency agreement, the necessary evidence of expenses incurred by the agent at the expense of the principal must be attached to the agent’s report.

3. The principal who has objections to the agent’s report must notify the agent about them within thirty days from the date of receipt of the report, unless another period is established by agreement of the parties. Otherwise, the report is considered accepted by the principal.

Article 1009. Subagency agreement

1. Unless otherwise provided by the agency agreement, the agent has the right, for the purpose of fulfilling the agreement, to enter into a subagency agreement with another person, remaining responsible for the actions of the subagent to the principal. An agency agreement may provide for the agent's obligation to enter into a subagency agreement, with or without indicating the specific terms of such an agreement.

2. The subagent does not have the right to enter into transactions with third parties on behalf of the person who is the principal under the agency agreement, except for cases when, in accordance with paragraph 1 of Article 187 of this Code, the subagent can act on the basis of sub-agency. The procedure and consequences of such reassignment are determined according to the rules provided for in Article 976 of this Code.

Article 1010. Termination of an agency agreement

The agency agreement is terminated due to:

refusal of one of the parties to fulfill an agreement concluded without determining the expiration date of its validity;

death of an agent, recognition of him as incompetent, partially capable or missing;

recognition of an individual entrepreneur who is an agent as insolvent (bankrupt).

Article 1011. Application of rules on agency and commission agreements to agency relations

The rules provided for in Chapter 49 or Chapter 51 of this Code are respectively applied to relations arising from an agency agreement, depending on whether the agent acts under the terms of this agreement on behalf of the principal or on his own behalf, unless these rules contradict the provisions of this chapter or the essence agency agreement.

The principal reimburses the agent for expenses

One of the main advantages of a contract for an agent is the minimal cost of its execution.

Firstly, the agent does not spend money on purchasing the goods, because they belong to the principal. And if a product sells poorly, it does not cause losses.

Secondly, the principal reimburses the agent for expenses under the contract. It is possible to set a fixed amount of compensation without taking into account actual costs. Another way is to calculate it based on the agent's actual expenses. Then, in order not to go broke on compensation, it is important for the principal to define in the contract:

• what expenses he reimburses (so that the agent does not include his morning coffee in the list) and their maximum amount;
• documents with which the agent confirms expenses.

The agent prepares a work report

A report is a mandatory document with which the agent informs the principal about the work done. We recommend that you define the following conditions in advance:

• report form - usually it is drawn up as a separate document;
• information that the agent includes in the report. For example, what kind of work the agent performed (list of services provided, list of goods sold, etc.) and how much money he spent on it. We recommend that the report also state the amount of the agent’s remuneration;
• The deadline for sending the report is after each transaction or for a period (for example, once a month).

The principal sends comments on the report within 30 days, unless another period is specified in the agreement. Later you won’t be able to make changes and you will have to pay the agent according to the report.

This is not all that can be said about agency agreements. We have planned several more articles about how the agent and the principal pay taxes under different interaction schemes.

Contents of the agency agreement

The agency agreement must necessarily contain the rights and obligations, as well as the responsibilities of the parties. It is negotiated on an individual basis.

This document paragraph may include the following:

• obligations to pay damages and compensation to the injured party;
• the possibility of unilateral termination due to dishonest fulfillment of the terms of the contract;
• penalties applied to the party that fails to fulfill the obligation.

IMPORTANT! Payment of a fine or other compensation does not relieve the agent from fulfilling his obligations, unless the customer himself requests termination of the contract. Also, the contract may provide for a section on termination by agreement of the parties: in what cases is this possible, in what order is it carried out, and when does it terminate.

See a sample agency agreement.