How to take into account construction costs when applying a simplified taxation system

Firms using the simplified taxation system (USNO) must pay a single tax when constructing facilities instead of VAT, UST, property tax and income tax. This requirement is contained in the Letter of the State Committee of the Russian Federation for Construction and Housing and Communal Sector dated October 6, 2003 NZ-6292/10 “On the procedure for determining the estimated cost of work performed by organizations working under the simplified tax system.” In this article we will talk about what options there may be when construction organizations use the simplified tax system, and how to take into account construction costs in each of the listed cases.

How to take into account construction costs if the contractor and subcontractor work on the simplified tax system

According to the provisions of paragraph 3 of Art. 4 of the Federal Law of December 6, 2011 No. 402-FZ “On Accounting”, the contractor and subcontractor are exempt from the obligation to maintain accounting if both of them operate using a simplified system. Since neither one nor the other will issue invoices, the customer will not receive the right to accept VAT. The customer's accountant will reflect this in accounting as follows:

Accounting statements for individual entrepreneurs and LLCs on the simplified tax system

Individual entrepreneurs using the simplified tax system are allowed not to conduct accounting, but organizations are obliged to. At the end of the year, the LLC submits tax and accounting reports to the inspectorate. The advantage over other modes is that accounting reports are submitted only once, and not quarterly. Small businesses (LLC on the simplified tax system, if the revenue for the previous year does not exceed 800 million rubles) keep accounting records in a simplified form. But this is a voluntary matter - to keep records in the general order or according to the simplified tax system, if it is more convenient for the company’s accountant. Reporting under the simplified tax system 6 percent 2022 for an LLC consists of the following documents at the end of the year:

In addition to final reporting, LLCs using the simplified tax system submit quarterly information to the Social Insurance Fund, Pension Fund, and Compulsory Medical Insurance Fund.

How to take into account construction costs if the subcontractor works on the simplified tax system, and the contractor works on the special tax system

A contractor using the general tax system cannot deduct VAT on construction work accepted from a subcontractor using the simplified system, since the subcontractor in this case does not issue an invoice. In this case, the contractor must charge VAT on the total cost of all work transferred to the customer. The preparation of an invoice and the acceptance of VAT for accounting will take place according to the scheme presented below:

1. The subcontractor completes any stage of work specified in the agreement without issuing an invoice, the contractor accepts the work.
2. The contractor gets acquainted with the cost of the work and includes it in expenses under account 20 “Main production”.
3. Upon completion of all required work, the contractor issues an invoice, delivers the work to the customer and reflects VAT in the tax return - the amount is transferred to the budget.
4. The customer reflects the cost of all construction work on the account. 08 “Investments in non-current assets”. The allocated VAT amount relates to the account. 19 “VAT on acquired assets.” If the customer is a VAT payer, he has the right to file a deduction for this type of tax.

The customer's accountant will reflect the transactions as follows:

The contractor's accounting entries will look like this:

How to take into account construction costs if the contractor uses the simplified tax system and the subcontractor uses the OSN

In a situation where the contractor operates on a simplified system, he will not have to charge VAT on the cost of completed work and issue an invoice to the customer (since the contractor is not recognized as a VAT payer). If a company that has made the transition to the “simplified” system issues an invoice to the customer and allocates value added tax, it is necessary to send a tax return for the current period and transfer the tax to the budget. VAT on materials used during construction cannot be deducted, since these are goods/work for production purposes. VAT will be included in the cost of purchased goods/work. The parties to the agreement act according to the following scheme:

1. The subcontractor issues an invoice for the cost of completed construction work and allocates VAT.
2. The subcontractor registers the document in the Sales Book, draws up a tax return indicating the amount of VAT and transfers the tax to the budget.
3. The contractor includes the total cost of work (including VAT) as expenses. The accountant reflects them on the account. 20.
4. The contractor delivers all work to the customer without issuing an invoice and presents a work acceptance certificate.
5. The customer includes the cost of the work he has accepted on the facility in the costs of creating a non-current asset. The accountant reflects the transaction on the account. 08.

The customer's accountant will reflect the transactions as follows:

The subcontractor's accountant will record the following accounting entries:

Simplified taxation system in construction

Based on paragraph 4 of Article 346.13 of the Tax Code of the Russian Federation (hereinafter referred to as the Tax Code of the Russian Federation), the conditions for applying the simplified taxation system are: the organization’s income for the reporting period should not exceed 15 million rubles and the residual value of fixed assets and intangible assets should not exceed 100 million rubles.

Note!

When applying the simplified tax system, when drawing up an estimate, the organization must provide for the costs of paying “input” VAT by suppliers, since this tax cannot be deducted from the budget.

The State Committee of the Russian Federation for Construction and Housing and Communal Sector in its Letter dated October 6, 2003 NZ-6292/10 “On the procedure for determining the estimated cost of work performed by organizations operating under a simplified tax system” explains the following: organizations and individual entrepreneurs working under a simplified The taxation system pays a single tax instead of income tax, corporate property tax, unified social tax (UST) and value added tax (VAT).

Let's consider the options that are encountered when construction organizations use the simplified tax system.

THE CONTRACTOR USES THE SYSTEM AND THE SUBCONTRACTOR USES THE REGULAR TAX SYSTEM

In accordance with paragraph 2 of Article 346.11 of the Tax Code of the Russian Federation, the use of a simplified system of taxation by organizations provides for the replacement of the payment of corporate income tax, corporate property tax and the unified social tax with the payment of a single tax calculated based on the results of the economic activities of organizations for the tax period.

Organizations applying the simplified taxation system pay insurance premiums for compulsory pension insurance in accordance with the legislation of the Russian Federation.

Other taxes are paid by organizations applying the simplified taxation system in accordance with the general taxation regime.

Organizations applying the simplified taxation system are not recognized as taxpayers of value added tax, with the exception of value added tax payable when importing goods into the customs territory of the Russian Federation.

Consequently, the contractor will not charge value added tax on the cost of the work performed.

The contractor will not have to issue invoices to his customers, because the obligation to draw up invoices, keep logs of received and issued invoices, purchase books and sales books is assigned only to value added tax payers (clause 3 of Article 169 of the Tax Code of the Russian Federation).

The same explanations are given in paragraph 1.2 of the Methodological Recommendations for the application of Chapter 21 “Value Added Tax” of the Tax Code of the Russian Federation.

If an organization that has switched to the simplified tax system issues an invoice to the customer and allocates VAT, it will have to provide a VAT return for the given tax period. And therefore, according to this declaration, the organization must pay to the budget the tax allocated in the invoice (subparagraph 1 of paragraph 5 of Article 173 of the Tax Code of the Russian Federation). The organization cannot claim value added tax on material resources used by the organization in carrying out construction work for deduction from the budget (clause 1.6 of the Methodological Recommendations for the Application of Chapter 21 “Value Added Tax” of the Tax Code of the Russian Federation).

Subclause 3 of clause 2 of Article 170 of the Tax Code of the Russian Federation establishes that value added tax on goods (work, services) for production purposes used in its activities by an organization that has switched to the simplified tax system is not accepted for deduction from the budget; the amount of the tax is included in the cost of purchased goods (works, services). On this issue, the same explanations are given in paragraph 1.3 of the Methodological Recommendations on the Application of Chapter 21 “Value Added Tax” of the Tax Code of the Russian Federation.

Let's look at what should be the procedure for preparing invoices and accounting for value added tax if a contractor, transferred to the simplified tax system, engages a subcontractor who applies the general tax regime to perform the contract.

The subcontractor issues an invoice to the contractor for the amount of work performed and highlights the value added tax as a separate line. Next, the subcontractor registers an invoice in the sales book, reflects the amount of value added tax in the tax return and pays it to the budget.

The contractor, having received an invoice and a certificate of completion of work from the subcontractor, includes the entire cost of construction work, taking into account value added tax, as part of its expenses and reflects it on account 20 “Main production”.

After completing the construction work under the contract, the contractor hands it over to the customer, and a delivery and acceptance certificate is signed. The contractor will not issue an invoice to the customer, since he is not a value added tax payer. The customer includes the cost of work performed as part of the costs of creating a non-current asset and reflects them on account 08 “Investments in non-current assets”.

To make it clearer, let's look at an example:

Example 1.
The customer Remstroy LLC entered into a contract for the construction of a warehouse with the contractor Remfasad CJSC, the cost of work under the contract was 600,000 rubles (excluding VAT). Work under the contract must be completed by September 21. To carry out the finishing work and to ensure that the work was completed on time, Remfasad CJSC hired a subcontractor, Remservis LLC. The cost of work performed under the contract is 200,000 rubles (excluding VAT). To carry out the work, Remservis LLC purchased materials in the amount of 94,600 rubles (including VAT - 14,430.51 rubles). Other expenses for the construction of a warehouse (construction workers' wages, taking into account unified social tax, insurance contributions to the Pension Fund, depreciation of equipment) amounted to 60,000 rubles

Let's consider the reflection of transactions in the accounting records of all parties.

Subcontractor (Remservis LLC):

Account correspondence		Amount, rubles	Contents of operation
Debit	Credit
10-8	60	80 169,49	Materials received from the supplier were capitalized (94,600 rubles -14,430.51 rubles)
19	60	14 430,51	Value added tax on materials is reflected
60	51	94 600	Paid materials to supplier
68 -1	19	14 430,51	Submitted for deduction from the budget VAT on materials
20	10-8	80 169,49	Materials consumed during the work were written off
20	02 (69, 70)	60 000	Other expenses for performing work are reflected
62	90-1	236 000	Revenue from work performed for CJSC Remfasad is reflected
90-3	68-1	36 000	VAT has been charged (for the purpose of calculating VAT, the organization determines revenue “by shipment”) (200,000 rubles x 18%)
90-2	20	140 169,49	The cost of work performed was written off (80,169.49 rubles + 60,000 rubles)
90-9	99	59 830,51	Profit from work performed is reflected (RUB 236,000 -RUB 36,000 -RUB 140,169.49)

Reflection of transactions with the customer Remstroy LLC:

Account correspondence		Amount, rubles	Contents of operation
Debit	Credit
08-3	60	600 000	The cost of building a warehouse is reflected
60	51	600 000	Paid for the work of JSC "Remfasad"
01	08-3	600 000	Warehouse put into operation

Reflection of transactions with the contractor CJSC Remfasad:

In accordance with paragraph 3 of Article 4 of the Accounting Law, organizations using the simplified tax system are exempt from accounting.

End of the example.

THE SUBCONTRACTOR IS TRANSFERRED TO THE SYSTEMICAL SYSTEM, AND THE CONTRACTOR IS TO THE REGULAR TAX SYSTEM
Considering the situation in which the subcontractor is transferred to the simplified taxation system, and the contractor operates under the regular taxation system, you should pay attention to the fact that, in this case, when accepting work from the subcontractor, the contractor cannot present for deduction from the budget of value added tax on these works. Since in this situation the subcontractor will not issue him an invoice.

The contractor must charge value added tax on the entire cost of work performed for the customer. Indeed, in accordance with paragraph 1 of Article 702 of the Civil Code of the Russian Federation (hereinafter referred to as the Civil Code of the Russian Federation), under a contract, one party (contractor) undertakes to perform certain work on the instructions of the other party (customer) and deliver it on time. And the customer undertakes to accept the result of the work and pay for it. If a contractor hires a subcontractor to perform some work, the subcontractor usually does not enter into a relationship between the customer and the contractor (clause 3 of Article 706 of the Civil Code of the Russian Federation). After all, under a contract, it is the contractor who carries out all the work for the customer. And it doesn’t matter that part of the construction work was carried out by third-party organizations.

Let us conclude that if the contractor accepts the general taxation system, and the subcontractor applies the simplified tax system, then the preparation of invoices and value added tax accounting will proceed as follows.

Having completed a certain stage of work under the contract, the subcontractor hands it over to the contractor. But in this case, the subcontractor does not issue an invoice to the contractor. The contractor includes as expenses the cost of work performed by the subcontractor, which is recorded on account 20 “Main production”.

Having completed all the work under the contract, the contractor will hand it over to the customer, and he issues an invoice to the customer, registers it in the sales book, and reflects the corresponding amount of value added tax in the tax return. This amount is subject to payment to the budget.

The customer reflects the cost of work performed on account 08 “Investments in non-current assets”. Having received an invoice and a certificate of delivery and acceptance of completed work from the contractor, the customer will assign the allocated amount of VAT to account 19 “Value added tax on acquired assets.” The customer will submit this amount of VAT for deduction from the budget if he is a value added tax payer.

Example 2.
Let’s use the data from example 1. The subcontractor Remservis LLC uses the simplified tax system. Let's consider the reflection of transactions in the accounting records of all parties.

For the construction of a warehouse, the contractor Remfasad LLC purchased construction materials in the amount of 250,000 rubles (including VAT - 38,135.59 rubles) and incurred expenses excluding subcontractor services in the amount of 75,000 rubles.

Subcontractor LLC "Remservis".

Organizations that have switched to the simplified tax system are exempt from accounting (clause 3 of article 4 of the Accounting Law).

Reflection of accounting transactions with the contractor CJSC Remfasad:

Account correspondence		Amount, rubles	Contents of operation
Debit	Credit
10-8	60	211 864,41	Materials received from the supplier were capitalized (250,000 rubles -38,135.59 rubles)
19	60	38135,59	Value added tax on materials is reflected
60	51	250 000	Paid materials to supplier
68-1	19	38135,59	Submitted for deduction from the budget VAT on materials
20	10-8	211864,41	Materials consumed during the work were written off
20	60	200000	The cost of work performed by the subcontractor is reflected
20	02, 69, 70	75 000	Other expenses for performing work are reflected
60	51	200000	Paid for work under the contract performed by a subcontractor
62	90-1	708 000	Revenue from work performed for LLC Remstroy is reflected
90 -3	68-1	108 000	VAT has been charged (for the purpose of calculating VAT, the organization determines revenue “by shipment”) (600,000 rubles X 18%)
90-2	20	486864,41	The cost of work performed was written off (211,864.41 rubles + 75,000 rubles + 200,000 rubles)
90-9	99	113135,59	The profit from the work is reflected (708,000 rubles - 108,000 rubles - 486,864.41 rubles)

Reflection of accounting transactions at the customer Remstroy LLC

Note!

The customer has the right to deduct VAT from the moment depreciation is calculated.

Based on paragraph 5 of Article 172 of the Tax Code of the Russian Federation, the customer will present the amount of tax for deduction from the budget as the object is registered. The moment of accrual of depreciation for an object of depreciable property begins on the 1st day of the month following the month in which this object was put into operation.

Account correspondence		Amount, rubles	Contents of operation
Debit	Credit
08-3	60	600 000	The cost of construction of a warehouse is reflected (708,000 rubles - 108,000 rubles)
19	60	108000	Value added tax on completed work is reflected
60	51	708000	Paid for the work performed under the contract of JSC "Remfasad"
01	08-3	600000	Warehouse put into operation
68-1	19	108 000	Value added tax is presented for deduction from the budget

End of the example.

THE CONTRACTOR AND SUBCONTRACTOR CARRY OUT WORK ON THE
SYSTEMICAL Taxation System In a situation where the contractor and subcontractor carry out work under the simplified taxation system, they are exempt from accounting (clause 3 of Article 4 of the Accounting Law). Consequently, neither the contractor nor the customer will issue invoices, which means that the customer will not be able to deduct value added tax from the budget for the work performed.

Example 3.
Remservice LLC and Remfasad CJSC use the simplified tax system. These organizations are exempt from accounting, which means they will not issue invoices.

Reflection of accounting transactions for the customer LLC Remstroy.

Account correspondence		Amount, rubles	Contents of operation
Debit	Credit
08-3	60	600 000	The cost of building a warehouse is reflected
60	51	600 000	Paid for the work of JSC "Remfasad"
01	08-3	600 000	Warehouse put into operation

End of the example.

“INPUT” VALUE ADDED TAX UNDER THE SYSTEMAL SYSTEM
How to write off VAT on purchased materials if the organization performing construction and installation work applies the SYSTEM system, and the object of calculation of the single tax is income.

Clause 2 of Article 346.11 of the Tax Code of the Russian Federation establishes that organizations using the simplified tax system are not VAT payers (except for cases when they import goods into Russia). Consequently, such organizations cannot take advantage of VAT deductions. Organizations using the simplified tax system include VAT on purchased goods (works, services) as expenses.

If an organization pays a single tax only on income, it will not be able to reduce its taxable income by the amount of “input” VAT.

If an organization has chosen income minus expenses as an object of taxation, then it will be able to reduce its taxable income by the amount of “input” VAT (subclause 8 of clause 1 of Article 346.16 of the Tax Code of the Russian Federation).

ACCOUNTING FOR COSTS FOR CONSTRUCTION OF PUBLIC FACILITIES WHEN APPLYING SYSTEMS

There are two points of view on accounting for the costs of construction of fixed assets and costs for the acquisition and completion of unfinished construction objects under the simplified tax system.

The point of view of the tax department is not interpreted in favor of the taxpayer; in accordance with Article 346.16 of the Tax Code of the Russian Federation, expenses for the construction of fixed assets and expenses for the acquisition and completion of unfinished construction projects are not directly provided for. The acquisition of fixed assets is a purchase under sales and purchase agreements. Therefore, the construction of fixed assets cannot be equated to the acquisition and such costs cannot be written off as expenses.

The position of the tax department is contained in the Letter of the Ministry of Taxation of the Russian Federation dated May 7, 2004 No. 22-1-14/853 “On the simplified taxation system”:

“The Small Business Tax Administration reports the following.

The list of expenses accepted when calculating the tax base for the single tax paid by taxpayers in connection with the application of the simplified taxation system is established by paragraph 1 of Article 346.16 of the Code.

Expenses for the construction of fixed assets and expenses for the acquisition and completion of unfinished construction projects are not included in the above list of expenses.

Based on this, in the case where the object of taxation is income reduced by the amount of expenses, taxpayers, when applying the simplified taxation system, do not have the right, when calculating the tax base, to reduce the amount of income received for expenses for the construction of fixed assets and the completion of unfinished construction projects.”

But there are other opinions on this issue.

Many share the same opinion as the tax authorities, based on paragraph 1 of Article 257 of the Tax Code of the Russian Federation and paragraph 8 of PBU 6/01, from which it follows that in tax and accounting legislation the concepts of “acquisition” and “construction” of fixed assets are separated. Consequently, construction costs and costs for the acquisition of fixed assets are different types of costs.

Another point of view is based on paragraph 1 of Article 218 of the Civil Code of the Russian Federation; by acquiring property, the organization becomes its owner, increasing its assets. The right of ownership can arise not only as a result of the purchase of property or gratuitous transfer, but it also arises in a newly created thing. Therefore, the costs of acquiring ownership rights can be taken into account by the organization as expenses. When choosing this position, it should be taken into account that this issue cannot be resolved without a trial.

The organization must independently determine any of the methods.

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Legislative regulation

Answers to common questions about how to take into account construction costs when applying the simplified tax system

Question #1:

The enterprise using the simplified system did not receive any income during the year and was engaged in the construction of a workshop. How to take into account construction costs under the simplified tax system “Income minus expenses”, when to do this?

Answer:

The workshop is the main means. There is no need to take into account individual cost components such as contractor's wages, salaries, and material costs, since they will form the initial cost of the completed workshop. When the last event occurs (the cost of the workshop will be paid, the workshop building will be put into operation, papers will be submitted for state registration of ownership of the structure), expenses can be recognized. To do this, the cost of the workshop is included in the costs during the year in equal shares on the last day of the reporting period according to the simplified system.

Question #2:

Is it necessary to take into account the costs of paying “input” VAT when drawing up an estimate for an enterprise using the simplified tax system that is building an office space?

Answer:

Yes, the cost of paying “input” VAT must be taken into account when drawing up estimates, since “input” VAT cannot be deducted.

Tax rate for LLC using the simplified tax system

In general cases, the single tax rate is:

• 6% from income;
• 15% on income reduced by expenses.

Local authorities have the opportunity to reduce rates on both tax objects.
They received the right to reduce the rate of 6% on income in 2016. And now the regional rate in some regions is even 1%. The lower threshold for the rate on the object “income minus expenses” is 5%. In regions, the rate varies from 5 to 15%.

You can evaluate the benefits of the simplified tax system by finding out how much the rate has been reduced in the region of interest. To find out, for example, if an LLC is on the simplified tax system of 6%, what taxes must be paid in 2022, you need to visit the website of the tax office or contact the local administration.

Material on the topic: The simplified taxation system rate will increase in 2022