Taxation of a lawyer who has established a law office

Not only individuals, but also legal entities can participate in legal proceedings. The latter must correctly take into account the costs that inevitably arise during the trial.

Question: How to reflect in an organization’s accounting the payment of compensation for legal costs by a court decision to an individual (who is not an employee of the organization) who has won a claim against the organization? In accordance with the court decision, the organization compensates the individual for legal costs (payment for representative services) in the amount of 16,000 rubles. Funds are transferred to the individual's bank account. On the date of filing a claim by an individual, the organization, based on an expert opinion, assessed the likelihood of a court decision in its favor as high. In this regard, the organization did not recognize an estimated liability in accordance with the norms of the Accounting Regulations “Estimated Liabilities, Contingent Liabilities and Contingent Assets” (PBU 8/2010), approved by Order of the Ministry of Finance of Russia dated December 13, 2010 N 167n. Tax accounting uses the accrual method. View answer

What is included in the cost structure

The composition of costs is determined by Article 101 of the Arbitration Procedure Code of the Russian Federation and Article 88 of the Code of Civil Procedure of the Russian Federation. In particular, they include any costs arising from the proceedings, as well as state fees. Let's look at a sample list:

• Payment for the services of experts, lawyers and consultants.
• Amounts paid to experts, translators and others.
• Costs associated with the inspection.
• Postage costs.
• Other expenses deemed necessary by the court.
• Costs of representing a party.
• Compensation for lost time, paid on the basis of Article 99 of the Code of Civil Procedure of the Russian Federation.
• Expenses for transport and accommodation of persons participating in the proceedings (Article 94 of the Code of Civil Procedure of the Russian Federation).
• Duty.

Some expenses have a fixed amount. For example, this is a duty. Part of the costs can be of any volume. In particular, this is compensation for loss of time. Its amount must be reasonable and appropriate to all the circumstances of the case.

Question: How to record legal expenses incurred by an organization when filing a claim in an arbitration court? In accordance with the agency agreement and on the basis of the submitted report with supporting documents attached, the organization pays for the services of an attorney (law firm) in the amount of 120,000 rubles. (including VAT 20,000 rubles), and also reimburses the expenses of the representative of the organization - an attorney for accommodation at the place of trial in the amount of 8,000 rubles. (VAT is not presented by the hotel). The legal proceedings are related to the demand from the buyer for the shortfall in payment for a sold fixed asset (fixed asset) (the sale of fixed assets is subject to VAT). Tax accounting uses the accrual method. View answer

Classifications (rev. 3.0)

In “1C: Accounting 8” (rev. 3.0), services provided to customers are divided into the following types:

• production services for which a planned cost has been established;
• services for the manufacture of products from customer-supplied raw materials;
• other services, the costs of providing which are recorded on account 20 “Main production”;
• trade services;
• other services.

The above classification is based on the accounting account, which summarizes information about the costs of providing services.

Production services for which a planned cost has been established

Production services for which the planned cost has been established include services the cost of which is formed on accounts 20.01 “Main production” or 23 “Auxiliary production” (hereinafter referred to as account 20.01). In this case, the cost may include costs accounted for in account 25 “General production expenses” and 26 “General operating expenses” (if provided for by the accounting policy). To reflect such sales transactions (rev. 3.0), the document Act on the provision of production services is intended. When posting a document in accounting, the recognition of revenue is reflected (Debit 62, 76 Credit 90.01 “Revenue”), the accrual of VAT (Debit 90.03 “Value Added Tax” Credit 68.02 “Value Added Tax”) and the write-off of the planned cost Credit 20.01). When performing routine month-closing operations, additional entries (with a plus or minus) are entered for the amount of the difference between the actual and planned cost for the Debit of account 90.02 and the Credit of account 20.01. If in the current month the services for which the planned cost was established were not actually provided (the document Certificate of Provision of Production Services was not entered for them), but there were turnovers for these services in the debit of account 20.01, the costs incurred are recognized as work in progress (WIP) , i.e. they are not written off to account 90.02.

Services for the manufacture of products from customer-supplied raw materials

A type of production services for which a planned cost is established is the provision of services for the manufacture of products from customer-supplied raw materials. The cost of such services is formed on account 20.02 “Production of products from customer-supplied raw materials.” To reflect such sales operations (rev. 3.0), the document Sales of processing services is intended. When posting a document, accounting records the recognition of revenue (Debit 62, 76 Credit 90.01 “Revenue”), the accrual of VAT (Debit 90.03 Credit 68.02) and the write-off of the planned cost of services (Debit 90.02 Credit 20.02). When performing routine month-closing operations for the amount of the difference between the actual and planned cost, additional entries (with a plus or minus) are entered in the debit of account 90.02 and the credit of account 20.02. If processing services were not provided in the current month (the document Sales of processing services was not entered for them), but there were turnovers for these services in the debit of account 20.02, the costs incurred are recognized as work in progress, i.e. they are not written off to account 90.02 . Work in progress is assessed taking into account the number of products that are manufactured but not presented to the customer for payment.

Other services - costs are included in account 20

Other services, the costs of providing which are accounted for on account 20, include production and other types of services, the cost of which is also formed on account 20.01 or 23 (hereinafter referred to as account 20.01), but in accordance with the adopted accounting policy for each product item is not calculated (see below - Analytical accounting of services by service name). To reflect the implementation of such (rev. 3.0), the documents Sales of goods and services and Provision of services are intended. The second document is used when the same services are provided to a group of customers. When carrying out these documents, only the recognition of revenue and the accrual of VAT are reflected in accounting. The costs of providing these services are written off not at the time the sales are reflected, but when performing routine month-end closing operations. In this case, the procedure for writing off expenses from account 20.01 to the debit of account 90.02 is determined by the settings of the Accounting Policy. By default, costs from account 20.01 are written off to account 90.02 in full, regardless of whether revenue for the corresponding item group is reflected in account 90.01. If the document Inventory of work in progress records work in progress, then the amount of costs minus the cost of work in progress is written off.

The program also supports an option in which costs on accounts 20.01, 23 will be written off to account 90.02 only for those item groups for which revenue is reflected on account 90.01 in the current month.

For other services, costs are not written off. They form work in progress. To support this option, you should specify in the Accounting Policy settings that costs are written off from account 20 “Main production” taking into account revenue.

Trade services

Trade services are understood as services, information on the costs of providing which is summarized in account 44.01 “Distribution costs in organizations engaged in trading activities.” Such services include the delivery of goods to customers, the provision of intermediary services for the sale of goods, etc. The documents Sales of goods and services, Report on retail sales, Report to the principal are intended to reflect such sales transactions (rev. 3.0). When posting these documents, accounting records reflect the recognition of revenue and the accrual of VAT. The costs of providing trade services do not need to be taken into account separately. They are included in distribution costs recognized as expenses for ordinary activities of the current period. In “1C: Accounting 8” (rev. 3.0), these costs are written off from account 44.01 to the debit of account 90.07 “Sales expenses” when performing the routine operation Closing account 44 “Costs of distribution”. There is no need to make any Accounting Policy settings to write off costs for the provision of trade services.

Other services

Other services are understood as services, information on the costs of providing which is summarized in accounts 44.02 “Business expenses in organizations engaged in industrial and other production activities” (delivery of products to customers) or 26 “General business expenses” (provision of intermediary services for the purchase of goods, brokerage services , dealers, etc.).

To reflect sales transactions in “1C: Accounting 8” (rev. 3.0), the documents Sales of goods and services, Report to the principal, Provision of services are intended. When posting these documents, accounting records reflect the recognition of revenue and the accrual of VAT.

Costs for the provision of other services in organizations engaged in industrial and other production activities are not required to be accounted for separately in account 44.02. They are part of business expenses, recognized in full as expenses for ordinary activities of the current period. In “1C: Accounting 8” (rev. 3.0), these costs are debited from account 44.02 to the debit of account 90.07 “Sales expenses” when performing the routine operation Closing account 44 “Distribution costs”. There is no need to make any adjustments to the Accounting Policy to write off the costs of providing such services.

There is also no need to set up an Accounting Policy if account 20 “Main production” is not used, and the costs of providing services are taken into account on account 26 “General business expenses”. When performing the routine operation Closing accounts 20, 23, 25, 26, the amount of costs for the provision of such services as part of general business expenses for the month is written off to the debit of account 90.08 “Administrative expenses”.

Tax accounting

Accounting for legal expenses differs in a number of rules. All costs must be confirmed. These papers can be used as confirmation:

• Checks and receipts.
• Agreements for the provision of legal services.
• Travel tickets.
• Extracts from investigative bodies.

It is recommended that the costs of pre-trial settlement be specified in the agreement with the lawyer. Costs are calculated on the basis of documents attached to the case.

The costs will be classified as non-operating expenses. Expenses that can be included in this composition are stipulated by Article 106 of the Arbitration Procedure Code of the Russian Federation and Article 94 of the Code of Civil Procedure of the Russian Federation. However, the list considered is not exhaustive. Sometimes the court recognizes legal expenses that are not included in the list. For example, these may be the costs of copying documents, translating them, or notarizing them. Expenses are not recognized when their connection with the proceedings is not obvious.

How to take into account legal costs in tax accounting for income tax ?

When expenses will definitely not be recognized

The conditions for recognition are specified in paragraph 1 of Article 252 of the Tax Code of the Russian Federation. In particular, these are:

• Validity.
• Availability of supporting documents.

How to reflect legal expenses in accounting ?

Expenses are not recognized in the following cases:

• No connection to legal proceedings. For example, a company entered into a subscription service agreement with a law firm. During the trial, the manager contacted lawyers about something unrelated to the case. Related expenses will not be recognized. In this case, they will be taken into account as part of expenses for legal services on the basis of paragraph 1 of Article 264 of the Tax Code of the Russian Federation.
• The representative did not take part in the proceedings. For example, the company paid for representation services, but the representative did not take part in any meeting.
• The firm is not a party to the proceedings. That is, the subject must be either a plaintiff, or a defendant, or a third party. If the firm is not a party, there will be no basis for recognizing legal costs.
• It is not the company that is involved, but its employee. If a company employee is held accountable, it will be his personal matter. That is, the company does not have to take into account associated costs.

Sometimes the company resorts to pre-trial settlement of the case. Related expenses for lawyers and consultants will also not be recognized. The corresponding decision was given by the Presidium of the Supreme Arbitration Court in Resolution No. 9131/08 of December 9, 2008.

Recognition of state duty

The fee must be included as an expense on the date the claim is filed. The latter is determined on the basis of the court's note on acceptance of the claim. Some do this on the payment due date, but this is not correct. The duty must be included in non-sales services on the basis of paragraph 1 of Article 265 of the Tax Code of the Russian Federation.

The fee may be returned by court decision. The amount received must be included in the structure of non-operating income on the basis of paragraph 3 of Article 250 of the Tax Code of the Russian Federation. Inclusion is made on the date the decision on the refund of the duty comes into force.

On what date should expenses be taken into account?

Legal costs are considered non-operating, and therefore they will be recognized on these dates on the basis of paragraph 7 of Article 272 of the Tax Code of the Russian Federation:

• Settlement date based on the terms of the agreement.
• The date of presentation to the payer of the papers on the basis of which calculations are made.
• The final date of reporting or tax time.

The company has the right to set its own dates for reflecting expenses on the basis of Letter of the Ministry of Finance No. 03-03-04/2/149 dated May 26, 2006. Typically, this is the date the service agreement is signed. For example, a company entered into an agreement with a lawyer. The date of signing the document will be the date of recognition.

Legal expenses reduce taxable income, regardless of whether they are recovered through the court. What does this mean? If the entity wins the case, the person found guilty must pay all of the winning party's legal costs. However, expense recognition is done regardless of wins or losses.

IMPORTANT! The costs of a third-party lawyer are also taken into account when the organization has a full-time lawyer on staff. However, if the work is carried out by a full-time lawyer, the costs are reflected in the structure of labor costs on the basis of Article 255 of the Tax Code of the Russian Federation. Expenses for your lawyer cannot be recovered from the losing participant in the case.

Documentary confirmation

The largest portion of expenses is legal fees. Related expenses can be verified. The following documents can be used as confirmation:

• Agreement with a specialist.
• Certificate of completed work.
• Payment papers.

The documents must indicate a list of services provided and their cost. It is necessary to record services in such a way that their connection with the proceedings can be traced. It is also recommended to prepare documents for confirmation:

• Power of attorney for a representative.
• Claim.
• Protocol of the proceedings.
• Judgment.

IMPORTANT! The enforcement fee is not taken into account when determining income tax.

The legislative framework

The organization of accounting in legal entities, as well as the organization of accounting in other companies and individual entrepreneurs, is based on basic regulatory documents in the field of accounting and taxation:

• Law on Accounting No. 402-FZ dated December 6, 2011,
• Federal accounting standards,
• Chart of Accounts and Instructions for its Application,
• Basic guidelines and recommendations,
• Tax (Tax Code of the Russian Federation) and Civil (Civil Code of the Russian Federation) Code of the Russian Federation.

Moreover, each industry and type of activity has its own set of regulatory documents that introduce their own specific features into the organization of accounting in these industries. You can view the texts of laws related to the activities of NPOs here.

Federal Law “On Advocacy and the Bar in the Russian Federation” No. 63-FZ of May 31, 2002 – the main law regulating the practice of law

on the territory of Russia, defines the following specific features of advocacy:

1. Lawyering is not a commercial activity.
2. The special status of a lawyer prohibits him from working as an employee under an employment contract.
3. A lawyer is obliged to carry out his professional activities through a certain form of legal education - a lawyer’s office, a bar association, a law office or a legal consultation.

Compensation for other legal expenses

When carrying out instructions from their clients, lawyers bear associated costs: for example, this may be the cost of travel, the cost of attracting specialized specialists for consultation, ordering an examination or assessment, and so on.

Payment of additional lawyer costs is carried out by indicating their admissibility and the procedure for compensation in the contract. You will need to have evidence that all indicated expenses are relevant to the assignment being provided. If a lawyer handles several cases and assignments at once, it will be necessary to allocate a share of expenses.

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Important terms of the agreement between a lawyer and a client

The agreement is drawn up in simple written form. The concluded contract must include the following terms and conditions: (click to expand)

• Data about counterparties - name of organizations, tax identification number, location address, contact phone number, other important details of the parties. The data may contain any details entered at the request of the parties.
• Information about the affiliation of the person provided with assistance to the bar.
• The name of the document is an acceptable type of agreement, preliminary agreement, or other applicable form.
• The subject of the contract, which is the main and mandatory condition of the contract.
• Deadlines for execution, cost of assistance provided and procedure for covering lawyer’s expenses.
• Place of conclusion of the contract, which allows you to obtain information about jurisdiction.
• Date of conclusion of the contract. Any date can be included in the contract. In this case, the start date of the contract for the provision of legal services is the day the document is signed by the last party.
• Liability for violation of obligations by the parties.

Essential conditions, in the absence of which the contract is considered invalid, include information about the parties, confirmation of the lawyer’s right to practice, subject matter, cost of the service, procedure for compensation of costs and liability.

Upon execution of the contract, the parties sign an act, which is drawn up in any form indicating the details of the parties: the provider of services and the recipient of the act. The document is an annex to the contract and a form of primary accounting, on the basis of which expenses are taken into account. There is no unified form of the act. The document is drawn up in any form indicating details that allow identification of participants, the cost of the service, the fact of its provision Legal services (