A VAT payer writes off inventory, including damaged ones, but does not know how to correctly determine the moment of occurrence of tax liabilities for VAT payment and reflect them in the reporting. More on the features of writing off inventory according to "tax rules" below.
Tax credit calculation rules
As specified in item 198.3 of the Tax Code of Ukraine (hereinafter - the Tax Code), the tax credit for the reporting period is determined based on the contractual (contractual) value of goods/services and consists of the amounts of taxes accrued (paid) by the taxpayer at the rate established by item 193.1 of the Tax Code during such reporting period in connection with the acquisition or manufacture of goods and the provision of services or the acquisition (construction, erection) of fixed assets, including other non-current tangible assets and unfinished capital investments in non-current capital assets, the import of goods and/or non-current assets into the customs territory of Ukraine.
The tax credit is calculated regardless of whether such goods/services and fixed assets began to be used in taxable transactions within the taxpayer's business activities during the reporting tax period, as well as whether the taxpayer carried out taxable transactions during such reporting tax period.
In accordance with item 198.5 of the Tax Code, the taxpayer is obliged to calculate tax liabilities based on the tax base determined in accordance with item 189.1 of the Tax Code, and to draw up no later than the last day of the reporting (tax) period and register in the Unified Register of Tax Invoices within the terms established by the Tax Code for such registration, a consolidated tax invoice for goods/services, non-current assets purchased/manufactured with value added tax (hereinafter - VAT) (for goods/services, non-current assets purchased or manufactured before July 1, 2015, if during such purchase or manufacture the tax amounts were included in the tax credit), if such goods/services, non-current assets are intended for their use or begin to be used, in particular, in operations that are not the taxpayer's economic activity (except for cases provided for in item 189.9 of Art. 189 of the Tax Code).
Tax liability arising
According to item 198.5 of the Tax Code of Ukraine, tax liabilities are determined for goods/services, non-current assets purchased for use in non-taxable transactions, on the date of their acquisition, and purchased for use in taxable transactions, which begin to be used in non-taxable transactions, on the date of the beginning of their actual use, determined in the primary documents drawn up in accordance with Law of Ukraine No. 996-XIV of July 16, 1999 "On Accounting and Financial Reporting in Ukraine".
Since the VAT payer carries out a transaction to write off inventory (including damaged ones), they will subsequently be used in transactions that are not related to the economic activity of such a payer. Since during the purchase of inventory (including damaged ones), the VAT amounts were included in the tax credit, the payer must, no later than the last day of the reporting (tax) period in which they are written off, calculate VAT tax liabilities at the basic rate in accordance with the cost of purchasing such inventory (including damaged ones).
