Real estate payment to the sole shareholder (case)

Situation:

A company ABC SRL offers to the sole shareholder a construction plus the afferent land. worth 220,000 lei.

According to the evaluation report, the construction is valued at 200,000 lei (excluding VAT). We mention that that construction was received in 2013.

The value from account 455 is 220,000 lei.

Can the payment procedure be used? How is the sales invoice prepared according to VAT? What is the accounting monograph in this situation?

 

Solution:

An important aspect that the company must take into account is the fact that the transaction must be made at market value as it takes place between affiliates.

From an accounting point of view, according to point 56 of OMFP no. 1802/2014, the principle of non-compensation reveals that any compensation between the elements of assets and liabilities or between the elements of income and expenses is prohibited.

All receivables and payables must be recorded separately in the accounts, based on supporting documents. Any offsets between receivables and payables to the same entity made in compliance with legal provisions may be recorded only after accounting for receivables and income, respectively the corresponding debts and expenses.

Therefore, the debt to the company has already been accounted for with the loan received.

The sale of the real estate is accounted for separately and income from the sale of the real estate is recorded, based on the contract concluded with the notary and the invoice:

461 “Different debitors ” = 7583 „Revenue from the sale of assets and other capital operations ”at market value (200.000 lei)

According to Article 53 of the Fiscal Code, the income thus obtained is taxable income,

From the point of view of VAT, deliveries of old constructions are exempt from VAT without the right of deduction, according to article 292 paragraph (2) letter f) of the Fiscal Code.

If the company pays for an old building whose transfer is, in principle, exempt from VAT without the right of deduction, the obligation to adjust the VAT deducted when purchasing or building the building is generated.

According to article 305 of the Fiscal Code, the VAT adjustment in the case of capital goods is made for a period of 20 years calculated starting with January 1 of the year in which you performed the reception.

According to Article 305 paragraph (2) of the Fiscal Code, the deductible tax related to capital goods, provided that the rules on self-delivery or self-delivery do not apply, is adjusted for a period of 20 years, for the construction or acquisition of a real estate, as well as for the transformation or modernization of a real estate, if the value of each transformation or modernization is at least 20% of the total value of the real estate / part of the real estate after transformation or modernization.

If the building was received in 2013, 8 years have passed since the adjustment period, and the company must adjust the VAT for the remaining adjustment period:

635 „Expenses with other taxes, fees and assimilated payments” = 4426 „Deductible VAT” VAT deducted at the time of construction x 12/20

According to article 292 paragraph (3) of the Fiscal Code, any taxable person may opt for the taxation of the operations provided for in article 292 paragraph (2) letters e) and f), under the conditions established by the methodological norms.

According to point 57 paragraphs (1) and (3) of the Methodological Norms for the application of the Fiscal Code, within the meaning of article 292 paragraph (3) of the Fiscal Code and without contravening the provisions of article 332 of the Fiscal Code, any taxable person may opt for the taxation of any of the tax-exempt operations provided for in Article 292 paragraph (2) letter e) of the Fiscal Code, regarding a real estate or a part of it.

The option is notified to the competent fiscal bodies on the form presented in annex no. 1 which is an integral part of these methodological norms and will be exercised from the date registered in the notification.

A copy of the notification is sent to the customer.

We mention that the late submission of the notification does not cancel the right of the taxable person to apply the taxation regime nor the right of deduction exercised by the beneficiary under the conditions of article 297 – 301 of the Fiscal Code.

Therefore, in the conditions in which the company opts for the taxation regime (in order to avoid the VAT adjustment) it is obligatory to submit a notification for the taxation of the old real estate delivery operation (being in principle exempt from VAT). Normally, at the time of the taxation delivery decision (before or simultaneously with the delivery date), a notification must also be submitted, but the late submission of the notification does not cancel the taxable person’s right to apply the taxation regime nor the right to deduct benefit.

Thus, in the conditions in which the delivery of the real estate is taxable by the effect of the law or by option, the invoice will be drawn up with VAT:

461 „Different debitors ”= 7583 „Income from the sale of assets and other capital operations ”market value: 200.000 lei

461 „Different debitors ” = 4427  „VAT collected”

Removing the property from the records:

% = 212 „Constructions”

2812 „Depreciation of constructions ”depreciated value

6583 „Expenses on assigned assets and other capital operations ”unamortized value

The compensation of the amounts is registered:

4551 „Shareholders / Associates – current accounts” = 461 „Different debitors ”

The difference between the higher billed amount and the lower loan amount will be paid by the partner.

Legal basis:

– MFP Order 1802/2014 for the approval of the Accounting Regulations regarding the individual annual financial statements and the consolidated annual financial statements;

Fiscal Code (approved by Law no. 227/2015, published in the Official Gazette no. 688 of 10.09.2015), with subsequent amendments and completions;

– Fiscal Procedure Code (approved by Law no. 207/2015, published in the Official Gazette no. 547 of 23.07.2015), with subsequent amendments and completions;

– Methodological Norms for the application of the Fiscal Code (approved by HG no. 1/2016).