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VAT increase up to 20%. What needs to be done?

The VAT rate will increase from 18% to 20% from January 01, 2019. Transactions (sale of services, goods or work performance) which used to be taxed at 18% will be taxed at 20% from January 01, 2019.     

Tax benefits such as, for example, the reduced rate of 10% VAT on children’s or medical products will remain as previously.

What to do is goods were paid in 2018 but shipped in 2019?

  1. In 2018, companies should accrue VAT on advance payment at the rate of 18%. 
  2. In 2019, companies will accrue VAT on shipment at the rate of 20% and deduct advance VAT in the previously calculated amount. 
  3. The 2% difference is paid by the seller, and the buyer compensate the overpaid 2% to the seller. 

Additional payments are taxed depending on when they are received from buyers:

  • If additional payments are received from buyers in 2018, they will be deemed part of advance payments and will be taxed at 18%. As a result, sellers will receive only partial compensation for their tax losses;
  • If additional payments are received from buyers in 2019, then they will be considered as additional VAT payments.

What to do when your cash register VAT is at 18%?

Companies using cash registers will need to update their cash registers and contact their cash register supplier to make arrangements for this update.

Should existing contracts be amended?

  • If the contract amount is specified without VAT, then no amendments will be required;
  • If the contract amount is specified with VAT, then additional agreements to contracts could be drafted to provide for this change of VAT.

What to do in case of erroneous payment of VAT at 18%?

It depends on who made this error:

  • If made by the seller in shipping documents, then the seller will need to correct it, and the buyer will need to make an additional payment in accordance with the contract price; 
  • If made by the buyer in payment documents, the buyer should specify in a letter to the seller the payment purpose, and if necessary, make an additional payment in accordance with the contract price.

How may we help?

If you have any questions about VAT increase or require assistance with specific business situations, please do not hesitate to contact us. We look forward to assisting and advising you.

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