Accounting and taxation for developers: creating financial results. Accounting for the developer Tax accounting for shared construction for the developer
Features of accounting and taxation of income and expenses of a developer carrying out shared construction (Azzheurova K.E.)
Date of article publication: 03/09/2014
The correctness of reflection in the developer's accounting of income received and expenses incurred for the creation of real estate objects has a significant impact on the formation of the financial result and the determination of taxable profit.
In accordance with the Accounting Regulations “Income of the Organization” PBU 9/99, approved by Order of the Ministry of Finance of Russia dated 05/06/1999 N 32n, the developer’s income is recognized as contracts for the sale of residential or non-residential premises are executed. If the developer transfers an apartment (or other premises) under an agreement for participation in shared construction, the agreement is considered fulfilled on the date of signing the acceptance and transfer act. This Regulation is regulated by Federal Law No. 214-FZ of December 30, 2004 “On participation in shared-equity construction of apartment buildings and other real estate and on amendments to certain legislative acts of the Russian Federation” (hereinafter referred to as Law No. 214-FZ).
If the premises are sold under a purchase and sale agreement, the agreement will be considered fulfilled on the date of transfer of ownership of it. To do this, the developer must first register ownership of this premises.
Let's consider the existing procedure for determining the developer's income when transferring and selling premises in a constructed multi-apartment residential building under an agreement of participation in shared construction.
According to clause 13 of PBU 9/99, the moment of recognition of income in the developer’s accounting should be established in the accounting policy as soon as the work is ready or upon completion of the work as a whole.
In the first case, the amount of income to be recognized in the reporting period can be determined from the amount of funds for the maintenance of the developer included in the estimate for the project under construction, and should increase the cost of construction. For example, if the degree of readiness of the developer’s completed work is established at the end of each month, then revenue from the sale of services is generated in the accounting registers with the same frequency.
In the second case, in the developer’s accounting, the full amount of income is recognized upon completion of construction. Then the proceeds from the provision of services to the investor for organizing construction will be reflected in the accounting accounts at a time when drawing up the act of acceptance into operation of the completed construction facility (form KS-14).
If the amount of revenue from the provision of developer services cannot be determined, then it is accepted for accounting in the amount of recognized expenses for the provision of these services, which will be reimbursed subsequently.
It is also necessary to determine and recognize additional income in the amount of the difference between the contractual cost of construction and the actual costs of its implementation. This difference is revealed on the account. 76 “Settlements with various debtors and creditors” when handing over shared construction projects to shareholders and writing off funds received from them in accordance with Letter of the Ministry of Finance of Russia dated May 18, 2006 N 07-05-03/02. Additional income, depending on the adopted accounting policy, should be reflected either as part of income from core activities in the account. 90 “Sales”, or as part of other income on the account. 91 "Other income and expenses."
If the contract does not provide for phased delivery of work and construction lasts more than one tax period, then controversial issues arise at the time of recognition of income in accounting. In this case, in accordance with the provisions of Letter of the Ministry of Finance of Russia dated October 13, 2006 N 03-03-04/4/160, the developer must independently distribute income between tax periods in order to recognize it in tax accounting based on the principle of uniformity (clause 2 of Article 271 of the Tax Code of the Russian Federation) . At the same time, in the accounting policy for tax purposes, he must choose one of two distribution methods: uniform or proportional to the share of actual expenses of the reporting period in the total amount of expenses provided for in the estimate.
Another point of view of recognizing income in tax accounting upon completion of construction is based on the fact that before the completion of construction, the amount of income cannot be determined unless it is allocated as a separate amount in agreements with investors or shareholders.
If the developer himself does not carry out the work of constructing a house on the land plot at his disposal, but only attracts money from the shareholder, then in accordance with Letters of the Ministry of Finance of Russia dated July 12, 2005 N 03-04-01/82 and the Federal Tax Service of Russia dated August 02. 2005 N MM-6-03/632 it is proposed to consider the developer’s income only the difference between the amount received from the shareholder under the terms of the agreement and the funds paid to the organizations directly constructing the object. This conclusion was made on the basis that the contract price can be determined as the amount of money to reimburse the costs of constructing a shared construction project and money to pay for the services of the developer (Clause 1, Article 5 of Law No. 214-FZ).
In another case, the procedure for paying remuneration for services rendered to the developer is determined by an agreement with the investor. The amount of remuneration is set as a fixed amount as a percentage of the estimated cost of construction in the form of savings between the actual costs of constructing the facility and its estimated cost.
An option is possible when the developer transfers the remaining unsold apartments to non-residential stock, rents them out after finishing, or assigns them the status of service apartments. These apartments must be recognized in the developer's accounting as a fixed asset and accounted for either on the balance sheet account. 01 “Fixed assets” (office or service apartment), or on the account. 03 “Profitable investments in material assets” (apartment intended for rental). Let's look at the features of accounting expenses for a developer.
Costs for the construction of facilities in accounting are grouped according to the technological structure of costs determined by the estimate documentation.
It is recommended to keep accounting for construction costs according to the following cost structure:
1) construction work;
2) equipment installation work;
3) purchase of equipment handed over for installation;
4) acquisition of equipment that does not require installation, tools and equipment, equipment that requires installation, but is intended for permanent stock;
5) other capital costs.
The cost of construction and installation work in the consolidated construction estimate is distributed among its corresponding chapters.
The developer's expenses for purchasing equipment consist of:
- cost of equipment according to suppliers’ accounts;
- transportation costs for equipment delivery;
- procurement and storage costs.
The costs of delivering equipment to the warehouse and procurement and storage costs are taken into account in advance on the equipment accounting account (07 “Equipment for installation”) in the total amount of deviations of the actual cost of purchasing equipment from their cost according to suppliers’ accounts. Then they are included in the cost of construction of the facility in proportion to the cost of the equipment commissioned for installation, taking into account the amount of these costs attributable to the cost of the equipment included in the balance at the end of the reporting period.
As studies of domestic economic literature have shown, some authors, in particular R.V. Filatova, propose to reflect the developer’s own maintenance costs on the account. 26 “General business expenses” with subsequent write-off to the account. 08 "Investments in non-current assets".
Other authors, in particular S.A. Vereshchagin, T.M. Sadykova, believe that in the conditions of the developer receiving income only upon delivery of the finished object to the investor with expenses incurred in the process of forming the costs of providing services related to the execution of the order, the use of the account. 08 is economically unjustified, since the developer does not invest in non-current assets, but produces a product in the form of providing a service in order to make a profit. Reflection of expenses on the account. 08 does not allow you to correlate expenses with the developer’s income when forming the financial result.
Therefore, in the accounting of developers who are not investors, it is more expedient to keep records of the costs of capital shared construction on the account. 76 "Settlements with various debtors and creditors." And the costs of maintaining the developer himself for the same object should be taken into account on the account. 20 “Main production”, since they relate to expenses for ordinary activities.
Thus, on the date of receipt of permission to put the house into operation, the developer has an account. 76, the costs of building a house incurred by all involved organizations and transferred to it in accordance with concluded agreements will be collected, and on the account. 20 - the cost of maintaining the developer himself. The sum of these costs will be the full cost of building the house, including each apartment in the house.
In order to connect the constructed facility to water supply, sewerage, heat, electricity and gas supply, the developer needs to pay a certain fee to the budget of the city (or other locality), which is called the cost of the organization’s share in the construction and reconstruction of the city’s (region’s) utility systems , regions, etc.). In accounting, the developer's expenses for connecting the property to communications must be included in its cost.
Please note that the fee is not paid by those developers who are constructing facilities at the expense of the city budget and transfer them to the city free of charge. Organizations that perform socially significant functions for the city may also be exempt from payment. Large Russian developers often build on both leased and their own land plots.
A plot of land for the construction of a real estate property is most often allocated by the municipal administration in accordance with an agreement on the development of a built-up area. The agreement between the city administration and the developer for the lease of land for development is concluded for the period of implementation of the investment contract. Rental costs should be distributed among the costs of construction of each of the separate real estate objects and reflected in the accounting registers with the following entry: D-t account. 76 "Settlements with various debtors and creditors" Set of accounts. 60 "Settlements with suppliers and contractors."
The developer can not only rent a plot of land from the municipal authorities, but also buy it into ownership. In this situation, a property is acquired, the rights to which will subsequently be transferred to the owners of apartments and non-residential premises, i.e. will not serve to generate income over a long period of time. Thus, the acquired land cannot be reflected in the accounting registers as an object of fixed assets.
Expenses for the acquisition of a land plot can be recognized both in accounting registers and for profit tax purposes as expenses for the construction of a non-residential property or house, included in its cost. When the apartments are transferred to their owners, the land plot on which it is located will become the common shared property of the residents.
Since the contract for the sale and purchase of a land plot, according to Art. 131 of the Civil Code of the Russian Federation (Civil Code of the Russian Federation), is subject to state registration, the state duty paid must also be attributed to the costs of constructing the facility. Consequently, the acquisition of a plot in the developer’s accounting registers is subject to reflection by the following accounting entries:
Dt sch. 76 "Settlements with various debtors and creditors" Set of accounts. 60 “Settlements with suppliers and contractors” - a land plot was purchased;
Dt sch. 76 "Settlements with various debtors and creditors" Set of accounts. 68 “Calculations for taxes and fees” - reflects the cost of paying the fee for registering a contract for the sale and purchase of a land plot.
In practice, a situation may arise when the developer does not have the appropriate permits to perform certain types of construction work. In this case, he is obliged to enter into contracts for the provision of these services with specialized organizations. If the developer independently enters into an agreement with design and survey firms, then the signing of acceptance and transfer acts on receipt of the package of documentation in the accounting registers is subject to reflection by the following accounting entry: D-t. 76 "Settlements with various debtors and creditors" Set of accounts. 60 “Settlements with suppliers and contractors” - a package of design and estimate documentation was received.
The value added tax (VAT), presented by the surveyor and designer, is included by the developer as part of the costs of constructing the house, which he will transfer in full to the shareholders. Therefore, the developer does not need to allocate the amount of VAT presented to him for payment, since, according to Art. 170 of the Tax Code of the Russian Federation (Tax Code of the Russian Federation), he has no right to accept it for deduction.
Costs incurred by the developer and directly related to the construction of the house are included in the costs of construction of objects subject to further sale, thereby increasing the cost.
The moment of signing a deed with a specific shareholder for a specific apartment allows the developer to determine the financial result and taxable profit for a specific transaction. The developer will be able to determine the final financial result for the built house only after he has no premises left in this house on his balance sheet.
In accordance with the Accounting Regulations “Accounting for Construction Contracts” (PBU 2/2008), approved by Order of the Ministry of Finance of Russia dated October 24, 2008 N 116n, the financial result includes the difference between the contractual cost of construction and the actual costs of constructing the facility, taking into account costs according to the contents of the developer.
A situation may arise in which the costs of maintaining apartments that have not yet been transferred to shareholders will exceed the expected income of the developer. In this case, instead of profit, the developer will receive a loss. This loss as a result of his business activity should reduce not only the financial result, but also taxable profit. The same can happen if the costs of building a house charged by the builders, as well as the costs of the developer himself, exceeded the sale price of the apartments.
Let's consider an example of how business transactions are reflected in a developer's accounting for income received and expenses incurred in the process of selling real estate under shared construction agreements.
Example. Limited Liability Company (LLC) "Stroykomplekt" acts as a developer for the construction of a residential building with 100 apartments with an area of 100 square meters. m each. In accordance with the concluded agreement, 10 apartments are subject to transfer to the city, agreements on participation in shared construction were concluded for 85 apartments during the construction process, and for 5 apartments there were no future owners on the date the developer received permission to put the house into operation.
The costs of building the house amounted to 300,000,000 rubles, of which the developer’s expenses were 25,000,000 rubles, and the remaining 275,000,000 rubles. were paid to organizations directly constructing the building.
The fee for state registration of rights to real estate for legal entities is set at 16,000 rubles. Moreover, 25 apartments were transferred to shareholders, taking into account the established sales price - 50,000 rubles. for 1 sq. m. Accounting records for accounting for income and expenses of the developer Stroykomplekt LLC and the determination of the financial result are reflected in the table.
Accounting records for recording the developer's income and expenses and determining the financial result
Account correspondence |
Amount, rub. |
Note |
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The costs of services provided by construction organizations are reflected. |
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Developer costs reflected |
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Revenue from the sale of developer services during the execution of the contract with the city authorities is reflected. |
Developer expenses per 1 sq. m of housing amounted to 2,500 rubles. . |
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The developer's services for the apartments transferred to the city have been written off. |
Revenue is 2,500,000 rubles. (10 sq. m x 100 sq. m x 2500 rub.). |
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The costs of builders for the construction of apartments transferred to the city have been written off. |
Construction costs for construction of 1 sq. m of housing amounted to 27,500 rubles. . |
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The fulfillment of the developer’s obligations to the municipal authorities is reflected. |
The costs of executing the agreement on the development of the built-up area are included in the cost of the house being built. |
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The costs of transferring 10 apartments to the city were included in the cost of the developer’s services. |
Apartments built on our own or outsourced for subsequent sale in accounting registers should be recognized as finished products |
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Builders' costs are included in the cost of apartments remaining with the developer |
The builders spent 1 sq. m 30,556 rub. (RUB 275,000,000 / 9,000 sq. m), where 9000 sq. m - area of the remaining apartments. Moreover, the costs remained the same. |
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The developer's own services are included in the cost of apartments |
Costs for 5 apartments amounted to RUB 15,278,000. (RUB 30,556 x 5 sq. m x 100 sq. m). The developer spent 1 sq. m 2778 rub. (RUB 25,000,000 / 9,000 sq. m). |
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The costs of paperwork are included in the cost of apartments remaining with the developer |
Costs for 5 apartments amounted to RUB 1,389,000. (RUB 2,778 x 5 sq. m x 100 sq. m). Costs amounted to 80,000 rubles. (RUB 16,000 x 5 sq. m) |
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Received money from shareholders. |
The total amount was 125,000,000 rubles. (RUB 50,000 x 25 sq. m x 100 sq. m). |
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Acceptance and transfer deeds have been signed with shareholders. |
76/settlements with US dollars |
The total amount was RUB 76,390,000. (RUB 30,556 x 100 sq. m. x 25 sq. m). |
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Income received. |
62, 76/USD payments |
RUB 48,610,000 (RUB 125,000,000 - RUB 76,390,000). |
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Developer services written off |
6,945,000 (RUB 2,778 x 100 sq. m x 25 sq. m) |
The developer's financial result (profit) for these apartments will be: RUB 41,665,000. (RUB 48,610,000 - RUB 6,945,000). This should be reflected in accounting by posting: D-account. 90 “Sales”, subaccount 9, K-t account. 99 "Profits and losses."
Cash and property received from shareholders and investors are targeted financing funds that developers do not take into account when taxing profits. At the same time, according to paragraphs. 14 clause 1 art. 251 of the Tax Code of the Russian Federation, the developer is obliged to keep separate records, otherwise the funds received for targeted financing will have to be included in the base when calculating income tax.
Accordingly, expenses incurred by the developer during the construction of the property are also not included in tax expenses. However, in accordance with Letter of the Ministry of Finance of Russia dated January 12, 2010 N 03-03-06/1/2, those expenses that are incurred at the expense of the developer’s own funds, he has the right to take into account when taxing profits.
The Ministry of Finance of Russia in Letter dated March 25, 2008 N 03-07-10/02 noted that the funds remaining at the disposal of the developer after the completion of construction cease to be targeted financing received from investors, which are not taken into account when taxing profits. Consequently, such amounts according to the rules of clause 14 of Art. 250 of the Tax Code of the Russian Federation increases the tax base for the income tax of developer organizations as targeted funds used for other purposes.
Thus, the savings of target funds received by the developer are recognized as his income, subject to corporate income tax. According to the opinion of the Ministry of Finance of Russia, expressed in Letters dated September 16, 2011 N 03-03-06/1/554 and dated April 20, 2009 N 03-03-06/1/263, if construction costs exceeded the targeted funds received from the investor, then the developer does not have the right to take into account the amount of loss when taxing profits.
Thus, the practical application of the above approaches to accounting for expenses incurred and income received has a huge impact on the accuracy of determining the financial result and taxable profit, which makes it possible to eliminate possible distortions in the accounting and tax reporting of the developer.
Information about the company KSK GROUP
KSK group traces its history back to 1994. From its founding to the present day, the company has been one of the market leaders in consulting services in the fields of audit, taxes, law, valuation and management consulting. Over 20 years of work, more than 2,000 projects have been implemented for major Russian companies.
KSK Group offers a comprehensive and practical solution to the most pressing problems facing financial and general directors of companies and business owners. An individual approach, a deep understanding of the needs and goals of clients, combined with practical knowledge, allow us to solve these problems as efficiently as possible.
The KSK Group team is a team of more than 350 specialists with unique experience in implementing projects for both medium-sized and largest Russian corporations.
Currently, KSK Group offers a full range of services and solutions for business:
- audit according to Russian and international standards;
- tax and legal consulting;
- outsourcing and automation of business processes;
- decisions on attracting financing;
- marketing decisions and business strategy development;
- management and personnel consulting;
- assessment and examination;
- support of capital transactions;
- Due diligence.
Forming a correct financial result of a company’s activities is one of the most pressing problems for Russian developers. The experience of KSK groups shows that developers are often forced to artificially create a virtual positive financial result of their activities, violating the accounting provisions (PBU). The fact is that during construction, due to the length of the process, developers incur losses. However, the competent authorities (including control and supervision authorities in the field of shared-equity construction) do not accept reports containing losses reflected in them.
Let's look at the example of one of the most complex types of construction - the construction of an apartment building - how to correctly and timely, taking into account all the features of the current legislation, to uniformly generate a financial result.
First of all, let’s answer the question of what is the developer’s income. The agreement for participation in shared construction specifies the price, that is, the amount of money to be paid by the shareholder for the construction (creation) of a shared construction project (Clause 1, Article 5 of the Federal Law of December 30, 2004 No. 214-FZ ""; hereinafter - Law No. 214-FZ). The price given in the contract can be defined as the amount of money to reimburse the costs of construction (creation) of a shared construction project and money to pay for the services of the developer.
Thus, it turns out that the developer’s income is:
- developer remuneration received during the construction of the facility;
- savings from the use of construction financing funds (if the terms of the contract determine that these savings remain with the developer and are not returned to the shareholder).
It should be noted that if the amount of the developer’s remuneration can be fixed in the contract already at the time of its conclusion, then the amount of savings can be determined only when the parties sign the act of transferring the object to the shareholder at the time of fulfillment of the developer’s obligations under the contract ().
Thus, the developer's income, which can be recognized on a straight-line basis throughout the construction of the project, will consist solely of the developer's remuneration.
How to evenly generate income from remuneration in accounting and tax accounting?
When reflecting income in the form of services of the developer, the latter should be guided by PBU 9/99 "". In accordance with clause 12 of PBU 9/99 " ", revenue is recognized in accounting if the following conditions are simultaneously met:
- the organization has the right to receive this revenue arising from a specific contract or otherwise confirmed in an appropriate manner;
- the amount of revenue can be determined;
- there is confidence that as a result of a particular transaction there will be an increase in the economic benefits of the organization. Such certainty is present when the organization has received an asset as payment or there is no uncertainty regarding the receipt of the asset;
- the right of ownership (possession, use and disposal) of the product (goods) has passed from the organization to the buyer or the work has been accepted by the customer (service provided);
- the expenses that have been or will be incurred in connection with this operation can be determined.
For tax accounting purposes, it is also possible to recognize income evenly. Thus, in accordance with income relating to several reporting (tax) periods, and in the event that the relationship between income and expenses cannot be clearly defined or is determined indirectly, income is distributed by the taxpayer independently, taking into account the principle of uniform recognition of income and expenses .
Thus, if the agreement with the shareholder stipulates that the price of the agreement includes the services of the developer and the cost of this service can be determined, revenue can be generated before the completion date of the agreement.
On what date should the savings of shareholders' funds be determined?
The issue of saving money for the shareholder is not covered in any way in the article; moreover, the legislation on shared participation in construction does not use the term “saving money for the shareholder” at all. This concept was developed by the developers themselves during construction practice.
Therefore, everything related to this concept, including the date of recognition of income in the form of savings from shareholders, is a current topic of discussion in professional circles. The authorities have provided some clarification on this matter. For example, the Russian Ministry of Finance in its letters has repeatedly expressed the opinion that the developer should determine savings on the date of signing the document on the transfer of the facility into operation (letter of the Russian Ministry of Finance dated August 16, 2011 No. 03-03-06/488, letter Ministry of Finance of Russia dated July 29, 2013 No. 03-03-06/1/30040). At the same time, neither in the Letters themselves, nor in any other normative act, there is any explanation as to which document the department has in mind.
Please note that the document on the transfer of an apartment building into operation and the permission to put an apartment building into operation are different documents. The date indicated in the permit to put the house into operation reflects the date the competent authority made the decision on the possibility of transferring the object into operation and does not coincide with the moment of the actual transfer of the house into operation to the shareholder. Let us remind you that the transfer of a shared construction project by the developer and its acceptance by the shareholder is carried out under a transfer deed no earlier than after receiving permission to put the house into operation in the prescribed manner (). In addition, a document confirming the transfer of an apartment building into operation may be an act signed by the developer and the HOA or the developer and the management company.
Taking advantage of the gap in this part, regulatory authorities are trying to charge additional income tax on savings, considering that the date of recognition of savings is the date of receipt of permission to put the facility into operation, and not the date of signing the transfer deed between the developer and the shareholder.
At the same time, this position is not consistent with the economic practice of the developer, since in fact, additional expenses of the developer often arise from the moment the object is put into operation until the moment the object is transferred to the shareholder. And all costs for the construction of the facility, including additional ones associated with completions, additions, etc., must be covered precisely from the funds of the shareholder for the construction of the facility, which will certainly lead to adjustments in the amount of savings of the shareholders’ funds.
Since the concept of savings is not legislated anywhere, as well as the procedure for its accounting, we propose to establish the moment for determining savings in the accounting policy. For example, as follows: “The moment of determining the savings or overexpenditure of funds of participants in shared construction will be the date of signing the acceptance certificate of the completed object between the Company and the participant in shared construction, since it is at this moment that the following conditions will be simultaneously met:
- all documents on the transfer of shared construction objects have been signed;
- the expenditure of funds received by the Company from participants in shared construction for the purposes established by Federal Law of December 30, 2004 No. 214-FZ " " has been completed.
The courts also emphasize that the expenditure of funds received by the developer from shareholders for purposes related to the fulfillment of investment obligations is not completed at the time the building is put into operation. And the act of acceptance of the object by the authorized commission or the decision to put the house into operation are not documents confirming the actual amount of costs following the transfer of the apartment to the shareholder (for example, the resolution of the Arbitration Court of the Moscow District dated March 13, 2015 in case No. A40-76189/13, FAS West Siberian District dated January 31, 2011 No. A27-6086/2010).
What about VAT?
There are currently two main positions developed by judicial practice regarding the presence or absence of a VAT tax base when savings occur.
Position 1. The developer is obliged to charge VAT on savings. This position is based on the point of view according to which only funds allocated for the implementation of an investment project, that is, intended to finance the costs necessary to obtain any useful effect, can be recognized as investment. Upon completion of the contract, the funds remaining at the disposal of the developer lose their investment value. Consequently, the excess amount of the contribution received by the developer from the shareholder over the actual costs of building the house is associated with payment for services provided on the basis of the contract. As a result, it is subject to inclusion in the VAT tax base (,).
EXAMPLE
The developer is constructing a multi-apartment residential building. The project completion date is December 2014. In March 2013, the developer entered into an equity participation agreement with the citizen. In accordance with its terms, the contract price is RUB 5,600,000. and is defined as the amount of funds to reimburse construction costs and funds to pay for the services of the developer. The price of the developer's services is included in the cost of the contract and amounts to 20% of its cost.
The cost of construction of the apartment, which is the subject of the contract, according to the accounting records of the developer, amounted to 3,500,000 rubles. The monthly cost of maintaining the developer is 45,000 rubles. The act of acceptance and transfer of the apartment to the shareholder was signed on December 31, 2014.
The developer’s accounting policy (both for accounting and tax accounting purposes) regarding the generation of income from the developer’s services within the framework of construction under equity participation agreements provides for the following: “The Company’s income from the provision of developer services is formed from two components :
- The cost of the developer's services, determined in the price of the share participation agreement when concluding such an agreement.
- The amount of savings of shareholders on construction is the excess of funds received from shareholders for the construction of objects over the actual costs of constructing these objects.
Revenue from the Company's provision of developer services under equity participation agreements in construction in the form of the cost of developer services is generated as the service is provided.
In this case, the service is considered to be provided on the last day of each month, starting from the month of concluding the equity participation agreement and ending with the last month of the quarter when the facility was put into operation (according to the equity participation agreement). Thus, the Company’s revenue in the form of the cost of the developer’s services is recognized monthly evenly over the period specified above.
If, upon completion of construction, a positive difference is formed between the funds raised from the participants in shared construction and the amount of actual construction costs (saving money for construction shareholders), it remains with the Company (if provided for by the terms of the contract) and accordingly increases the cost of its services.
The developer’s obligations are considered fulfilled from the moment the Company and the participant in shared construction sign the Transfer Deed for the apartment; the cost of the developer’s services generates revenue in the amount of savings of the participants in shared construction as of the date the parties sign the specified transfer deed for the apartment.”
Based on the above terms of the contract, the cost of the developer’s services is determined in the amount of 1,120,000 rubles. (20% of RUB 5,600,000).
The period for straight-line recognition of income in the form of developer services is 22 months (from March 2013 to December 2014).
The monthly amount of revenue from the developer’s services is RUB 50,909.09. (RUB 1,120,000 / 22 months).
At the time of signing the apartment acceptance certificate (December 31, 2014), the developer reflected income in the form of savings for the shareholder in the amount of 980,000 rubles. (RUB 5,600,000 – RUB 1,120,000 – RUB 3,500,000).
Let's consider how these transactions should be accounted for in accounting (see table).
Table. Accounting entries reflected in the developer's accounts
Accounting records | Amount (thousand rubles) | Contents of the operation | |
---|---|---|---|
Debit | Credit | ||
51 | 76 – shareholders | 5 600 | Funds received from shareholders |
Accounting entries at the end of each month, starting from 03/31/2015: | |||
90 – 2 | 20 – developer expenses | 45 | Cost of the Developer's services |
62 – shareholders | 90 – 1 | 50,91 | Reflected revenue for the services of the Developer |
20 – developer expenses | 10, 02, 70, 69 | 45 | Developer maintenance costs |
20 – construction of the facility | 60 – contractors | 3 500 | The contractor presented the completed work that forms the construction project (during the entire period as the contractors present the relevant documents) |
43 | 20 – construction of the facility | 3 500 | The completed construction project has been accepted for accounting |
76 – shareholders | 43 | 3 500 | The apartment was transferred to the shareholder on the basis of a transfer deed |
76 – shareholders | 62 – shareholders | 1 120 | Reflects the offset of the equity holder's debt for the Developer's services from funds allocated for the execution of the equity participation agreement |
76 – shareholders | 90 – 1 | 980 | Savings from shareholders are reflected in income |
Victoria Yazykova,Project Manager of the Audit Department of KSK Group,
Account 76 reflected the funds of shareholders received through participation in shared construction, used to cover the costs of building a house. These expenses were accounted for in the debit of account 08 or 20 (depending on the developer’s understanding of their economic nature). Upon completion of construction, without reflecting sales turnover, account 08 (20) was closed as a debit to account 76 and savings were determined. It was taken into account as the developer’s revenue on the loan of account 90 in correspondence with account 76, on which the amount of savings of the shareholders’ funds remained. The implementation was not reflected for the reason that the developer did not take ownership of the completed shared construction projects before transferring them to the shareholders, which means that there was no formal transfer of ownership from the developer to the shareholders for these objects. In principle, this approach corresponded to the existing understanding of the requirements of subparagraph “d” of paragraph 12 of PBU 9/99, which one of the conditions for recognizing revenue in accounting determined the transfer of ownership from the organization to the buyer or acceptance of work (services) No transfer of ownership (acceptance of work, services) ) - no revenue. At the same time, no one particularly asked the question: what is the nature of the relationship between the developer and the shareholder in the agreement for participation in shared construction from the point of view of civil law? It was believed that the developer receives trust funds from shareholders, which many took into account not under the credit of account 76, but according to the credit of account 86. This is indeed true, but only for tax accounting purposes, since this is directly defined in subparagraph 14 of Article 251 of the Tax Code of the Russian Federation. For accounting purposes, the funds received from shareholders were not targeted, since they assumed compensation: the shareholder - money, the developer - an apartment (shared construction object). That is, the economic nature of the relationship between the participants in shared construction corresponded to ordinary commercial relations aimed at making a profit.
The impetus for rethinking the relationship between the developer and the shareholder was the resolution of the Plenum of the Supreme Arbitration Court of the Russian Federation dated July 11, 2011 No. 54. The main idea of this document is as follows. Any agreements relating to investment relations in the field of construction of real estate objects providing for the transfer to the investor of a financed share in the object under construction, which can also include agreements for participation in shared construction, cannot be considered as a separate type of agreement. After all, such agreements are not provided for by the Civil Code of the Russian Federation. These transactions should be considered only within the framework of transactions directly under civil law. For example, as purchase and sale agreements for future real estate. Paragraph 11 of this resolution states that the norms of the Federal Law of December 30, 2004 No. 214-FZ “On participation in shared-equity construction of apartment buildings...” are special in relation to the provisions of the Civil Code of the Russian Federation on future property. That is, this should be understood in such a way that an agreement for participation in shared construction is a type of purchase and sale agreement with a special procedure for registering ownership rights: directly to the buyer, bypassing the seller-developer.
Reflection of transactions
The question arises: did the developer correctly reflect in the accounting the transfer of shared construction projects to shareholders, bypassing the sales accounts? After all, the accounting entry debit 76 credit 08 (20) did not economically in any way reflect the existing options for accounting for business transactions related to the transfer of property. That is, in this regard, accounting for this operation was mostly conceptual rather than normative. The answer should be sought in the legal qualifications of the agreement for participation in shared construction.
Today, few people would dare to object to the recommendations of the Plenum of the Supreme Arbitration Court of the Russian Federation that agreements for participation in shared construction are a type of purchase and sale agreements. Therefore, we will take this qualification as a basis. This gives us the right to assert that the transfer of shared construction projects from the developer to shareholders is an operation for the sale of finished construction products. Consequently, it must be reflected in the sales accounts of the developer (seller). What's stopping you? But clause 12 of PBU 9/99 interferes, establishing that a mandatory condition for recognizing revenue is the fact of transfer of ownership from the seller to the buyer. But the developer does not formalize the ownership right to himself, which means he does not transfer it. So what next? After all, shouldn’t we always take into account receivables, as defined in the same paragraph 12, in the event of failure to meet the conditions for recognizing revenue?
It can be assumed that special provisions of Law No. 214-FZ in relation to the provisions of the Civil Code of the Russian Federation on purchase and sale may also provide for special conditions for the recognition in accounting of proceeds from the sale of shared construction projects. This gives the right to assert that when transferring these objects from the developer to equity holders, the transferring party has operations for the sale of finished construction products in the form of apartments, non-residential premises and parking spaces. As a result, the following entries are made in accounting:
Debit 51 Credit 76
- funds of shareholders received under agreements are reflected;
Debit 20 Credit 60
- costs for the construction of the facility are taken into account;
Debit 19 Credit 60
- reflected VAT presented by suppliers and contractors;
Debit 43 Credit 20 (19)
- the cost of finished construction products has been formed;
Debit 76 Credit 90
- reflects the turnover of the sale of shared construction projects in the amount of the entire amount of funds received from shareholders;
Debit 90 Credit 43
- sold finished construction products are written off.
Based on the results of postings in shared construction, accounting does not determine the savings of shareholders, since the price of the contract (with the exception of the developer’s remuneration) is reflected in full as revenue from the sale of shared construction projects.
Taxation procedure
Is it necessary to charge VAT in this case? Formally speaking, then no. The fact is that, in accordance with subparagraph 22 of paragraph 3 of Article 149 of the Tax Code of the Russian Federation, transactions for the sale of residential buildings, residential premises and shares in them are not subject to taxation. But the most important thing is not even this, since this norm does not exempt operations for the sale of non-residential premises and parking spaces from taxation.
The Tax Code of the Russian Federation is a direct reading document. Even if we assume that there are some discrepancies or misunderstandings in it, they should be interpreted in favor. In accordance with subparagraph 1 of paragraph 1 of Article 146 of the Tax Code of the Russian Federation, transactions for the sale of goods (work, services) are recognized as an object of taxation. Sale is considered to be the transfer of ownership of goods (work, services), which is provided for in Article 39 of the Tax Code of the Russian Federation. Since in our case there is no formal transfer of ownership, there is no object of taxation.
Construction is carried out using our own resources
Does the situation change if the developer builds the facility not using a contract method, but with his own resources?
Previously, specialists from the financial department explained that if an organization that is a developer under a participation agreement in shared construction, on its own or on its own with the involvement of other persons, undertakes to build a property, that is, the developer directly carries out construction and installation work, then on the basis of subparagraph 1 of paragraph 1 Article 162 of the Tax Code of the Russian Federation received from shareholders are included in the developer’s tax base as advance payments received for the upcoming work (letter dated July 12, 2005 No. 03-04-01/82).
According to the author, this statement of the Russian Ministry of Finance is at least controversial. The fact is that the specified procedure for taxing the funds of shareholders is acceptable if the norms of contract relations are applied to the agreement for participation in shared construction. In 2011, clarifications of IFRIC 15 “Agreements for the construction of real estate” came into force (Appendix No. 59 to Order of the Ministry of Finance of Russia dated November 25, 2011 No. 160n). Paragraphs 10 to 12 of this document provide that an agreement for the construction of a property that allows the buyer to specify the major structural elements of the design of the property before construction begins or major structural changes during construction should be within the scope of IAS 11 Contracts for construction". Conversely, if buyers have only a limited ability to influence the design of the property or to negotiate only minor changes to the basic design, the agreement is an agreement for the sale of goods within the scope of IAS 18 Revenue. In accordance with the requirements of paragraph 7 of PBU 1/2008, international standards can be applied along with accounting provisions approved by the Ministry of Finance of Russia, if the specific regulatory legal acts do not establish accounting methods.
Therefore, clarifications in the field of agreements for the construction of real estate can be fully accepted when forming the accounting records of developers working within the framework of shared-equity construction. This means that, regardless of the construction method (contractor or by the developer himself), the agreement for participation in shared construction should be considered as a purchase and sale agreement, since it does not imply the opportunity for the shareholder to stipulate the main structural elements of the design of the property before the start of construction or stipulate the main structural changes in the process construction. And since, as already noted, the sale of shared construction projects is not subject to VAT, then the funds of shareholders received under these agreements, provided that the developer performs the work on his own, are not subject to VAT. And accounting for construction costs is carried out by the developer in the same way as discussed above: expenses are accumulated in the debit of account 20 in correspondence with the credit of accounts 10, 70, 60, etc.; then the cost of finished construction products is formed in the debit of account 43. Turnovers from the sale of finished construction products are reflected in the usual manner.
Developer services
With this approach, what happens to the accounting of services that, in accordance with the agreement, the developer can provide to equity holders? Here it should immediately be noted that the developer’s services can only take place if the contract price is divided into the amount of funds allocated to cover the costs of building the house and the developer’s remuneration. If this is not provided, then there is no need to talk about any services of the developer in this case.
The provision of services by the developer to equity holders is subject to reflection in accounting as a separate type of activity. Funds intended for payment of remuneration are accounted for as advances received on the credit of account 62. The developer's expenses related to the provision of services are reflected in the debit of account 20. Revenue from the sale of services is recognized in the manner prescribed by the developer's accounting policy.
Features of tax accounting
Is anything changing in tax accounting? In general, no.
Funds received from shareholders are recognized in tax accounting as earmarked funds on the basis of paragraph 14 of Article 251 of the Tax Code of the Russian Federation. The expenditure of funds is carried out within the framework of targeted financing in compliance with the order of their expenditure provided for in paragraph 1 of Article 18 of Law No. 214-FZ. The funds received are not revenue, and their expenditure is a tax expense for tax purposes. If the savings of shareholders' funds are determined upon completion of construction, this savings (if under the terms of the contract it is not subject to return to shareholders) is reflected for tax purposes as part of the developer's non-operating income or as part of revenue from the sale of services. If upon completion of construction an overexpenditure of shareholders' funds is determined, it is not recognized in order to reduce the tax base for savings and the overexpenditure is established for the construction project as a whole.
Are savings determined within tax accounting subject to VAT? This depends on the economic nature of the amount in question. For example, the price of a participation agreement in shared construction can be divided into an amount allocated to cover the costs of constructing the facility and the developer’s remuneration for the services provided to shareholders. If that part of the funds that should be allocated to cover construction costs is not fully spent, resulting in savings, then it should be attributed to an increase in the developer’s remuneration, recognized in tax accounting as part of revenue from the sale of services. As a result, if the amount of remuneration itself was subject to VAT, then the amount of savings will be subject to this tax. And vice versa: if the reward was not taxed, then the savings are not taxed.
If the price of the agreement for participation in shared construction does not imply remuneration to the developer for services, which may indicate that the developer does not provide any third-party services other than the subject of the agreement to the shareholders, then the amount of savings cannot be considered remuneration for the provision of services. And since its receipt by the developer is not related to operations for the sale of goods (works, services), it is not subject to VAT and is reflected in non-operating income.
Results
The proposed methodology for accounting and tax accounting of agreements for participation in shared construction, in the opinion of the author, today best meets the requirements of current legislative and regulatory acts. However, only the developer himself has the right to determine the methodology for maintaining accounting under agreements for participation in shared construction and to protect his right to use the chosen methodology in necessary cases.
During shared-equity construction, the developer reflects the money of shareholders in a special manner - separately from all other transactions. These are targeted funds. They are not taken into account in income and expenses. The transfer of objects to shareholders is not considered a sale. VAT is not charged on transfer.
The developer's income is his savings, which he determines when he builds the object. We'll tell you how to calculate savings and what taxes to pay on them.
How to calculate savings
The developer's income is his remuneration. Most developers do not indicate the amount of remuneration in the share participation agreement. The law allows this (clause 1, article 5 of the Federal Law of December 30, 2004 No. 214-FZ).
Then the developer’s income will be all the savings - the difference between the money received from the shareholders and the construction costs. The amount of savings can be determined only after construction is completed using the formula:
Example 1
The company is building an apartment building according to the DDU. The total amount that the company received from shareholders is 400,000,000 rubles. The total amount of construction costs is RUB 320,000,000. The developer's savings will be 80,000,000 rubles. (400,000,000 - 320,000,000).
To calculate savings, the cost price for each apartment - a shared construction project - is determined in proportion to the area. That is, based on the share of the usable area of a particular apartment or other room in the total usable area of the building.
Areas that belong to common shared ownership - stairs, elevators, technical floors - are not taken into account. The areas are determined in accordance with the explication of the premises, the project declaration and concluded agreements for participation in shared construction.
Example 2
Let's continue example 1. The total area of the house is 12,000 sq. m. m. Including:
- 10,000 sq. m - area of apartments;
- 2000 sq. m - the area of stairs, technical floors and other similar premises that belong to the common property in an apartment building.
Cost of 1 sq. m of apartment will be equal to 30,000 rubles. (300,000,000 ₽ / 10,000 sq. m). The cost of apartment No. 1 with an area of 45 sq. m will be equal to 1,350,000 rubles. (30,000 ₽ × 45 sq. m).
According to the DDU, the shareholder paid 1,800,000 rubles for it. The developer's savings for this apartment will be 450,000 rubles. (1,800,000 - 1,350,000).
How to reflect savings in accounting
Reflect the revenue at the time of transfer of apartments to equity holders. In accounting, make an entry in the context of analytics for each contract:
DEBIT 76 SUB-ACCOUNT “PAYMENTS WITH SHAREHOLDERS” CREDIT 90
- reflects the savings of shareholders, which remain at the disposal of the developer.
This procedure follows from the Instructions for the chart of accounts, as well as from other documents (clause 7 of PBU 9/99, clause 3.1.1 of the Regulations on Accounting for Long-Term Investments, letter of the Ministry of Finance dated October 9, 2006 No. 07-05-06/245 ).
Reflect the overrun by posting:
DEBIT 91 CREDIT 76 SUB-ACCOUNT “PAYMENTS WITH SHAREHOLDERS”
- overexpenditure is written off - the negative difference between the funds received from the shareholder and the actual costs of constructing the facility (excluding taxation purposes).
When to recognize income as savings for income tax purposes
The savings that remain with the developer are funds that were not used for their intended purpose. They need to be included in non-operating income (clause 14 of article 250 of the Tax Code of the Russian Federation). Disputes arise over how to recognize income - for the house as a whole or for each apartment separately. Officials give conflicting explanations. The courts also do not have a unified position. Let's consider two options. The chosen method must be fixed in the accounting policy.
The developer determines the financial result upon completion of construction of the house as a whole. Specifically, on the date of signing the permit to put the facility into operation (letters from the Ministry of Finance dated August 5, 2013 No. 03-06/1/31306, dated August 16, 2011 No. 03-03-06/1/488).
Courts sometimes support this point of view (resolution of the Arbitration Court of the Far Eastern District dated December 16, 2014 No. F03-5458/2014). The arguments are as follows. The Tax Code does not require determining profit for individual objects. Based on Law No. 214-FZ, the developer has the right to determine savings or overspending of shareholders’ funds as a whole for the property.
The developer determines the income on the date of signing the document transferring the property to the shareholder. It is safer to use this method. That is, recognize income on the date the shareholder signs the act of acceptance and transfer of an apartment or other shared construction project.
After all, one DDU can lead to savings. Otherwise - overspending. For example, if the contract was concluded at an early stage of construction at a lower price.
In favor of this option is the letter of the Ministry of Finance dated February 7, 2011 No. 03-03-06/1/77. Some judges share this opinion (resolution of the Arbitration Court of the Far Eastern District dated February 2, 2017 No. F03-6266/2016).
The arguments are as follows. The inspectorate has the right to calculate the tax base not for the house as a whole, but for each shareholder. The customer is obliged to keep records of costs for each apartment in a building under construction. And accordingly, determine the tax base in the form of savings at the time of execution of the equity participation agreement (Clause 1, Article 8, Article 12 of Law No. 214-FZ).
Officials do not allow a developer’s negative result to be recognized as a loss for income tax (letter from the Ministry of Finance dated September 16, 2011 No. 03-03-06/1/554). They consider it a lack of income for a particular shareholder. Overspending under such contracts, according to controllers, does not reduce profits. The amount of income consists of positive differences for each shareholder.
Do I need to charge VAT?
There is no need to charge VAT on the amount of savings under agreements for participation in shared construction. This is the money that the developer received for his services. And the services of the developer during shared construction are exempt from VAT from October 1, 2010 (subclause 23.1, clause 3, article 149 of the Tax Code of the Russian Federation, letter of the Ministry of Finance dated September 7, 2016 No. 03-07-11/52381, resolution of the Arbitration Court of the North-Western District dated May 5, 2017 in case No. A13-8355/2016).
An exception is the services of a developer during the construction of industrial facilities. Officials believe that this also applies to non-residential premises in an apartment building for which the developer has entered into a contractual agreement. The Ministry of Finance requires VAT to be charged on savings in relation to such objects - offices, shops, cafes, hairdressers (letter dated October 31, 2016 No. 03-07-15/63397).
The courts do not agree with this. After all, an apartment building is a non-production object, regardless of the presence of non-residential premises in it. Therefore, under DDU agreements, the developer does not create or transfer premises for production purposes to shareholders.
Consequently, all premises in a residential building are subject to VAT benefits for developer services (subclause 23.1, clause 3, article 149 of the Tax Code of the Russian Federation).
Arbitration practice has developed in favor of companies. The Supreme Court drew attention to this (rulings of the Supreme Court of the Russian Federation dated April 6, 2017 No. 308-KG17-2206, dated September 21, 2016 No. 302-KG16-11410, dated July 22, 2016 No. 306-KG16-4710).
The remaining courts also adhere to this approach (resolutions of the Arbitration Court of the North-Western District dated February 13, 2017 No. F07-12970/2016, Arbitration Court of the Volga District dated February 1, 2016 No. F06-3767/2015, etc.).
So if you are ready to argue, do not charge tax. If not, it is safer to charge VAT on savings on non-residential properties as part of a house.
Yu.A. Inozemtseva, accounting and taxation expert
Here is a house that was built... by a developer!
We deal with accounting and tax accounting for developers
The construction business in Russia is developing rapidly. Developers raise money for construction in the form of investor funds and bank loans. And investors and creditors, in order to adequately assess their risks, need high-quality accounting reports from the developer.
However, our “construction” accounting lags significantly behind market realities. After all, the only document that talks about accounting for the developer (Regulations on accounting for long-term investments) was adopted in the early 90s and is very outdated. Regulations, approved By Letter of the Ministry of Finance dated December 30, 1993 No. 160 (hereinafter referred to as Regulation No. 160).
We will talk about how to properly conduct accounting for developers (except for situations where the developer is also an investor or general contractor). Let's not ignore taxation issues.
Who's who at the construction site
The construction process usually involves several participants. The key figures are the investor and the developer.
Everyone understands who an investor is. The investor finances the construction and upon completion receives ownership of the capital construction project. clause 2 art. 4 of the Law of February 25, 1999 No. 39-FZ.
But the situation with the terms “developer” and “customer” (“technical customer”) is confusing, because different definitions are given in regulations of different years. But now these terms are used in the meaning established by the Town Planning Code (hereinafter - Gr K) Art. 3rd Civil Code of the Russian Federation.
As a rule, a developer is an organization (although it can also be an individual) that owns or has leased a land plot and organizes the construction of a property on it for an investor. clause 16 art. 1 GRK RF. But if we are talking about shared construction, then the developer can only be an organization clause 1 art. 2 of Law No. 214-FZ of December 30, 2004 (hereinafter referred to as Law No. 214-FZ). The developer obtains permits for the construction of the facility and for its commissioning clause 1 art. 51, paragraph 2 of Art. 55 GrK RF. Since developers, as a rule, do not have specialists in the field of construction, they usually attract technical customers.
A technical customer is a specialized construction organization that, on behalf of the developer (under an agency agreement), performs various organizational actions - enters into contracts for the preparation of design documentation, controls the quality of construction work, etc. clause 22 art. 1 GRK RF
Note that one company can combine various functions, for example, be an investor and a developer at the same time.
As we can see, “developer” and “technical customer” are categories that define the relationship between the parties solely for the purposes of state control in the field of urban planning (issuing various permits, regulating activities to raise funds for shared housing construction, etc.). As you understand, for accounting purposes, it does not matter who issues the construction permit or the commissioning of the facility. After all, the accounting procedure, first of all, should reflect the economic content of business transactions between the parties.
By the way, we can say that the urban planning term “developer” has an economic equivalent - this is a developer. Development is a foreign word (from the English development), but recently it has taken root among us. Companies that build real estate with their own funds and with the money of investors and make a profit from their sale or rental are called developers. But for simplicity, we will continue to use the term “developer” in this article.
Accounting
So, you need to figure out which of the participants in investment and construction activities represents the asset under construction and what exactly the developer sells - finished products, work or services.
But let's first remember the classic wiring diagram of the developer. (In practice, various nuances are possible, but we will not delve into them.)
Traditional accounting method for the developer
Contents of the operation | Dt | CT |
Received money from investor | 51 “Current accounts” | 86 “Targeted financing” |
Construction costs are reflected (cost of contract work, technical customer services, etc.) | ||
VAT presented by contractors as part of the cost of work is taken into account | 60 “Settlements with suppliers and contractors” | |
Developer costs recognized | 20 “Main production” (26 “General expenses”) | 10 “Materials”, 70 “Settlements with personnel for wages”, 69 “Calculations for social insurance and security” |
Developer's remuneration recognized | 86 “Targeted financing” | 90-1 “Revenue” |
The developer's savings are taken into account in income (if the funds transferred from the investor exceed construction costs) | 86 “Targeted financing” | 90-1 “Revenue” |
If investor funds are insufficient, the developer may experience a loss | ||
Cost taken into account | 90-2 “Cost” | 20 "Main production" |
The construction project was transferred to the investor | 86 “Targeted financing” | 08 “Investments in non-current assets” |
VAT is transferred to the investor on a consolidated invoice | 86 “Targeted financing” | 19 “VAT on purchased assets” |
The stated method of accounting is generally accepted for developers; it is applied regardless of the terms of the agreement with investors.
This accounting procedure is based on the norms of the no longer valid PBU 2/94 (applied until 2009) and Regulation No. 160.
As we have already said, Regulation No. 160 sets out the accounting rules for the developer. But the “developer” for whom Regulation No. 160 was written is not an organization that builds a property for sale on a land plot it owns, but a specialized construction company that organizes the construction process itself and controls the quality of construction work. clause 1.4 of Regulation No. 160. This means that we are talking about a technical customer in GRK terminology, that is, an organization that performs agency functions for a fee. It turns out that in the terminology of the Group of Companies, Regulation No. 160 does not apply to the developer.
As we can see, the traditional accounting procedure for developers is not provided for by accounting regulations. But that's not so bad. Much worse is that it can lead to distortions in financial statements.
As can be seen from the posting diagram, the object under construction until it is transferred to the investor is reflected in account 08 “Investments in non-current assets”, which means that accountants reflect it in the developer’s balance sheet in the group of items “Fixed assets” (line 1150). This is wrong. After all, the developer initially builds the property not for himself, but for the investor. This means that the constructed property will never be used by the developer as OS.
The fact that funds received from investors are usually reflected in account 86 and on the balance sheet as targeted financing is also far from indisputable. Targeted financing in accounting is considered to be money received by an organization (usually from the budget) for certain purposes, for example, for the purchase of operating systems. The balance of targeted financing must be reflected in the balance sheet in the group of items “long-term liabilities” or “short-term liabilities a” Letter of the Ministry of Finance dated 05/08/2014 No. 07-01-12/21775. But not in the total amount, but in a separate line “targeted financing” clause 20 PBU 13/2000. That is, the amount reflected in the balance sheet in the line “targeted financing” means that the organization has other people’s funds, which it must spend to finance its own capital or current costs. clause 4 PBU 13/2000. It is obvious that investors' funds should be used for the construction of the facility, and not for the developer's own needs. This means that reflecting investor money on the balance sheet as targeted financing leads to distortion of reporting.
Accounting with the developer according to IFRS
You will find the full texts of the commented IFRIC interpretations: section “Legislation” of the ConsultantPlus systemSince, as we have already said, the developer’s accounting is not regulated by Russian accounting regulations, we turn to IFRS clause 7 PBU 1/2008. How companies involved in the construction of real estate need to keep records is discussed in IFRIC 15, Agreements for the Construction of Real Estate. put into effect on the territory of the Russian Federation by Order of the Ministry of Finance dated November 25, 2011 No. 160n (hereinafter referred to as IFRIC 15). Of course, IFRIC 15 does not mention the term “developer”, the Interpretation refers to “enterprises that undertake the construction of real estate directly or through a subcontractor in” paragraph 4 IFRIC 15. However, this wording allows this document to be applied to developers.
According to IFRIC 15, the accounting treatment depends on who can determine the main structural elements of the future property - the investor or the developer.
For information on how to apply PBU 2/2008, read:If the investor decides what the building under construction will be like, then the developer must apply IAS 11 (the Russian equivalent of this IFRS is the “construction” PBU 2/2008). That is, an asset under construction should be reflected in the developer’s accounting on account 20, and revenue should be recognized as the facility is ready.
But if the investor cannot change the design of the object, the construction of which he finances, since the developer offers standard building options, then the developer recognizes revenue from the sale of goods (finished products) pp. 12, 16- 18 IFRIC 15. This is the most common situation in Russian practice, and we will consider it.
There is an exception to the general rule of IFRIC 15 on the recognition of revenue from the sale of products from the developer. If the investor supplies materials for construction (without determining the design of the future building), then the developer should recognize revenue from the provision of services. paragraph 15 IFRIC 15. However, this version of the agreement does not occur in Russian practice.
We are building for sale
In practice, two types of agreements between investors and developers are most widespread - an investment agreement (usually for commercial real estate) and an equity participation agreement for the construction of apartment buildings (ADU). Let's see what the developer's ideal accounting would look like in these situations (that is, using IFRIC 15).
SITUATION 1. Under the terms of the investment agreement, the investor transfers a certain amount of money to the developer and upon completion of construction receives ownership of the constructed object (or part of it). As a rule, the developer's remuneration is not specified in the contract. The developer's profit is the difference between the amount received from the investor and the costs of constructing the property, including the operating expenses of the developer himself. The design of the future property is determined by the developer.
SITUATION 2. An agreement on shared participation in construction was concluded between the developer and the shareholder. Relations between the developer and citizens under such agreements are regulated by the Law on Participation in Shared Construction of Apartment Buildings in Law No. 214-FZ.
Usually, the DDU indicates the fixed cost of the apartment, which the shareholder must pay. The amount of the developer's remuneration, as a rule, is not indicated; the contract only states that it is included in the price of the apartment. That is, the developer’s profit is the difference between the amount received from shareholders and the costs of building the house. Later in the article we will talk about exactly this version of the contract.
Law No. 214-FZ on shared-equity construction stipulates that shareholders’ money must be directed to strictly defined purposes (for example, for the preparation of design documentation and the performance of engineering surveys for construction, for the construction of engineering support systems) Part 1 Art. 18 of Law No. 214-FZ. At the same time, the Law does not oblige the developer to report to the shareholder exactly where and in what amount his money is directed.
Only a certain controlling body has the right to control the targeted spending of shareholders’ money. clause 1, part 6, art. 23 of Law No. 214-FZ.
In Moscow, the authorized body for control in the field of shared construction is the Committee to ensure the implementation of investment projects in construction and control in the field of shared construction. Decree of the Moscow Government dated April 26, 2011 No. 157-PP.
But the fact is that, due to the specifics of their activities, developers, in principle, cannot organize accounting in such a way that it is possible to determine what the funds of each shareholder were spent on. After all, the money goes to the current account from the shareholder in the total amount, which includes the developer’s remuneration. In addition, money does not come to the developer simultaneously from all shareholders, but gradually, throughout the entire construction process. Therefore, at first there are not enough funds from the shareholders and developers build the facility not only with the money of the shareholders, but also with their own (most often they attract loans). That is, money goes to the settlement accounts of developers from various sources, and then is used for construction, for example, to pay contractors’ bills or to repay loans. It is practically impossible to organize separate accounting of cash flows, and therefore control over the intended use in such conditions. This means that shareholders’ money is not targeted financing from an accounting point of view.
Thus, in terms of economic content, situation 2 is similar to situation 1.
This means that, based on the requirement of priority of content over form in the accounting and reporting of the developer raising money both under an investment agreement and under the DDU, it is necessary to recognize the object under construction in account 43 (sometimes account 41 is used) in the balance sheet in the group of items “Inventories” (line 1210). And in the statement of financial results - the proceeds from the sale of the constructed object upon transfer of it to the shareholder pp. 12, 16- 18 IFRIC 15.
Please note: we are talking only about accounting, and we will address tax accounting and VAT issues later.
The posting diagram will be as follows (postings for VAT are not given, since we will consider the procedure for calculating VAT below).
Both under an investment agreement for the construction of commercial real estate and under a DDU, the price of the agreement can be determined as the amount of money to reimburse the developer for construction costs and the amount of money to pay for the developer’s services. In this case, the developer’s activity is essentially an agency one. But in practice, such agreements have not become widespread.
Tax accounting
Today, the position of regulatory authorities and courts on taxation of developers’ activities is that, regardless of the terms of construction financing contracts, they are essentially agents and provide a service to the investor. As we have already said, this approach in most cases does not correspond to the essence of the relationship between the investor (shareholder) and the developer. However, this position is sustainable for both income tax and VAT purposes. It has not changed even after the clarification of the Plenum of the Supreme Arbitration Court that, from a legal point of view, investment agreements are most often contracts for the sale and purchase of future immovable property and clause 4 of the Resolution of the Plenum of the Supreme Arbitration Court of July 11, 2011 No. 54.
Income tax
From the point of view of “profitable” accounting, money received from investors or shareholders is considered funds for targeted financing subp. 14 clause 1 art. 251 Tax Code of the Russian Federation. The cost of the construction project transferred to investors (shareholders) is not recognized as the developer’s revenue for tax purposes. In turn, the developer’s costs for the construction of the facility are also not taken into account in expenses x clause 17 art. 270 Tax Code of the Russian Federation. If the developer's remuneration is allocated in the agreement, it is included in income subject to income tax.
This approach also applies to situations where the contract specifies a fixed amount that the investor must pay for the property and does not specify the developer’s remuneration. That is, the investor’s funds are considered to be targeted, despite the fact that the developer does not provide him with a report on the costs incurred.
True, the provisions of sub. 14 clause 1 art. 251 of the Tax Code apply only if the developer uses investors’ funds for their intended purpose and keeps separate records of income (expenses) received (incurred) within the framework of targeted financing. Otherwise, they must be included in non-operating income. But, as we have already said, developers do not keep separate records of costs paid from shareholders’ funds and from their own funds. Interestingly, the tax authorities do not require this. This is how they usually act. Based on the developer's accounting data, the cost of construction of one square meter of the building is calculated and multiplied by the number of square meters transferred by the developer to the investor (shareholder). Then the resulting value is compared with the amount of money that the developer received from investors. If the developer received more from investors than he spent on the square meters transferred to them, then the difference is what was spent for other purposes and is subject to income tax as non-operating expenses. Resolution of the Federal Antimonopoly Service of the Northern Territory of June 17, 2013 No. A26-5720/2011.
But most often, the difference between the amount of money received from investors (shareholders) and the amount of the developer’s expenses for the construction of the object transferred to him is usually called the developer’s savings, and not non-target expenses. It is taken into account when taxing profits upon completion of construction of the facility, at the time of its transfer to the investor Resolution of the Federal Antimonopoly Service of the Moscow Region dated January 28, 2014 No. F05-16991/2013.
This taxation procedure applies to both investment agreements and DDUs. Letter of the Ministry of Finance dated July 29, 2013 No. 03-03-06/1/30040.
In our opinion, the presence of so-called savings in itself indicates that the developer is selling products (the result of work) to the investor, and not services. Otherwise, money not spent on construction would have to be returned to investors, and not end up in the pocket of the developer.
It would seem that the current approach to taxation of the activities of developers suits everyone today: both tax authorities and taxpayers.
But due to the fact that the Tax Code treats any investor money as targeted income, negative consequences also arise.
If a developer experiences a loss under investment agreements or DDU, it will not be possible to take it into account without disputes with the tax authorities Letter of the Ministry of Finance dated 02/03/2012 No. 03-03-06/1/62. The logic is clear: if we consider the developer to be an agent who builds with investors’ money, then overspending on construction is the problem of investors, not the developer. Sometimes the court agrees with the tax authorities Resolution of the FAS VSO dated 08/07/2013 No. A33-120/2012.
But most often, judges support developers and allow losses to be taken into account when taxing profits and Resolution of the Federal Antimonopoly Service No. F03-3710/2013 dated August 23, 2013; FAS UO dated December 15, 2010 No. Ф09-10505/10-С3; FAS MO dated March 28, 2014 No. A40-75073/13.
VAT
For VAT purposes, the activities of the developer are also considered to be agency activities. clause 22 of the Resolution of the Plenum of the Supreme Arbitration Court of May 30, 2014 No. 33.
Since money received from investors and shareholders is considered earmarked receipts and not advances, there is no need to pay advance VAT on them (unless the developer is a “part-time” contractor). True, sometimes local tax authorities still try to reclassify DDU into contracts for the purchase and sale of future real estate and charge additional advance VAT, but to no avail. Resolutions of the FAS VSO dated April 15, 2013 No. A78-3003/2012, dated November 18, 2013 No. A78-10830/2012.
Accordingly, VAT is assessed on the developer’s remuneration, which is determined upon completion of construction, at the time of transfer of the object to the investor (except for remuneration related to the construction of housing) clause 1 art. 146, sub. 23.1 clause 3 art. 149 Tax Code of the Russian Federation.
The so-called savings, in fact, are also a remuneration for the developer, therefore, if we are talking about the construction of commercial real estate (or industrial facilities in an apartment building), then such remuneration is subject to VAT at the calculated rate of 18/118 Letter of the Ministry of Finance dated October 18, 2011 No. 03-07-10/15.
If the developer applies the procedure for recording transactions provided for by IFRS, then the VAT entries regarding the cost of the contractor’s work will be as follows:
- debit 19 – credit 60 - submitted for VAT by contractors for work performed;
- debit 62 – credit 19 - “contract” VAT is overcharged to the investor.
Despite the fact that the traditional accounting procedure for developers does not reflect the economic essence of construction operations, it is premature to abandon it. Firstly, it is so ingrained that both accountants and users of financial statements understand what non-current assets and targeted financing actually mean in the developer’s statements. That is, paradoxically, even “incorrect” reporting fulfills its information function. And secondly, the traditional accounting procedure today coincides with the generally accepted taxation procedure for developers.