Tax management_______ _________

#1
OOO Mer acting in its own name as a commissioner renders services to the principal OOO Tree, including
the acquisition of various types of goods and fixed assets, as well as related services. All of the business
conducted by Tree is subject to the standard rate of value added tax (VAT).
During Quarter 1 (Q1) 2020, Tree transferred the following amounts (all inclusive of VAT at the standard
rate) to Mer’s bank account:
– 40,786,000 RR as reimbursement for the acquisition of goods;
– 29,897,000 RR as reimbursement for the acquisition of fixed assets;
–3,724,920 RR as reimbursement for transportation expenses; and
– 1,614,240 RR as reimbursement of certification expenses for the goods subject to special certification.
During Q1 2020 Mer carried out the commissioned purchases, but only received input VAT invoices for the
following:
– 90% of the goods acquired;
– 70% of the fixed assets acquired; and
– 100% of the both transportation and certification expenses
On 30 March 2020, Mer issued an invoice to Tree for commission fees of 4,298,440 RR (inclusive of
VAT). This invoice was received by Tree on 2 April 2020.
Required:
(i) Calculate the value added tax (VAT) liability of OOO Tree (as principal) and OOO Mer (as
commissioner) for Quarter 1 (Q1) 2020, clearly indicating whether the amounts calculated relate
to input VAT or output VAT.

#2

In January 2020, OOO KPMG decided to build a warehouse for the packaging of its products, using its own
work force. In November 2020 the documents confirming the title of ownership were received. In December
2018, the warehouse was put into use for operations chargeable to value added tax (VAT) at the standard
rate, and profits tax deductible depreciation of the warehouse commenced.
The following expenses were incurred during the construction in Quarter 4 (Q4) 2020:
Materials written off (including VAT) 1,487,300 RR
Wages and salaries of workers and engineers 1,800,000 RR
Social insurance contributions 550,000 RR
Depreciation of non-current assets used in the construction 45,000 RR

Required:
(i) State the recognition date for the value added tax (VAT) taxable base for the construction works, and
calculate OOO KPMG’s VAT liability for Quarter 4 (Q4) 2020. Clearly identify all elements of the input
VAT and output VAT.

№3
Proso
OOO Proso provides repair and maintenance services to the Russian market, using its own production
facilities. Proso is 70% owned by a Russian company, OOO Zvezda, and 30% owned by a Dutch company,
BV.
Proso always applies the accruals method for both value added tax (VAT) and corporate profits tax
purposes.
According to Proso’s tax policy, direct costs should be allocated based on the services completion ratio. The
completion date is the date when the act of acceptance for the services is accepted and signed by the
customer.
Proso applies the non-linear method for depreciation and does not use the 30% of immediate write-off
deduction for profits tax purposes.
All the services provided to Russian customers by Proso during the year 2020 were subject to Russian VAT
at the standard rate.
The following data is available for Proso in respect of the year 2020. All amounts are inclusive of VAT
(where relevant) unless stated otherwise.
Sales and prepayments for the year 2020

Proso uses the first-in, first-out (FIFO) method of inventory valuation. As at 31 December 2020, repair
services rendered with an invoice value of 88,736,000 RR were awaiting acceptance by customers.
At 31 December 2019, the inventory balance had been equal to 0 RR.
Purchased direct materials put into production during 2020 were valued at 30,326,000 RR.

Direct labour costs

Proso has 105 employees involved in production activities. In 2020, the monthly gross salary per production
employee was 25,000 RR.
In addition, Proso provided its employees engaged in production activities with annual voluntary insurance
against accidents at work. The total insurance premium paid in 2020 was 2 ,000,000 RR.
Direct production equipment
Production equipment 1
Historic cost 143,960,000 RR
Date put into use 5 March 2018
Monthly non-linear tax depreciation rate 2.7%
Indirect expenses
Monthly salaries of 18,000 RR were paid to 15 administrative employees. In addition, three general
management employees received 100,000 RR per month.