Tax accounting as a tool for value added tax calculation
Table of contents: The Kazakh-American Free University Academic Journal №8 - 2016
Author: Trofimova Yuliya, Kazakh American Free University, Kazakhstan
The concept of "Tax Accounting" was included into the
legislation and practical management after the introduction of the Law "On
taxes and other obligatory payments" in 1995 and received a broad
interpretation. V. K. Rodostovtsev defined tax accounting as follows: it is an
operational accounting, required to be kept by the taxpayers during the tax
year to account for income and deductions, while the majority of deductions and
a number of items of income are not registered in the accounting records.
According paragraph 1 of Article 56 of the Tax Code of the Republic of Kazakhstan, tax accounting is a process of keeping tax records per formed by a tax
taxpayer (a tax agent) in accordance with the requirements of this Code, in
order to generalize and systematize information about the objects of taxation
and (or) objects related to taxation, as well as about calculation of taxes and
other obligatory payments to the budget and tax reporting.
The main goal of tax accounting is accurate
calculation of tax liability, therefore it should be considered in a close
connection with the process of calculation of tax payable to the budget. The
main content of the tax accounting is based on bookkeeping, standards of which
are determined by the legislation of the Republic of Kazakhstan in the field of
accounting and financial reporting.
The taxpayer independently or through an
authorized person organizes tax accounting and determines the forms of
generalization and systematization for tax purposes in the form of tax
registers. The taxpayer also develops and approves tax accounting policy. In
order to determine the objects of taxation or objects related to taxation, to
calculate tax liability enterprises need to keep records that include
accounting records, primary accounting documents, tax forms, and tax accounting
In order to ensure transparency of
operations related to the taxpayer's activities and their financial situation
the Tax Code contains the following rules:
- tax accounting is carried out in tenge on
an accrual basis.
- according to paragraph 2 of Article 57 of
the Tax Code, the accrual method of accounting is a method by which the results
of operations are recognized on the fact of their commission and not the date
of receipt or payment of cash or cash equivalents;
- objects of taxation or objects related to taxation, as well as the
calculation of taxes and other obligatory payments to the budget are determined
on the basis of the tax accounting for the tax period;
- consideration of exchange rate differences
for tax purposes is carried out using the market rate of exchange;
- accounting of inventory for tax purposes
is done in accordance with IFRS and legal requirements of the Republic of
- operations based on a barter agreement,
transfer of the collateral to the pledge if the debtor fails to perform secured
obligation are treated for tax purposes as a sale of goods, rendering of services,
performance of work.
For organizations that have taken the
decision to maintain separate tax records, Article 58 of the Tax Code provides
different conditions of taxation for calculating tax liabilities. In the
conduct of separate tax accounting the taxpayer allocates the total cost of the
specific weight of incomes derived from activities over which the reduction in
the corporate income tax, and other activities, in the total amount of income
received during the reporting tax period.
Separate tax accounting is required for the
following categories of taxpayers:
- subsoil users: on contract activity
separately from the non-contractual activities;
- parties to the agreement on joint
activities: joint activities separately from other activities;
- trustees: on the activities of asset
management separately from other activities;
- a legal person, using a special tax
regime for small businesses, in the event of income subject to taxation in the
general procedure separately from the tax obligations of the special tax
- organizations that organize conduct specialized international exhibitions in the Republic of Kazakhstan on the activities corresponding to paragraph 1 of Art. 135 of the Tax Code and other activities.
The taxpayer independently determines the
procedure for keeping separate tax accounting, describing the basic provisions
in the tax accounting policy, so that according their records it was possible
to accurately determine the taxable base for the calculation of liabilities.
Also, the taxpayer develops structure
and forms of analytical tax registers, ways of their formation, order of
storage of primary documentation and tax statements.
Organizations engaged in activities, should
present all their business transactions as primary supporting documents, which
are the basis for accounting and tax accounting. Requirements record preparation and storage are provided in Article
59 of the Tax Code.
The taxpayer keeps all the accounting
records in Kazakh and (or) Russian languages, both on paper and (or) electronic
carriers and presents them to
the tax authorities during the tax inspection. In accordance with Article 46 of
the Tax Code, the term of limitation for tax liability and asset records is
five years. Keeping records in case of reorganization of the legal entity is
assigned to the successor.
Adopted by the organization tax accounting
policy, which establishes the procedure of tax accounting in compliance with
the requirements of the Tax Code provides all stakeholders with a complete,
accurate and understandable information, which the taxpayer uses for the
calculation of tax liabilities and other obligatory payments to the budget.
According to Article 60 of the Tax Code,
tax accounting policy shall contain the following:
- self-developed forms and procedures of
- activities carried out according to the
- officials responsible for complying with
the tax accounting policy;
- in case the taxpayer is engaged in
subsoil development - the order of separate tax accounting;
- allocation methods for the purpose of calculating corporate income tax;
- method of attribution of value added tax
to the offset provided for by the Tax Code;
- in the case of the hedge the process of
determination of risks hedge tools and assessment methods;
- in the case of transactions with Islamic
values - revenue accounting policy;
- depreciation rates for each subgroup or
group of fixed assets, taking into account paragraph 2 of Article 120 of the
- in the case of invoicing, the maximum
number of digits used in the numbering, and, in the context of structural
units, the code of each of these units;
Change in and (or) addition to the tax
policy is carried out by the taxpayer using one of the ways specified in paragraph
5 of Article 60 of the Tax Code.
Individual entrepreneurs that don’t perform
accounting and financial reporting, make entries in the tax register on the
basis of primary documents, forms and requirements of which are approved by a
Individual entrepreneurs keep tax
registration according to paragraph 3 of Article 60 of the Tax Code.
The value of the tax account is large
enough, because the type of taxation prevailing in the country reflects the
level of economic and political maturity of the society. Taxes are the active
tool of state regulation. Setting
taxes, the government, tries to decide upon the best way to collect all the
necessary resources from businesses and households, and thus joins the
collective consumption and investment.
But, despite the fact that the state takes
over the regulating and accumulating functions, the tax system itself operates
on a micro level, i.e. basic tax functions are carried out at the level of
individual taxpayers - both corporate and individual.
Government, replenishing the state treasury
funds through the collection of taxes, reserves the right to introduce new
taxes, reducing or increasing them in order to be able to promote or hinder certain types and forms of economic
activity in production, sale, consumption of certain goods.
Failure to comply with the tax laws,
improper record keeping, inappropriate determination of the tax base, and as a
consequence, the tax obligation entails administrative penalties in the form of
forced collection of tax arrears, penalties and fines.
Therefore, tax records is improved over the
years and, with the increase in
complexity of business processes, its impact on the economic life gradually becomes
Under the principles of tax accounting we should understand the basic terms and
ideas that are so necessary for the development of the tax system of a
particular state. The basic principles of taxation in the Republic of Kazakhstan, reflected in Article 4 of the Tax Code, are presented in Figure 1.
Tax accounting rules, accounting
documentation in a combination with the fundamental principles of taxation is a
powerful lever to influence the formation of an efficient and fair tax system
of any law-governed state.
In the early 1990 's, all spheres of
economic life in Kazakhstan underwent certain reforms. This uncertain and unstable
time witnessed the focus on fiscal relations, tax accounting, previously
unknown in our country. Value added tax was one of the first compulsory
payments imposed in the practice of taxation of the Republic of Kazakhstan. This tax not only firmly established in the tax system of our country since its
inception, but also became one of the most important state taxes. Value added
tax is a universal indirect tax. The basis of its collection is added value created
at all stages of production and circulation of commodities. But the main burden
of taxation is transferred to the final consumers of products, works and services.
1. Taxation principles in the Republic of Kazakhstan
Value added tax, being the most significant
indirect tax, performs two complementary functions: a regulatory and fiscal
2. VAT functions
Fiscal, economic and psychological
benefits of value added tax gave it the opportunity of wide application and
dissemination. The benefits of this tax is its high yield. Value added tax has
a fairly extensive tax base that is why almost every person shall pay the tax
regardless of the size of the income. This tax covers a wider range of goods
and services than other indirect taxes. Thus, simply by raising the tax rate
the state can quickly respond to the need for additional income. Value-added
tax was introduced into the tax system of the Republic of Kazakhstan in December
1991. At that point, the tax has been successfully used in 43 countries. Its
use has become a prerequisite for the state to join the European Economic Community.
A key element in improving the tax system of the Republic of Kazakhstan was the introduction of value added tax instead of the sales tax. A world experience
of the tax system design has become a powerful argument in favor of this tax.
In Kazakhstan, the rate of the value added tax starting from July 2001 has
gradually decreased from 20% to a current rate of 12%. In different countries,
there are different approaches to determining VAT rates. The specific values of
interest rates in certain developed countries are shown in Figure 3.
3. VAT rates abroad
The European Union has adopted the basic
rate limit - it must be at least 15%. Preferential goods have a reduced rate of
value added tax, it should be at least 5% in total .
Ireland has seen
the most frequent changes in the VAT value. Relatively frequently, VAT has been
changed in Italy and France. Counties with stable VAT are Malta and Poland. Over the last 20 years VAT rates haven’t been changed in Austria, Sweden and Denmark.
The most convenient and simple scheme of
calculating value added tax in
the European Union, is in Germany. Introduced in 1973, VAT has become the second
largest source of revenue after income tax.
Collection of VAT is designed in such a way
that the final consumer of goods and services gets them saddled with taxes of
identical value. In Germany, there is a practice of pre-tax deduction. This
gives the entrepreneur the right to reduce the value added tax by the amount of
tax, imposed on him by other entrepreneurs for their taxable turnover.
The rate of value added tax in Germany tends to grow. Thus, previously it
was 14%, then 15%, 16%, and at the moment it is 19%, with a reduced rate of 7%.
A reduced rate applies to:
- food (except alcohol and turnovers of
cafes, hotels and restaurants;
- mass media;
- urban and suburban public transport;
- health, charity, and church organizations;
- works of art;
- dentist’s services;
- animal breeding and crop raising.
Enterprises of Agriculture and Forestry, as
well as export are exempt from VAT.
The peculiarity of the German law on value
added tax is in the fact that there is a special article describing imposition
of tax on entrepreneur’s withdrawing from the circulation of goods and services
for personal use without payment. The right of set-off is given only to an
entrepreneur, whose total amount of exemptions is established by financial
bodies. This takes into account the presence of dependent children. Also, the
use of private branded vehicles is a subject of financial control, which must
be necessarily reflected in the annual declaration for the value-added tax.
In Sweden, there are two principles of
determining value added tax on export – the destination principle and the principle
of origin. Since January 1, 1995, this country have seen significant changes in
the tax system that affect the objects taxable with value added tax.
The level of taxation in Sweden compared with other EU countries, the highest. Thus, VAT for the basic goods and services is
25%, including bottled water, alcoholic beverages, tobacco. Also, there is a
rate of 12% and 6%. Social sector services, insurance and banking services,
acts of purchase and sale of real estate, rental of residential and office
space, etc. are not tax deductible .
In the United States and Japan, there were intense debates around the issue of the introduction of value added tax. In the USA, the opponents of VAT won the victory. They believed that this would entail outpacing
the rise in prices and, consequently, the reduction in effective demand on the
part of the general population, and then a drop in the rate of economic growth.
In Japan, the introduction of value added
tax also did not receive support in 1950. However, in December 1988, as a part
of ongoing reforms VAT was, after all, introduced. The attitude of consumers to
the new tax was controversial and the tax turned out to be profitable to more affluent
classes of the Japanese society. The reform has not been worked out thoroughly
enough: in invoices the amount of value-added tax has not been indicated in a
separate line, as it is the case, for example, in the European Union, Russia, the Republic of Kazakhstan .
The rate of value added tax in Japan is 5%, consequently, there is no reimbursement of the tax; the accrual is done using
the balance method. Value-added tax in Japan is completely credited to the
Thus, in the USA and Japan direct taxes play the leading role in the taxation system, which is explained by peculiarities
of historical development and mentality of the population. Indirect taxes are
represented by excise and customs duties.
Among the advantages of value added tax in
foreign countries there is its neutrality with respect to the system of
production and distribution of goods and services existing in the country.
Value added tax in the countries of the European Union plays an important role
and contributes to the free movement of goods, services, people and capital
within the borders of the union. Within the European Union VAT tax is
considered to be the most promising.
As can be seen from the written above,
there are significant differences  in the taxation system of value added tax
in the Republic of Kazakhstan and foreign countries.
1. The Code of the Republic of Kazakhstan "On taxes and other obligatory payments to the budget"
(Tax code) (with alterations and amendments as of 09.04.2016)
2. Rubanov A. Foreign
experience of indirect taxation. Retrieved from http: // www. jourclub.ru/
Table of contents: The Kazakh-American Free University Academic Journal №8 - 2016