Payment of a claim not with money, but with goods in exchange.
May 12, 2011 | 30,00 EUR | answered by Michael Herrmann
Dear Sir or Madam, the following issue:
Retailer A has a claim against Retailer B from L+L booked, normal net + 19% = gross, receivables/revenues. Retailer B cannot pay with money as he has no liquidity. Instead, Retailer B provides goods worth the net claim to Retailer A. A list is created during the handover of the goods, detailing the items Retailer A receives from B. The transferred goods are used items. A intends to incorporate the items into his fixed assets. How should Retailer A book this?
1. How should the claim settlement be booked? As B only delivers goods worth the net claim, what happens to the value-added tax at A? Does A still owe this to B?
2. As the items are used, how should A book the fixed assets and how should they be depreciated? Does B need to inform A of the age of the goods? (Depreciation rate is known)
3. How should B book this? How should the payment of the liability and the VAT be treated? As B takes the inventory from his fixed assets, how should he account for this?
Thank you and kind regards.
Dear inquirer,
First of all, thank you very much for your inquiry, which I would like to answer based on the information provided and in the context of your involvement in an initial consultation. The response is based on the description of the situation. Missing or incorrect information about the actual circumstances can affect the legal outcome.
The sale of the "inventory" from B to A constitutes a sale of fixed assets. The consideration is the corresponding liability (gross) of B, as he is relieved by the gross amount.
Therefore, B books: Liability B to proceeds from the sale of tangible assets + 19% VAT. He also books depreciation of remaining book value to respective fixed assets. This balances out the remaining book value. Only the difference between proceeds and remaining book value is recognized as profit. He must remit the VAT to the tax office.
As with other sales, B must issue a regular invoice to B. For tax purposes, it is irrelevant whether the payment is made by cash or by offsetting mutual claims.
A books: respective fixed assets + 19% input tax to receivables from B. He claims the input tax.
Fixed assets are depreciated over a reasonably reduced useful life. This value can be estimated. Knowing and documenting the age is certainly helpful.
Since receivables are offset in the same amount, the net amount of the receivables is also the same. A and B each have the same amount of sales tax and input tax, so no payments to the tax office are required. A does not have to pay sales tax to B, as he offsets it with an existing receivable that includes the same amount of sales tax.
If B has already received a refund of input tax when the liability was incurred, he must remit the sales tax for the current sale and cannot offset it again with input tax.
I hope that these explanations provide you with a sufficient overview of the situation within the scope of your involvement and this initial consultation, and I remain
Yours sincerely,
Michael Herrmann
Dipl.-Finanzwirt (FH)
Tax Advisor
