Export through an intermediary (commission agent): on whose balance sheet are the goods, when is revenue recorded and which documents are needed for 0% VAT?

"Shohjahon Ipak" LLC produces atlas and adras silk fabrics. Its products are in demand abroad, but the company has no foreign trade department: it lacks both the people and the experience to find a foreign buyer, conclude a contract and clear goods through customs. Management found a way out: it entrusted the export to "Sharq Darvozasi Savdo" LLC, which is experienced in this business, under an agency (commission) agreement. The commission agent concludes the transaction with the foreign buyer itself, sells the goods on the instructions of "Shohjahon Ipak" and receives an agency fee for this.

Accountant Oysha has many questions: the goods are not in the warehouse, but they have not been sold either; the money comes to the intermediary; who confirms 0% VAT, and with which document?

Which documents are prepared?

Oysha started with the documents. Documents proving the right to the zero rate are submitted together with the VAT return (Tax Code, the last part of Article 260). In export through an intermediary some of them are drawn up by the commission agent, so obtaining copies on time is the principal's task:

In addition, information on border crossing provided by the customs authorities to the tax authorities in real time serves as a basis for confirming export (part two of Article 261). The list of other documents required depending on the type of activity and the procedure for submitting them are approved by the Cabinet of Ministers (the last part of Article 261); the list of customs clearance documents for the export customs procedure is also set by the Cabinet of Ministers (Customs Code, Article 31).

On whose balance sheet are the goods handed to the intermediary?

On the balance sheet of the principal (the owner of the goods). NAS No. 21 has a special account for this: 2830 "Finished goods transferred under agency (commission) agreements". Under paragraph 140, finished goods handed over for sale on agency terms are transferred from 2810 to 2830. However, the standard's table of journal entries (paragraph 141) has no separate line for this transfer, so set in the accounting policy how the handover entry is made; it is not included in the table of journal entries below.

Note: 2830 is an ordinary balance sheet account, not an off-balance sheet one. The off-balance sheet account is used by the commission agent: it keeps the goods it has accepted on account 004 "Goods accepted under agency (commission) agreements" at the prices in the acceptance and transfer certificate (paragraph 441). In other words, the same atlas appears in two places: on the owner's balance sheet (2830) and off the intermediary's balance sheet (004).

On 1 October "Shohjahon Ipak" handed over 2 000 metres of atlas, with a production cost of 150 000 soum per metre (hypothetical): 2 000 × 150 000 = 300 000 000 soum.

When and at which rate is revenue recorded?

There is no sale on the handover day: the goods still belong to the owner. Under paragraph 140, when goods handed over through an intermediary are sold, entries are made as for 2810, i.e. revenue and cost are recorded at the moment the commission agent sells the goods. The accountant learns about this from the commission agent's report.

On 12 October "Sharq Darvozasi Savdo" sold 1 500 metres of atlas to a foreign buyer at 20 dollars per metre and sent a report: 1 500 × 20 = 30 000 dollars. The rate (hypothetical) is 12 530 soum: 30 000 × 12 530 = 375 900 000 soum.

There is one useful link concerning the rate. Under paragraph 13 of NAS No. 22, the commission agent's foreign-currency debt to the principal arises at the Central Bank rate on the date the goods were sold. If the principal also records revenue at the rate of the date of sale shown in the report (paragraph 7), the mutual debt of the two parties comes out the same in soum, and no discrepancy appears in the reconciliation statement (practical tip).

What happens on the intermediary's side? Under paragraph 11 of NAS No. 2, gross proceeds in agency activities are not the intermediary's revenue; its revenue is only the agency fee. NAS No. 21 has a separate line for this fee: Dt 4010 – Ct 9010 (paragraph 383, line 5). Article 250 of the Tax Code follows the same logic: the intermediary's tax base is the agency fee, and the principal's tax base is the value of the goods sold by the intermediary.

Where is the agency fee recorded?

Under the agreement, the fee of "Sharq Darvozasi Savdo" is 9 000 000 soum (hypothetical). For the principal this is an expense related to selling the goods. Paragraph 407 of NAS No. 21 says that account 9410 "Selling expenses" reflects expenses on selling goods, so the fee is debited to 9410.

However, for the credit side the NAS No. 21 table has no separate line "the principal accrued the agency fee". Decide in the accounting policy on which account you keep settlements with the commission agent, and apply that procedure every month. For this reason this entry is not included in the table of journal entries below. Check the question of whether VAT applies to the agency fee separately against the agreement and the current version of the Tax Code.

If the money arrives in the intermediary's account, when is VAT credited?

As a general rule, input VAT on purchases used for export is credited in proportion to the foreign currency proceeds received in the exporter's account in Uzbekistan (Tax Code, Article 266, part two). There is a separate rule for export through an intermediary: VAT is credited "in proportion to the amount of foreign currency proceeds received in the account of the intermediary, the attorney or the taxpayer" (part four of Article 266). In addition, a bank statement confirming the foreign buyer's payment is mandatory (Article 266, item 5 of part one).

In the example, the foreign buyer transferred the 30 000 dollars in full to the commission agent's account on 20 October, and the commission agent transferred them to "Shohjahon Ipak" on 3 November.

The foreign-currency receivable is remeasured in the ordinary way: the rate on 31 October is 12 550, on 3 November 12 500 (hypothetical).

How does the principal record the whole chain?

Check on 4010: debit 375 900 000 + 600 000 = 376 500 000; credit 375 000 000 + 1 500 000 = 376 500 000. Balance zero. If the 2 000 metres handed over on 1 October were recorded on 2830, the 500 unsold metres remain on it: 300 000 000 − 225 000 000 = 75 000 000 soum.

Practical tip

• Write the reporting deadline and the list of documents into the agreement. If it is clearly stated within what time after each sale the commission agent provides the report, a copy of the contract, the declaration, the accompanying document and the bank statement, you will not delay the VAT return (practical tip).
• Reconcile 2830 every month. Under paragraph 140, analytical records on 2830 are kept by responsible persons, types of goods (grades, lots, kinds) and storage locations. Obtain information on the month-end balance from the commission agent and reconcile it with the balance on 2830 (practical tip).
• Keep the commission agent on a separate analytical line on 4010. The debtor is not the foreign buyer but the commission agent: it is the one who transfers the money to you (practical tip).
• Take the rate from the date of sale in the report. Then the debt the commission agent recorded under paragraph 13 of NAS No. 22 will match your receivable in soum (practical tip).
• Take into account the day the money is with the intermediary too. For crediting VAT, what matters is the date the proceeds arrived in the commission agent's account (Article 266, part four), not in your account.