VAT returns must be filed by all companies and individual entrepreneurs operating under the general taxation system (OSNO), as well as those on the simplified taxation system (STS) if they lose the right to VAT exemption.
Proper preparation and timely submission of a VAT return is not just a formality — it is a key condition for obtaining a lawful VAT deduction.
However, in practice even experienced accountants make mistakes. Below are the most common ones from a tax lawyer’s perspective.
5 Common VAT Return Mistakes
1. Errors in invoices
Incorrect invoice data (number, date, amount, or counterparty’s tax ID) is the most common reason for receiving a tax authority request to clarify the VAT return. Such mistakes may lead to denial of input VAT deduction and additional tax charges during audits.
2. VAT deduction beyond the three-year limit
A key condition for VAT deduction is compliance with the three-year limitation period under Article 173(2) of the Russian Tax Code. Missing this deadline makes the deduction invalid and requires correction of the return.
3. Failure to charge VAT on received advances
When receiving an advance payment for future supply of goods, works, or services, VAT must be calculated in accordance with Article 167(1) and (14) of the Tax Code.
Applicable rates:
22% (standard rate)
10% (reduced rate)
5% or 7% (for STS taxpayers, where applicable)
4. Failure to claim VAT deduction on advances upon shipment
When goods or services are supplied, VAT previously charged on the advance must be reversed (claimed as a deduction). Otherwise, double taxation occurs, resulting in overpayment and potential tax authority claims.
5. Failure to restore VAT on paid advances
Buyers are required to restore VAT previously deducted on advance payments in the period when the supplier issues the invoice for shipment. Missing this step distorts the tax base.
Why are unreliable counterparties dangerous?
VAT reporting issues may arise due to your counterparties if they fail to file VAT returns or do not reflect transactions properly.
Tax authorities actively search for so-called “VAT gaps” — chains of transactions involving non-compliant parties.
Consequences for compliant companies:
Requests for explanations and summons to the tax authority in the best case
Field tax audits, additional tax assessments, penalties, and interest in the worst case
How to file a VAT return without errors: 7 tips
Check purchase and sales ledgers before filing — this is the basis of the VAT return
Use electronic document interchange (EDI) to minimize invoice errors
Regularly reconcile accounts with counterparties
Use automation tools (e.g., VAT modules in accounting software like 1C)
Carefully review accounting data, including trial balances and account analysis
Conduct counterparty due diligence before signing contracts
Include tax indemnity clauses in contracts to allocate risk of tax violations
Real case: how a tax lawyer saved a client 30 million rubles
Situation:
A client under outsourced accounting services provided documents for initial review. A systematic audit of prior periods was conducted.
Issue:
An unclaimed VAT deduction on a previously received advance was identified. The amount of recoverable VAT was 30 million rubles.
Actions taken:
Informed the client about the available deduction
Prepared and filed amended VAT returns
Successfully passed a desk tax audit
Result:
The client received the full refund of 30 million rubles and avoided cash flow disruptions.
Need help with VAT reporting?
Preparing a VAT return correctly requires not only attention to detail but also deep knowledge of tax legislation.
If you need assistance with preparation, review, or filing of VAT returns, contact TIM tax consultants — experienced tax lawyers and accountants who will help minimize risks and protect your VAT deductions.