FORMATION OF THE COST OF PRODUCTION, AND IMPACT ON VAT AND INCOME TAX

Many factors must be taken into account for the successful operation of a business. One of these is the formation of the cost of production. How profitable this or that product is depends on this process. To calculate the cost of production, it is necessary to analyze in detail and include all possible costs arising from the moment of product creation. In this process, not only financial specialists can be involved, but also economists who will help to correctly determine and form the cost of production.

Formation of production costs can occur in different ways. The specific method of cost of production depends on its specifics and features of the work.

It should also be noted that the cost of production itself does not include administrative and sales expenses. This cost includes costs related exclusively to the production of this or that product, wages of workers, raw materials, etc.

But together with the formation of the cost of production, it is also necessary to understand how it will affect VAT and income tax.

Cost of production and impact on VAT

If you analyze the tax legislation, you can understand that in the Tax Code of Ukraine, the cost of production is not mentioned when determining the VAT tax base. For the calculation and payment of VAT, the level of ordinary prices for one or another type of production is taken into account. From the above, it can be concluded that the cost of production does not affect the calculation and payment of VAT in any way and is not related to it. In other words, when implementing one's own production, the same rules apply as for civil law agreements, in which the parties are free to choose the price. That is, VAT is paid not on the cost price, but on the price determined between the parties to the contract. The second issue is cost price and profit tax.

Cost of production and impact on income tax

The cost of production directly affects the financial condition of the enterprise and its direct and net profit. It is clear that the higher the cost of production, that is, its cost, the lower the company's profit. Namely, the tax is paid from this profit. Which is later transferred to the tax declaration submitted by the company to the controlling authorities. That is, the profit tax is directly related to the formation of the cost of production.

Therefore, if you analyze the above, you should note that when calculating the cost of production, you should use the services of accountants and economists, because only specialists can correctly determine the cost of this or that product, on which the calculation of the company's profit and the payment of mandatory payments from it will depend in the future. taxes

A correctly formed cost of production is the key to a successful business and the achievement of set goals in the production process.