VAT on the Sale of Assets Obtained from the Write-Off of Fixed Assets: Rules, Calculations, and Practical Examples

When fixed assets are written off, an entity may obtain various types of assets: scrap metal, construction materials, components, spare parts, and other items that can be reused or sold.

In each situation, it is essential to correctly determine:

• whether VAT must be applied on the sale,
• whether previously deducted VAT must be adjusted,
• how the transaction should be properly recorded in accounting.

Below is a detailed guide that will help you avoid mistakes during tax inspections.

What are the assets obtained from write-off and when does VAT arise?

Write-off refers to the removal of a fixed asset from use due to physical or moral wear, damage, or cessation of use.

As a result of write-off, the entity may obtain:

• scrap metal and metal waste,
• paper, plastic, glass,
• construction materials,
• parts and components,
• other assets.

VAT does not arise at the moment these assets are obtained, but only when they are sold.

Legal basis: Art. 102 of the Fiscal Code

1. VAT from the unamortized value

If, at the time of write-off, the asset still has an unamortized value, the entity loses the right to deduct the VAT related to that portion of the value.

VAT to be reversed = unamortized value × 20%

2. When VAT adjustment is mandatory

The adjustment is required if:

• VAT was deducted at the time of purchasing the fixed asset;
• the asset is written off before being fully depreciated;
• there is an unamortized value at the date of write-off;
• the asset is no longer used in taxable operations.

3. When VAT adjustment is NOT required

• residual value = 0;
• the fixed asset is fully depreciated;
• VAT on acquisition was not deducted;
• the assets obtained at write-off continue to be used in the entity's activity.

Valuation of assets obtained from write-off

The assets are recorded in accounting at their fair value, but not higher than the residual value of the written-off fixed asset.

Valuation rules:

When the sale of assets is subject to VAT

1. Regular taxable operations (20% rate)

The sale of the following is subject to VAT:

• construction materials,
• usable parts and components,
• any assets that are not exempt from VAT.

In this case, the entity must:

1. calculate VAT,
2. issue an invoice with VAT,
3. record the appropriate accounting entries.

2. VAT exemption under Art. 103 para. (9⁴) of the Fiscal Code

The following are exempt from VAT without the right to deduction:

• scrap metal and metal waste,
• paper and cardboard,
• glass waste,
• plastic,
• rubber.

The sale of scrap metal is exempt from VAT without the right to deduction in accordance with Art. 103 para. (9⁴) of the Fiscal Code.

Calculating VAT on the sale of assets

If the operation is taxable:

VAT = sale price × 20%

Example:
50,000 MDL × 20% = 10,000 MDL

VAT adjustment from unamortized value

The adjustment is performed at the moment of write-off.

Steps to follow:

1. Determine the unamortized value.
2. Multiply by the VAT rate (20%).
3. Record the amount as an expense.

Mini-example:
Unamortized value — 40,000 MDL

VAT adjustment = 40,000 × 20% = 8,000 MDL

Accounting entry: Dt 714 Ct 534 — 8,000 MDL VAT to be reversed

Accounting entries

1. Sale of scrap metal (VAT exempt)

Dt 221 / 2342 Ct 612 — sales income Dt 714 Ct 211 — cost write-off VAT exemption applies; VAT adjustment is not required

2. Sale of materials (VAT taxable operation)

Dt 221 / 2342 Ct 612 — sales income Dt 221 / 2342 Ct 534 — VAT calculated (20%) Dt 714 Ct 211 — cost write-off

3. VAT adjustment at write-off

Dt 714 Ct 534 — VAT reversed from deduction

Detailed example

Initial data:

• Initial value of the fixed asset: 600,000 MDL
• Accumulated depreciation: 560,000 MDL
• Residual value: 40,000 MDL
• Materials obtained: Variant I — 50,000 MDL, Variant II — 30,000 MDL

Variant I: assets obtained worth 50,000 MDL

1️⃣ Write-off of the fixed asset

Dt 124 Ct 123 — 560,000 MDL

2️⃣ Recording the obtained assets

Dt 211 Ct 123 — 40,000 MDL (within residual value) Dt 211 Ct 612 — 10,000 MDL (income)

3️⃣ VAT adjustment

Dt 714 Ct 534 — 8,000 MDL VAT

Variant II: assets obtained worth 30,000 MDL

1️⃣ Recording in inventory

Dt 211 Ct 123 — 30,000 MDL

2️⃣ Uncovered residual value (10,000 MDL) — expense

Dt 7212 Ct 123 — 10,000 MDL

3️⃣ VAT adjustment

Dt 714 Ct 534 — 8,000 MDL

Common mistakes in practice

❌ Incorrect classification of assets as “waste” — VAT exemptions do not always apply.
❌ Failure to adjust VAT when residual value exists.
❌ Errors in valuing assets obtained from write-off.
❌ Incorrect determination of income and expenses.
❌ Errors in calculating VAT on the sale of materials.
❌ Misapplication of VAT exemptions.

Conclusions

• When writing off assets, it is important to check whether an unamortized value exists.
• The sale of scrap metal is VAT-exempt.
• The sale of materials and usable components is subject to VAT.
• VAT adjustment is required only when the conditions of Art. 102 of the Fiscal Code are met.
• Correct calculations and accounting entries protect the business from penalties during inspections.

If you require assistance with accounting calculations, entries, or transaction analysis, the specialists at Intelcont.md are ready to help.

* Explanation of abbreviations:

• Dt (debit) — where value enters.
• Ct (credit) — where value leaves.