In practice, parties to transactions have been using such a tool as a security deposit for quite a long time. The Civil Code of the Russian Federation, however, until 2015 did not contain rules regulating its application. There are currently official regulations in place to regulate its use. At the same time, the norms define its specificity somewhat differently than it was previously understood.

Security payment: civil law

The Code contains two standards regarding the use of this tool. The legislation provides its definition and indicates key features. A security payment is the contribution by one of the parties to the relationship in favor of the other of a certain amount. Due to it, the party’s fulfillment of the terms of the transaction is guaranteed. Payment provides, among other things, the obligation to compensate for losses or pay a penalty in case of violation of the contract. This provision is enshrined in Art. 381.1 (clause 1) of the Code.

Purpose

Security payment as a method is used in a variety of cases. For example, the rules on its application apply to transactions in which transferable bonds, shares, other securities and items with generic characteristics are included as guarantees. The security payment is provided as part of conditional transactions. For example, when specified circumstances occur, it is included in the debt repayment account.

Specifics

It is necessary to clearly understand the properties that a security deposit has. The Civil Code of the Russian Federation does not consider this instrument as a “fine”, the amount of which is lost by the debtor if the terms of the transaction are violated. It is used to cover property losses and debts. This follows from the direct interpretation of Art. 381.1, clause 1. The rule indicates that the security payment is a guarantor of the fulfillment of contractual terms and is included in the repayment of debt, but is not collected in excess of the established amount. If we consider this instrument as a measure of responsibility, then it should be taken into account that it will be compensatory in nature. In other words, its application is aimed at restoring the position of the creditor that existed before the violation of his interests. Accordingly, a security payment cannot act as a means of enrichment.

Formal requirements

What conditions must be met in order to apply a security deposit? The Civil Code does not establish certain requirements for the agreement on its use, including its form. However, for practical reasons and based on the norms of the Code, the document must contain key terms agreed upon by the parties. In particular, the agreement should indicate what kind of obligation is secured by the payment and list the circumstances on the basis of which the creditor can satisfy the claims presented at its expense. If these conditions are not met, then the instrument in question cannot be used. In addition, the agreement must contain a specific payment amount. It should be borne in mind that its size may vary depending on certain circumstances. Therefore, it is advisable to indicate in the contract not a fixed amount, but a percentage.

Nuance

In paragraph 2 of Art. 381.1 there is an indication of the deadline for the occurrence of circumstances under which a security payment may be included in the repayment of the debt. With a high degree of probability, the courts will consider the presence of this condition in the agreement to be mandatory, since any such mentions in the rules are regarded as mandatory. Meanwhile, the absence of an indication of the period of occurrence of certain circumstances cannot lead to the recognition of the transaction as not concluded. This is due to the fact that the security payment, acting as an accessory (additional) obligation, is tied to the main one. Accordingly, there is an initial contract in which there is an indication of the period of occurrence of the circumstances.

Scope of distribution

In practice, a security deposit is used when concluding preliminary, rental, and distribution agreements. This tool may also perform functions other than those covered by warranty. For example, its entry can be used as a condition for starting to fulfill the terms of the transaction. In other words, the supplier or contractor does not begin repaying the obligation until payment is received.

Specifics of the occurrence of circumstances

It is stipulated in clauses 2 and 3 of Art. 381.1 of the Code. The second paragraph, in particular, states that if the specified circumstances do not occur within the established period, the participant in the transaction may return the security payment. A similar rule applies in the event of termination of the main agreement. The parties, however, may establish other conditions. For example, the parties to the transaction may agree that the security payment will be counted as payment for products for recent periods if the bulk of the products have been transferred or the majority of the work/services have been completed. In this case, there is no reason to doubt that the terms of the transaction will be fulfilled. In a similar way, you can apply the instrument in question in a lease agreement. In this case, the amount will cover the debt for the last month. This will avoid multiple transfers of funds from account to account, since the lender will already have the security deposit at its disposal. Problems with resolving the issue of sending money back to the debtor will also be eliminated.

Stimulating function

In paragraph 3 of Art. 381.1 of the Code provides that the parties may stipulate a condition under which additional payment or return of the security payment is made if specific circumstances arise. This provision makes it possible to stimulate the legal behavior of the counterparty. As a rule, it is used when concluding long-term contracts to guarantee timely repayment of debt. For example, the lender may set a liability limit. If it is exceeded, the deduction amount also increases. Also, the creditor, on the contrary, can reduce the amount of security if the debtor repays the obligation on time.

Difficulties in transactions

A security deposit cannot be used to secure a non-monetary obligation. For example, this may be a condition on the timely transfer of the leased item to the owner, maintaining the object in proper condition, and so on. Formally, there is no way to secure non-monetary obligations with payment. However, there is a way out of this situation. To use a security deposit, a non-monetary obligation must be converted into a monetary one. The creditor must provide in the agreement for violation of the terms of the transaction (penalty). And the security payment will guarantee its execution.

Compensatory function

The agreement between the parties may provide for the return of the security deposit in the absence of violations of its terms. This can happen for various reasons. However, in any case, the procedure must be voluntary on the part of both participants. The agreement may establish compensation in the event of unilateral termination of the relationship. However, participants often agree that the security payment is not returned, but is counted towards the repayment of this amount.

Differences from deposit

As stated above, the main function of the security payment is compensation for probable losses. It does not act as an instrument for punishing a participant who has violated the terms of the transaction. This differs from a deposit. The latter, by agreement of the parties to the relationship, may be transferred in excess of the amount of losses with offset, unless otherwise established by agreement.

Important point

Unlike many other types of security other than earnest money, the payment in question allows the creditor to receive the amount before the terms of the transaction are violated. Other means involve the transfer of compensation after the debtor has performed certain actions. The Civil Code does not prohibit the use of a security payment by a creditor for its own purposes. The deposit is taken into account as part of the amounts under the agreement. This rule does not apply to a security payment unless it is established by the parties. Thus, it allows you not only to receive amounts under the main agreement, but also to have additional financial guarantees.

Subject of the transaction

It consists mainly of cash. Until recently, civil turnover required financial support, but it was not directly provided for in the Civil Code. Other means did not allow for guaranteed receipt of money in the event of failure by the counterparty to fulfill the conditions. The only exception was It was formally independent of the principal debt and was provided by a solvent organization. The widespread use of this option is hampered by its high cost. At the same time, the collateral to a certain extent acts as a deficiency in payment. For example, if we are talking about a large amount, then the debtor is unlikely to seek to withdraw it from circulation. In addition, he does not receive any interest for this. However, the parties can also agree on their calculation. Such a fee would be quite justified. This is due to the fact that the debtor’s funds are with the creditor, and the Code does not prohibit the latter from using them for commercial purposes.

Foreclosure

In addition to security, the payment can be used as some kind of “reserve fund”. For example, the terms of the transaction may provide for the right of the participant in whose account the funds are stored to spend them to pay off the debt that has arisen. So, if the user under the lease agreement does not pay the next amount, the owner can count the security payment as it. In these cases, the agreement should include rules that require the property owner to notify the tenant of the foreclosure. It is advisable to notify the subject in writing. The contents of the notice may be included in the breach of transaction claim.

Possible disputes

After the end of the rental agreement, the security deposit may be counted as the last month's rent or returned to the user. However, at this stage the latter may experience certain difficulties. If the owner does not fulfill his obligations in good faith, it will be extremely difficult to get the funds back. If the tenant regularly complies with the terms of the deal, then in case of refusal, he can go to court. The practice in cases of this category is very ambiguous.

Most courts take the position that the right to foreclose on a security deposit must be established by agreement between the parties. If it is not provided, the actions of the owner paying off the last installment will be considered illegal. In addition, the courts indicate that sending a notification to the user about the foreclosure of payment is mandatory. However, this rule is not established in legislation. However, by notifying the counterparty, the transaction participant demonstrates his good faith. Accordingly, proof of notice may help resolve the case.

Conclusion

In general, we can say that a security deposit can become a fairly effective tool for forcing a party to a transaction to properly fulfill its obligations. But when drawing up an agreement, it is necessary to clearly stipulate all the conditions. The parties must come to a decision that does not infringe on their interests. Otherwise, the security payment will act as a discriminatory instrument. If the conditions for its application are transparent, then there will be no disputes or difficulties in resolving them.

On June 1, 2015, the concept of a security payment was introduced into the Civil Code of the Russian Federation as a way to ensure the fulfillment of obligations. Although the concept itself was officially introduced only from this date, in practice it was used earlier. Let us consider in more detail the procedure for reflecting security payments in the accounting records of each party to the agreement.

Security payment is a sum of money that one party to the contract pays in favor of the other as security for the fulfillment of monetary obligations, including the obligation to compensate for losses or pay a penalty in case of violation of the contract, as well as other obligations provided for in paragraph 1 of Art. 381.1 Civil Code of the Russian Federation.

If the circumstances stipulated by the agreement occur, the amount of the security payment is counted towards the fulfillment of the corresponding obligation, and in the event of failure to meet the relevant circumstances within the period stipulated by the agreement or termination of the secured obligation, the security payment is subject to return, unless otherwise provided by agreement of the parties 1.

The basis for recording the transactions in question is an agreement containing a condition for the payment of a security deposit and the grounds for its return or offset. The accountant will also need an extract from the organization’s current account to confirm the receipt or debit of the security payment.

Other transactions related to these calculations are confirmed by an accounting certificate. The mandatory form of this document is not established by law. Therefore, it must be developed independently and approved by order of the head of the organization as an annex to the accounting policy2. An accounting certificate is issued when reflecting and writing off the amounts of the security payment in an off-balance sheet account, as well as when offsetting the security payment against the repayment of the obligation. Let's take a closer look at accounting options using examples.

Example 1.

Let's consider a situation where the contract establishes an obligation to pay a security deposit that guarantees the fulfillment of obligations. It is stipulated that if during the term of the contract the procedure for payment of rental payments is not violated, the security deposit will be returned.

Accounting for security deposit received

Under the specified conditions, the amount of the security payment received by the organization until it is offset against the fulfillment of the obligation represents a payable to the counterparty, since it is subject to return provided that the latter properly fulfills its obligations under the contract. Thus, on the date of receipt of the security payment, its amount is not included in income, since there is no increase in the economic benefits of the organization, that is, the receipt in question does not correspond to the concept of income given in clause 2 of the Accounting Regulations “Income of the Organization” PBU 9/993 .

To reflect in the accounting of settlements for security payments, an organization can open a separate sub-account to account 76, which must be enshrined in the accounting policy4. In our example, this will be subaccount 76-5 “Calculations for security deposit”.

Receiving a security deposit is reflected in accounting on the basis of the agreement and the bank statement on the current account with the following entries:

Debit 51 “Current accounts”

At the same time, the amount of the payment received until it is returned on the basis of an accounting certificate is reflected in the security received in the debit of off-balance sheet account 008 “Security for obligations and payments received.”

On the date return of security deposit in connection with the fulfillment by the counterparty of its obligations, there is no reduction in the economic benefits of the organization, that is, no expense arises in relation to clause 2 of the Accounting Regulations “Expenses of the organization” PBU 10/995. The organization's accounting records the repayment of accounts payable to the counterparty.

The return of the security deposit on the basis of the agreement and the bank statement on the organization’s current account is reflected in accounting as follows:

Credit 51 “Current accounts”.

At the same time, the amount of collateral for the credit of account 008 “Collateral for obligations and payments received” is written off from the off-balance sheet account based on the accounting certificate.

Accounting for issued security payments

The issued security payment also does not lead to a decrease in the economic benefits of the organization and, accordingly, is not recognized as an expense, but is reflected in accounting as a receivable6.

The amount of the security deposit paid can be reflected in the accounting records using the following entry:

Debit 76-5 “Security payment settlements”

Credit 51 “Current accounts”.

At the same time, this amount of the security payment is reflected in the debit of off-balance sheet account 009 “Securities for obligations and payments issued.”

When the security deposit is returned in the event of proper fulfillment of obligations under the contract, the following entries are made in accounting:

Debit 51 “Current accounts”

Loan 76-5 “Calculations for security payment.”

Example 2.

Let’s say that in the situation under consideration, during the term of the contract, the customer (tenant, buyer) commits a violation of the procedure or terms of payment, which leads to the obligation to pay a fine in the amount stipulated by the contract. Under the terms of the agreement, the executor (lessor, seller) has the right to withhold the amount of the fine from the amount of the security payment, and is obliged to return the rest of the security payment.

Accounting with the performer

In this situation, a claim is filed against the customer, and in the account of the contractor, settlement operations for the claim are reflected only on the date the debtor acknowledged the claim7.

Accordingly, the primary document for this operation will be a document confirming such consent. For example, this could be a letter or notice from the tenant, signed by his manager.

Then, on the date of receipt of the relevant document, the organization reflects other income 8:

Credit 91-1 “Other income”.

The deduction of the amount of the recognized fine at the expense of the amount of the security payment on the basis of the agreement and the accounting certificate-calculation is reflected in the accounting by the following entries:

Debit 76-5 “Security payment settlements”

It should be taken into account that the amount taken into account as collateral is also subject to a commensurate reduction.

Loan 008 “Securities for obligations and payments received” - the amount of the security payment aimed at repaying the debt under the claim is written off from the off-balance sheet account.

Upon termination of the contract, the security payment is returned to the tenant minus the withheld fine, which is reflected by the posting:

Debit 76-5 “Security payment settlements”

Credit 51 “Current accounts”.

The corresponding amount is also written off to account 008 “Securities for obligations and payments received.”

Accounting with the customer

On the date of recognition of the claim received from the contractor, the customer records other expenses in the accounting records:

Debit 91-2 “Other expenses”

Credit 76-2 “Calculations for claims.”

And then reduces the amount of receivables for the security payment by the amount of withheld penalties:

Debit 76-2 “Calculations for claims”

Loan 76-5 “Calculations for security payment.”

At the same time, the offset amount of the security payment is written off against the credit of account 009 “Securities for obligations and payments issued.”

note that not the entire amount of security is subject to write-off, but only that part that is aimed at paying off penalties.

Example 3.

It is possible that the amount of the security deposit under the terms of the agreement is not refundable, but is counted towards the repayment of obligations under the agreement, for example, towards the last rent payment under the lease agreement.

In such a situation, the security payment performs not only a security, but also a payment function. Therefore, the payment of a security deposit in such a situation can also be considered as an advance payment under the contract. However, prepayment in accounting is also not recognized as either income or expense of the organization9.

When the security payment is offset against the repayment of obligations under the contract, an internal entry is made in the analytical accounts of account 76 “Settlements with various debtors and creditors.”

Offsetting the security payment against the repayment of obligations under the contract is also the basis for writing off the security amount from the off-balance sheet account, for the customer - under the credit of account 009 “Securities for obligations and payments issued”, for the contractor - under the credit of account 008 “Securities for obligations and payments received”.

The article discusses the features of accounting for security payments, which depend on the terms of the contract and the procedure for their use.

The amendments made to the provisions of the Civil Code of the Russian Federation did not make significant changes to accounting, but clearly established the functions of the security payment. Now security can be recognized as an advance payment only if there are appropriate conditions in the contract.

________________________________________________________________________________________________________________

1 Clause 1, 2 Art. 381.1 Civil Code of the Russian Federation.
2 Parts 4 tbsp. 9 of Law No. 402-FZ.
3 Order of the Ministry of Finance of Russia dated May 6, 1999 No. 32n.
4 Clauses 9, 10 Regulations on accounting and financial reporting, approved. By Order of the Ministry of Finance of the Russian Federation dated July 29, 1998 No. 34n.
5 Order of the Ministry of Finance of Russia dated May 6, 1999 No. 32n.
6 Clause 3, 16 PBU 10/99.
7 P. 16 PBU 9/99.
8 Clause 7, 10.2 PBU 9/99.
9 P. p. 3, 16 PBU 10/99, p., p. 3, 12 PBU 9/99.

Current legislation does not provide for the possibility of transferring money as collateral - but there is an independent operation called a “security payment”. As a rule, when concluding a lease agreement, it is agreed upon to pay a fee for the use of the property and a certain amount designed to protect the lessor from possible losses. In the agreement, such a payment may be called a “deposit,” “security deposit,” or “security deposit.” From a legal point of view, this is nothing more than financial security for the obligations of the party to the contract - the tenant. The official name of this payment is security deposit. In this article we talk about what its purpose is, how to use it, and whether the payment is subject to taxes. We will also consider the security payment for an accounting entry using an example and find out what the opinion of the Russian Ministry of Finance is on this issue.

Definition and purpose of security payment

Important! A security payment is not similar to a deposit or advance payment.

A security payment is a certain amount of money that is paid by one of the parties to the contract in favor of the other party as a penalty or a guarantee of the absence of probable losses in the event of violation of the terms of the contract. This is not the same as a deposit and an advance. Money cannot be the subject of collateral, if only because foreclosure on the pledged property presupposes its sale, and money cannot be sold.

The deposit is paid to the second party to the agreement against the payments due from the first party, which are stated in the agreement between them. An advance, in turn, differs from a deposit in that:

• If the provision of the agreement is violated by the party to the agreement who paid the deposit to the other party, then this amount will not be returned to the payer.
• If the agreement is violated due to the fault of one of the parties to the contract who received a deposit from the other party, the culprit will return the deposit and pay the same amount as a penalty on top.

The need to tax the amount of the security deposit

Important! If the text of the agreement between the parties states that the amount of the security payment can be used by the recipient in settlements of the main obligation upon termination of the agreement, the security payment is considered as an advance. Accordingly, the need arises to pay personal income tax and VAT (and the company generates income using the simplified tax system).

If the agreement does not provide for settlements under the main obligation upon termination of the agreement using a security payment, then this payment cannot be regarded as income of the recipient of the funds. A security payment is not income until some event occurs, upon the occurrence of which the obligations will be secured by the amount of the security payment. If nothing like this happens, the money is returned to the payer. It turns out that the party to the contract who received the payment is its temporary holder who has no commercial benefit.

Features of using a security deposit

When considering the use of such an instrument as a security deposit, it is necessary to remember the following points related to its payment:

1. If the circumstances provided for by the agreement between the parties occur, the previously transferred security payment must be counted towards the fulfillment of the party’s obligation.
2. If any circumstance specified and provided for in the agreement does not occur in due time (or the secured circumstance has been terminated), the party that received the security payment at the time must return the funds to the payer (unless otherwise specified in the agreement).
3. The agreement between the parties can initially provide for the obligation of one of the participants to additionally transfer the security payment to the partner in the event that an agreed upon circumstance occurs. For example, such a move is appropriate if the security payment was spent to compensate for losses or pay a penalty.
4. In essence, the party to the contract to whom the security payment was transferred receives an interest-free loan. This happens because no interest is accrued on the amount of this payment for the use of money (unless such a clause is specified in the agreement).

Security payment for a posting in accounting (using an example)

Important! When a security payment is transferred, the entries must be reflected in a separate sub-account in which settlements are made for the main obligation provided for in the agreement.

A lease agreement has been signed for the workshop. For late transfer of rent to the owner, the tenant will be charged a penalty interest at the rate of 30% per annum. The lessor who has received the security deposit has the right to use it to pay off interest on late rent payments. VAT is not paid on the amount of the security deposit. The workshop owner's accountant will make the following entries:

DEBIT	CREDIT	A comment
51	60 sec. "Security payment"	The security deposit has been credited (excluding VAT)
	60 sec. "Rent"	The rent has been credited (the terms specified in the agreement have been violated). Including VAT.
	91	Interest accrued for late payment of rent (30% per annum). VAT is not charged.
60 sec. "Security payment"	76 s/sch. "Calculations for claims"	The security deposit is written off to pay off a claim for late payment of rent.

Examples of using a security deposit

Example 1 – using a security deposit to improve payment discipline

A lease agreement was concluded in relation to the warehouse, according to which, for late transfer of rent payment, interest is charged on the amount of the payment at a rate of 30% per annum. It turns out that the tenant is simultaneously imposed with 2 monetary obligations - payment for the use of the rented premises and interest for late deposit of funds into the landlord's account (fine). That is, at the expense of the security deposit, the warehouse owner has the right to repay interest (with notification) without affecting the main debt. This clause of the lease agreement increases the payment discipline of the warehouse tenant.

Example 2 – using a security deposit for “lending” at the expense of the tenant

A vehicle lease agreement was concluded between the parties, the provisions of which provided for the transfer of a security deposit in the amount of 50% of the market value of the vehicle. The purpose of making a payment by the tenant is to insure the landlord against possible losses if the tenant gets into an accident and damages the car. The essence of this payment is interest-free lending to the owner of the vehicle, since the security payment is not income and, accordingly, is not subject to personal income tax (NDFL).

From June 1, 2015, the list of ways to ensure the fulfillment of obligations was supplemented with a new item. Namely: a security deposit. The corresponding amendments to the Civil Code of the Russian Federation were made by Federal Law No. 42-FZ dated 03/08/2015. Before this, the list included a surety, a guarantee, and a deposit (clause 1 of Article 329 of the Civil Code of the Russian Federation).

The meaning of a security payment is that one party to the contract transfers to another an amount that he returns upon fulfillment of obligations and does not return if the obligations are not fulfilled. Security deposits are often used between contractors and in lease relationships. But previously, payment was provided for in contracts, and it was not regulated by civil law.

Accountants often have questions: is it necessary to regard the security payment as an advance and pay VAT on the security payment? And should the recipient charge VAT when the security deposit is offset against the payment of penalties?

Security or advance

To appreciate the importance of the amendment, consider a practical situation.

Let’s assume that in February 2015, Shagane LLC entered into a contract with D.S. Merezhkovsky. According to the agreement, the entrepreneur, starting in April 2015, rents premises with an area of ​​500 sq. m. from Shagane LLC. meters. The guarantor of fulfillment of obligations is a security payment in the amount of 100,000 rubles, transferred on February 18, 2015 to the account of Shagane LLC. In case of proper fulfillment of obligations under the contract, the specified amount must be returned to D.S. Merezhkovsky in full.

If the security payment is considered an advance payment, then it must be included in the VAT tax base. This means that in the first quarter of 2015, VAT of 18,000 rubles must be calculated and paid. If you do not connect the security payment with payment for goods and services, then there is no need to charge and pay VAT. In this case, the security payment is reflected in account 76 and is held until returned to the transferring party.

Officials were not always unanimous in their recommendations. Tax officials linked the security payment with payment for goods and services and demanded that the VAT tax base be increased at the time the payment was made. The same point of view can be found in the explanations (letters dated 01/12/11 No. 03-07-11/09; dated 02/02/2011 No. 03-07-11/25).

Judicial practice was also not clear-cut. For example, in the decision of the Federal Antimonopoly Service of the Volga District dated March 24, 2011 in case No. A12-16130/2010, the court, after studying the purchase and sale agreement attached to the case materials, saw signs of an advance in the security payment. In this case, the security payment is included in the VAT base in the period of receipt.

Sometimes judges considered it correct that the amount of the security deposit is not included in the VAT tax base until it is offset against payment under the contract. For example, the same FAS of the Volga District considered the cassation appeal of LLC Investment Company CityCenter. And invalidated the decision of the Federal Tax Service for the Central District of the city. The judges came to the conclusion that the payment received by LLC Investment Company CityCenter from the counterparty as a guarantee ( security deposit, is not an advance and does not require payment of VAT (Resolution of the Federal Antimonopoly Service of the Russian Federation dated July 24, 2014 No. A12-22792/2013).

The same arguments were given by the FAS of the Moscow District. The decisive argument was the condition of the agreement that they perform only a security function and do not have signs of an advance on the sale (resolutions of the Federal Antimonopoly Service of Moscow dated July 17, 2007 No. KA-A40/6494-07; dated April 27, 2011 No. KA-A40/3679-11) .

When to recognize income and expenses

Now the Civil Code of the Russian Federation states: payment secures the obligations of the parties and is not an advance. This means that there is no need to prove its purpose. It is possible in the contract at what point the security payment will be counted towards the fulfillment of obligations or returned. Until this moment, there is no reason to regard the payment as payment for goods, services and to pay VAT on the security deposit.

The security payment on the date of transfer is not an expense of the transferor. At the time of receiving the security payment, the receiving party does not have any economic and, therefore, income. Expenses for the transferring party and income for the receiving party are generated if:

• the security payment was counted against sanctions for failure to fulfill obligations under the contract (at the time the sanctions were recognized by the organization itself or at the time the court decision entered into force);
• the security deposit begins to perform the function of payment. For example, the rent of a tenant who has made a security deposit before using the property. In this case, expenses and income are reflected in the usual manner - on the date of drawing up the act on the provision of services or on the date stipulated by the contract.

For ease of understanding, we provide a small table.

Should the security deposit be included in income and expenses?

Victoria Bushueva,
Accounting expert at SKB Kontur

A security payment as a method of ensuring the fulfillment of obligations began to be used in civil circulation in June 2015, when the new edition of the Civil Code of the Russian Federation came into force. Read our article about what this measure is, when and how you can use it.

Security payment in civil law (Civil Code of the Russian Federation)

The concept of “security payment” was introduced into the Civil Code of the Russian Federation in March 2015 by the Law “On Amendments...” dated 03/08/2015 No. 42-FZ. Before this, it had not been interpreted anywhere, although in practice this financial instrument was quite actively used in the form of a security/insurance deposit or a guarantee fee/payment and was recognized by the courts as a legal type of security (see, for example, the resolution of the Arbitration Court of the Moscow District dated 02/02/2015 in the case No. A41-25273/14).

Now from § 8 ch. 23 of the Civil Code of the Russian Federation, which came into effect on June 1, 2015, it becomes clear that the security payment:

• is a measure to ensure the fulfillment of an obligation by the debtor;
• can arise only in monetary obligations, including from the obligation to pay penalties and compensation for losses;
• contributed by one party to the benefit of the other;
• expressed in money, securities or things that have generic characteristics;
• used in present and future contracts;
• is counted towards the fulfillment of the obligation;
• must be returned to the person who contributed it if the event specified in the contract does not occur.

Thus, in Civil Code security payment contains quite clear signs and properties that distinguish it from other types of security, in particular from a pledge, a deposit, as well as an advance payment under a contract (advance payment).

As an example, we can consider the appeal ruling of the Moscow City Court dated October 2, 2016 in case No. 33-42173/2016. The parties to the case, calling the deposited funds a security payment, relied on the properties inherent in the deposit. However, the appeal court pointed to Art. 381.1 of the Civil Code of the Russian Federation, which does not contain a provision for a double refund if the transaction was not completed due to the fault of the seller.

The use of a security deposit is relevant for lease agreements, rental agreements, and preliminary agreements.

Features of applying a security deposit

A security payment is mentioned in civil law as a way to ensure the fulfillment of a monetary obligation. But it can also be used for other purposes:

1. As a closing agreement. The parties agree that the deposited funds will pay for the last delivery of goods, the last stage of work or the last month of rent. This will eliminate the transfer of funds from one person to another and remove the issue of return.
2. As a payment method. If during the validity of the contract the debtor does not have the funds to make the next payment, it is repaid using the security. At the same time, the contract continues to be in effect, and in order to fulfill the condition of securing the obligation, the debtor later contributes funds again.
3. As working capital for the lender. The Civil Code of the Russian Federation does not contain restrictions or prohibitions regarding the use of working capital, which means that the creditor can dispose of them while the main agreement is in force.

The amount of the security payment may, by agreement of the parties, increase if the debt has become larger, and decrease if the amount of the main obligation decreases (clause 3 of Article 381.1 of the Civil Code of the Russian Federation).

IMPORTANT! The coincidence of the amount paid as a security deposit with the sale price of the real estate cannot serve as a basis for recognizing the preliminary purchase and sale agreement as the main one (clause 8 of the resolution of the Plenum of the Supreme Arbitration Court dated July 11, 2011 No. 54, appeal ruling of the Moscow City Court dated August 10, 2016 in the case No. 33-27079/2016).

Differences between a security payment and other methods of securing performance

A security payment has distinct differences from other methods of securing the fulfillment of obligations:

1. Unlike a penalty, a security payment cannot serve as a sanction for poor performance of the contract, but can cover accrued penalties and fines.
2. The security deposit can only be in the hands of the creditor, while the collateral remains with the debtor or is transferred to the pledgee. In this case, the latter bears full responsibility for the safety of the collateral.
3. The deposit protects the interests of 2 parties at once, and when concluding the main contract, the deposited amount is included in the total payment amount. The security payment protects the interests of the creditor and, if not used, is returned to the debtor. Read more about the differences between these financial instruments in our article Security payment and deposit - what is the difference.
4. A security payment differs from an advance in that the use of the latter depends on events that may arise, while an advance is made for an obligation that has already arisen.
5. The lien occurs after the actual breach of the contract, while the security payment is made in advance.

Concepts and conditions of a security payment agreement, sample agreement

The legislator said nothing about the form, concept and conditions of the security payment agreement. These points will most likely be clarified by the courts.

However, based on the current Russian practice of document management, we believe that such an agreement can be concluded in the form of a separate document, which:

• drawn up in writing if the main obligation must be concluded in writing by virtue of law;
• contains a reference to the main agreement or the obligation itself and the conditions under which the creditor can satisfy its interests at the expense of the contributed funds;
• includes information on the amount of the security payment, the possibility of additional payment and partial or complete withdrawal of funds before the debtor fulfills his obligations;
• determines the possibility (or lack thereof) of accruing interest on the amount of the security deposit;
• establishes a validity period equal to the validity period of the main contract.

Any lease or purchase and sale agreement, or any other agreement, may contain a provision for the payment of a security deposit.

Accounting for security deposit

The basis for reflecting in accounting the receipt of a security payment, its use and return is the agreement and the occurrence of an event that is insured by the deposited funds.

So, initially, the receipt of a security payment by the lessor (seller, etc.) does not lead to the generation of income and the receipt of economic benefits, as is understood in paragraph 2 of the regulation approved by Order of the Ministry of Finance of Russia dated May 6, 1999 No. 32n. In this regard, the deposited amount will be considered accounts payable and will be carried out as follows: Dt 51 Kt 76-2 (subaccounts are conditional, in our case 76-1 means the next payment, 76-2 means a security payment).

The same amount is reflected in off-balance sheet account 008.

When returning an unclaimed security payment, a reverse entry is made: Dt 76-2 Kt 51, and off-balance sheet account 008 is credited, i.e. the amount is written off.

If an event has occurred that must be covered by collateral, or the parties have agreed to use money as a repayment payment, the amount is included in income and is carried out as follows: Dt 76-1 Kt 90-1 or Kt 91-1.

VAT is withheld from it: Dt 90-3 (91-2) Kt 68.

The last regular payment, repaid by the security deposit, is made as follows: Dt 76-2 Kt 76-1.

How is VAT calculated and posted on a security deposit?

At present, the issue of calculation and payment of VAT remains unresolved. When should this be done: immediately upon receipt of the security payment or only after its actual use? The position of the Ministry of Finance and judicial practice in this case are ambiguous.

If the creditor who received the security payment decided to immediately calculate VAT, he calculates it as follows: Dt 76 Kt 68.

This is done if, for example, the lease agreement stipulates that the amount of the security payment in the last month of the lease is used to close the contract (letter of the Ministry of Finance of Russia dated November 3, 2015 No. 03-03-06/2/63360).

Then, after transferring funds from the security payment account to the next payment account in the last period of the contract, a tax deduction should be made, since VAT on the next payment has already been paid (see above).

The tax deduction is carried out as follows: Dt 68 Kt 76 - for the amount of the originally accrued VAT.

Return of the security deposit upon termination of the contract

According to paragraph 2 of Art. 381.1 of the Civil Code of the Russian Federation, if the events provided for in the contract did not occur, the money or other means of security payment must be returned to the person who made it.

If the procedure for return is not determined, the security payment is transferred to the debtor within 7 days from the date of presentation of the demand (clause 2 of Article 314 of the Civil Code of the Russian Federation).

If the creditor refuses to return the funds, the debtor has the right to go to court with a claim for recovery of unjust enrichment.

Refund of the security deposit upon termination of the contract is not always possible. With these funds, the creditor can cover losses and penalties arising as a result of improper performance by a party of its obligations (Article 394 of the Civil Code of the Russian Federation).

Thus, the concept of a security deposit appeared relatively recently, in 2015, but it has been operating as a financial instrument for a long time. Judicial practice and the procedure for its reflection in accounting prove this.