Invoice with discount - option to pay VAT on debits

[svanteschubert]

Background

Invoice paid with discount (in case of delivery of goods or supply of services with the option to pay VAT on debits)

French Use Case n°22b: Invoice paid with discount for the supply of goods (or PS with VAT option on debits)

If a discount is applied when the supplier has made a supply of goods or opted to pay VAT on debits, the payment data is not transmitted and is not taken into account by the tax authorities. As a result, the tax authorities have no way of knowing the discount granted by the supplier, and can therefore reduce the VAT collected by the same amount.

The supplier could inform the tax authorities of the application of a discount by issuing a credit note. This is an option, as discount credit notes are not provided for by law.

This option is available to companies wishing to avoid having to make a subsequent adjustment to their output VAT, which may have been unduly increased.

Figure 25: Invoice paid with discount (case of supply of goods or services with VAT on debits)

The specifics of the data and associated management rules are :

• On initial invoice :
  • Invoice note (BT-21/BT-22) with
  • Subject code: "AAB
  • Text: mention discount
• If credit note, amount before tax = discount granted before tax; VAT = VAT on amount discount granted / calculated
  • Possibility of using invoice type (BT-3): 381 or 261 (Credit note or self-billed credit note)
  • A discount can also be net of tax, in which case the credit note must include :
  • VAT type code (BT 118) : E
  • VAT exemption reason code (BT-121): VATEX-CNWVAT This code applies to all types of credit note net of tax.

The specific features of the associated life cycle or process are :

• Transmission of invoice (flow 2) mentioning terms and conditions of discount application
• Lifecycle transmission (flow 6)
• Transmission of a credit note (flow 2) showing the amount of discount applied

NOTE: The above text was taken from case no. 22b of the PDFs - originally from the French government site: https://www.impots.gouv.fr/specifications-externes-b2b (see uses cases V2.2 & our translated use cases V2.3)

[edmundgray]

When an invoice is paid with a discount, it means that the buyer has paid less than the original invoice amount, usually in return for making an early payment. In the case of early payment discount the invoice does not reflect the VAT payable. In this case the buyer pays the lesser amount and reduces the VAT amount accordingly when making a VAT return. Handling Discounts and returned goods in Ireland

In the case of delivery of goods or supply of services with the option to pay VAT on debits, VAT is applied when payment is received rather than when the invoice is issued⁴. If the customer takes up the prompt payment discount after the invoice has been issued, the supplier must adjust the VAT amount to reflect the actual payment that was received.