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Discounts applied before or after VAT ?


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Hello,

I have not found an answer on the forum to this question.

I heard from the Italian tax office that confirmed that a discount should be applied after the VAT calculation.

Like this, that is:

taxable 100 + VAT 22% = 122 - discount 50 = 72

and not

taxable 100 - discount 50 + VAT 22% = 61 (incorrect)

Now I find myself obliged to issue a 100% discount but with VAT calculation on the entire taxable amount

With a cart rule, whether with the% discount or the total amount, VAT is indicated at zero, that is, does the cart apply wrong discounts as calculated BEFORE VAT?

I attach an image of how the rule applies, i.e. the discount applied BEFORE and not AFTER as due.

Can anyone give me an opinion? How do you do it?

Thank you?

Claudio

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Hey i'm not a business consultant but i know that there can be 2 discount forms..one is related to the payment method ( "sconto pagamento" in italian)..imagine you pay in cash at the checkout in a shop...there you can get a discount and this is calculated after VAT and in these terms you pay all ammount for a service/product before invoice!..the purpose is to reduce cash flow income latency from customers...i mean Shop owner can receive all the money in one time payment.

The other is a discount related to the particular marketing conditions ( sconto cassa ) ...so when you want to compete in a market or simple reduce stock of old products etc etc...this kind of discount must be calculated before tax ( on "imponibile"...product total cost - Discount + VAT)

ciao

Edited by Fabry (see edit history)

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54 minutes ago, Fabry said:

Hey i'm not a business consultant but i know that there can be 2 discount forms..one is related to the payment method ( "sconto pagamento" in italian)..imagine you pay in cash at the checkout in a shop...there you can get a discount and this is calculated after VAT and in these terms you pay all ammount for a service/product before invoice!..the purpose is to reduce cash flow income latency from customers...i mean Shop owner can receive all the money in one time payment.

The other is a discount related to the particular marketing conditions ( sconto cassa ) ...so when you want to compete in a market or simple reduce stock of old products etc etc...this kind of discount must be calculated before tax ( on "imponibile"...product total cost - Discount + VAT)

ciao

Thank you.

First of all I admit yo be very confused. You are right.

My goal is to have some products sold for free at zero cost but, above all, VAT must be calculated on the entire value of the tax base, since the seller will pay the VAT and the customer will pay nothing so VAT must be calculated.
I can only get an invoice with taxable 0 and VAT 0 with the shopping cart discounts and this is incorrect for Italian law.

issue the "free" invoice with the application of VAT, exercising the right not to charge it to the customer, specifying on the invoice that it is a "free transfer without recourse pursuant to art. 18 of the Presidential Decree 633/1972

 

Please, add google translator to my confusion ...  😫

Edited by papons (see edit history)

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  • 11 months later...
On 2/14/2020 at 9:58 AM, papons said:

Thank you.

First of all I admit yo be very confused. You are right.

My goal is to have some products sold for free at zero cost but, above all, VAT must be calculated on the entire value of the tax base, since the seller will pay the VAT and the customer will pay nothing so VAT must be calculated.
I can only get an invoice with taxable 0 and VAT 0 with the shopping cart discounts and this is incorrect for Italian law.

issue the "free" invoice with the application of VAT, exercising the right not to charge it to the customer, specifying on the invoice that it is a "free transfer without recourse pursuant to art. 18 of the Presidential Decree 633/1972

 

Please, add google translator to my confusion ...  😫

Did you find a solution ? My goal is the same

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As the retailer surely its up to you what you charge for a product  and the VAT is calculated on the final price

All my discounts are Base price  minus discount  plus vat    im in UK  not sure if it makes much difference  but have recently had a vat inspection and  came though it ok  no issues.

 

 I beleive your 2nd example is correct not sure how the first can be correct when VAT stands for value added tax,  the tax is based on or added to the value of the product

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