To encourage prompt payment of invoices, business owners offer payment discounts (in VAT terms: discount for cash payment).
Payment discount
A customer who pays the invoice within 14 days may, for example, deduct 3% from the invoice amount. If the payment discount is applied (in which case the customer pays the invoice amount after deducting the payment discount), no VAT is payable on the discount. If, on the other hand, the customer pays the full invoice amount, VAT is also payable on the payment discount.
Processing of payment discounts
The payment discount can be treated in two ways on the VAT invoice: it may or may not be included in the consideration.
If the payment discount well When the reimbursement is included, the VAT invoice looks as follows:
| Work carried out | € 102,00 | |
| VAT (21%) | € 21,42 | |
| Invoice amount | € 123,42 |
The customer who pays on time deducts the payment discount of 3% (€3.06) from the invoice amount excluding VAT and pays €120.36. The service provider must now formally issue a credit note for the part of the payment not received. Only then is the service provider not required to pay VAT on the payment discount to the tax authorities.
It has, however, been agreed that the credit note may be omitted, that the supplier pays the full amount of VAT stated on the invoice (€21.42) and that the customer deducts this same amount of VAT (provided, of course, that the conditions attached to this deduction are met).
If the payment discount not When the reimbursement is included, the VAT invoice looks as follows:
| Work carried out | € 102,00 | |
| From: discount (3%) | € 3,06 | |
| € 98,94 | ||
| VAT (21%) | € 20,78 | |
| Invoice amount | € 119,72 |
If the customer pays on time, they pay €119.72 and deduct €20.78 in VAT (provided the conditions for this deduction are met). The supplier pays €20.78 in VAT.
If the customer fails to pay on time, they must pay the invoice amount plus the discount (€122.78). The supplier must then issue a supplementary invoice for the VAT due on the payment discount: 21% * €3.06 = €0.64.
Implicit payment discount
Gelderland District Court recently ruled that these methods of processing are also permitted where the payment discount is not stated on the invoice, but the parties have (tacitly) agreed on a payment discount (as evidenced by the fact that the parties had been applying a payment discount for some time).