Prompt Payment Discount - discount on the nett or gross figure.

kluivert

Hi guys,

There is a bit of a debate starting here about prompt payment discount.

I was thought that you take the discount on the nett figure.

Balance to be paid is € 121.50 and 5% discount.

Nett Discount
Gross 121.50
Vat 21.50
Nett 100.00

Less Disc 5% = 5

Amount to be paid equals - 121.50 - 5 = 116.50

Gross Discount
Gross 121.50

Less Disc 5% = 6.08

Amount to be paid equals - 121.50 - 6.08 = 115.42

Common belief is that you take the discount on the gross figure.

Which one is correct?

Victor

ARRRRGGHHHHHHHHHHHHHHHHHH!

Two completely separate calculations. Discount then VAT. You aren't legally entitled to give a discount on VAT, you simply apply VAT to the discounted figure. VAT is always the last calculation.

Nominal (gross) price 100.00
Discount 5.00
Real (nett) price 95.00
VAT 20.43
Payment to be made 115.43

(.005 gets round up to .001)

kluivert

Am still waiting on someone to state that calculating the discount on the nett figure is correct way

Vat on Sales Reconciliation

Total Vat on Sales 21.5

Total Sales 100.00
Less: Discounts 5

Total Sales 95.00

Vat on Total Sales @ 21.5% = 20.43

Difference is overpayment of vat on sales of 1.08.

What a conundrum.

The answer I think is whether or not vat on sales is accounted for on a cash basis or invoice basis.

If on Invoice basis need to do a credit note in order to reclaim vat over paid?