Insights
VAT
Annual Bonuses, Discounts & Co
Especially in the trade sector, annual bonuses, discounts and other price reductions are common marketing tools that companies receive from their suppliers. These price reductions must be treated correctly for VAT and special aspects need to be observed.
In VAT, a distinction must be made between a reduction of consideration by the supplier and other services provided by the customer to the supplier. A reduction of consideration occurs when the supplier subsequently reduces the originally agreed consideration (the price), for example in the form of a discount, cash discount or an annual bonus. Characteristic is the immediate link of this reduction of consideration with the underlying transaction, i.e. the original supply of goods or services by the supplier. This reduction directly affects the VAT taxable base, which must be adjusted accordingly.
In the practice of trading companies, discounts play a particularly important role. Discounts are price reductions that the entrepreneur grants to the buyer on the list price. Discounts lead to a reduction of the taxable base when they are granted or taken after the fact. If the taxable base has changed, the entrepreneur who made the supply must adjust the VAT amount due for that supply. At the same time, the entrepreneur to whom the supply was made must also correct the input tax deduction claimed.
Other services provided by the customer
Other services provided by the customer of the goods to the supplier of the goods, however, are not directly linked to the underlying transaction. They constitute independent services, for example in the case of marketing measures that the customer of the goods provides for the supplier, such as special labelling or presentation of the supplier's goods in the customer's shop (e.g. a food retailer). In such cases there is regularly an independent service of the customer to the supplier with its own VAT assessment. Particular attention must be paid to the applicable VAT rate. For example, a milk producer is subject to a rate of 10 %, while the marketing service provided by the food retailer is taxable at the standard rate of 20 %.
Note
Do not forget the correct recording of the transactions in the accounts. It depends on the individual case whether there is a reduction of expense or revenue. Due to the complex VAT regulations, which are regularly updated, ongoing tax advice and appropriate support are essential.
In the practice of trading companies, discounts play a particularly important role. Discounts are price reductions that the entrepreneur grants to the buyer on the list price. Discounts lead to a reduction of the taxable base when they are granted or taken after the fact. If the taxable base has changed, the entrepreneur who made the supply must adjust the VAT amount due for that supply. At the same time, the entrepreneur to whom the supply was made must also correct the input tax deduction claimed.
Other services provided by the customer
Other services provided by the customer of the goods to the supplier of the goods, however, are not directly linked to the underlying transaction. They constitute independent services, for example in the case of marketing measures that the customer of the goods provides for the supplier, such as special labelling or presentation of the supplier's goods in the customer's shop (e.g. a food retailer). In such cases there is regularly an independent service of the customer to the supplier with its own VAT assessment. Particular attention must be paid to the applicable VAT rate. For example, a milk producer is subject to a rate of 10 %, while the marketing service provided by the food retailer is taxable at the standard rate of 20 %.
Note
Do not forget the correct recording of the transactions in the accounts. It depends on the individual case whether there is a reduction of expense or revenue. Due to the complex VAT regulations, which are regularly updated, ongoing tax advice and appropriate support are essential.