Settlement of goods and financial rebates on the basis of VAT

Service-Tax

The average citizen equates the concept of a rebate with a discount, i.e. a discount that can be found in stores for various goods or services. It is worth remembering, however, that this word is also very often used in trade between companies making multiple transactions. It is not uncommon that the discount is not settled on the original invoice but on the subsequent ones. Below we will answer the question of how to deal with documenting this type of transaction.

Definition of a discount for VAT

According to the definition published in the PWN Polish Language Dictionary, a discount is defined as a reduction in the price of a given product by a certain amount, as well as the value of that amount itself. In order to be able to talk about a discount in the case of entrepreneurs, it is important that it is correctly included in the invoice. There are two important points to keep in mind here.

First, according to Art. 29a paragraph. 7 points 1 and 2 of the VAT Act, if the discount is granted for the earlier payment for the goods / service or occurs for a different title at the time of sale, its value should be excluded from the tax base.

Secondly, as results from Art. 29a paragraph. 10 points 1, if the discount is granted after the sale is made, it is mandatory to lower the tax base by the value of price reductions and discounts.

In turn, when the transaction was made, the invoice was issued, and the discount was granted only after that, then, in accordance with the provisions of the Act, it is obligatory to prepare a correcting invoice.

Correction invoice and the discount granted

Pursuant to Art. 106j paragraph. 1 point 1 and 2, it is mandatory to document the granting of such a reduction by means of a correcting invoice, if they were previously indicated in the form of a rebate or discount. When issuing this type of document, the following information should be included in it:

  1. the words "Correction invoice" or the word "Correction",
  2. sequence number and date of issue,
  3. data from the source invoice to which the correcting invoice relates (date of issue, sequential number, names and surnames or names of the taxpayer and buyer of goods or services, their addresses and taxpayer's tax identification number),
  4. reason for correction,
  5. if the correction affects a change in the tax base or the amount of tax due - the amount of the correction of the tax base or the amount of the correction of the tax due, respectively, broken down into amounts relating to individual tax rates and tax-exempt sales,
  6. in cases other than those indicated in the above point - the correct content of the corrected items.

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Pursuant to Art. 106j paragraph. 3 relating to the situation of correcting an invoice for granted discounts, it is obligatory to indicate the period to which the reduction or discount applies to the correction. It is worth remembering that in this case there is no obligation to include the buyer's tax identification number and the date of sale - these data are required on correcting invoices, but referring to other situations.

It should be emphasized that the last paragraph allows taxpayers to correct all sales made to the contractor for which the price reduction is granted with a single document. This is particularly important news for wholesalers, as it will help reduce costs. Only special attention should be paid to taking into account the data on each corrected source invoice, as well as the period mentioned in the last paragraph to which the discount applies.

Commodity discounts and invoicing

The above examples relate primarily to financial rebates that arise by granting the seller a reduction in the price of the purchased goods or service. It should not be forgotten that there is another form of discount in trade, in the form of a commodity discount, which is created by increasing the quantity of goods for the same price.

Commodity discounts may be granted both at the time of sale of goods / services and at a later date. Despite the fact that the value of the invoice - the tax base and the tax amount itself - do not change, it is necessary to issue a corrective invoice. This fact should be specified in the documentation because the price of the goods has been changed.

There is also a way to circumvent invoicing, which is to consider the free transfer of goods as a separate transaction. In this case, it is not required to correct the original invoice. However, one should take into account the possibility that the tax authorities will treat this type of operation as a free transfer of goods / services for the company's purposes. If this happens, it will have to be taxed.