Discount and VAT correction - how does it affect the tax settlement?

Service-Tax

The title discount is a reduction in the value of receivables for goods or services sold in a situation where the buyer pays the payment before the agreed date. Discount and VAT correction - in this article we will consider how the issue of applying a discount affects the settlement of VAT, and in particular, how to correct the declaration.

Discount on the basis of VAT

The VAT Act does not define what a discount is and how it should be understood. Consequently, it is justified to adopt its common meaning.

However, the provisions on the tax base also apply to the discount applied. Well, according to Art. 29a paragraph. 7 point 1 of the VAT Act, the tax base does not include amounts that constitute a price reduction in the form of a discount for early payment.

However, pursuant to Art. 29a paragraph. 10 point 1 of the Act, the tax base is reduced by the amounts of discounts and price reductions granted after the sale.

If, at the time of issuing the invoice, it is certain that the discount will be applied, the information on this subject should be included on the invoice. According to Art. 106e paragraph. 1 point 10 of the VAT Act, the invoice should include the amounts of any price discounts or reductions, including in the form of a discount for early payment, unless they are included in the net unit price. The discount, understood as an early payment reduction, is not a component of the VAT tax base. Information on the amount of the discount should be included on the invoice issued.

Discount and invoice correction

If, after the original invoice has been issued, the buyer pays the amount due before the due date, a discount will also be issued. This, however, makes it necessary to issue a corrective invoice. According to Art. 106j paragraph. 1 point 1 of the VAT Act, if after issuing the invoice, a price reduction was granted in the form of a discount, a correcting invoice should be issued.

However, there is no obligation to issue a correcting invoice if the discount is already included in the original invoice. Let us remind you that the basic invoice issue date is the 15th day of the month following the month in which the tax obligation arises.

Example 1.

On February 5, the taxpayer sold the goods to his contractor. The payment deadline was set on March 5, but the buyer paid the full amount on February 7, thanks to which a discount in the form of a cash discount was applied. The seller issued an invoice on March 10. The invoice indicated that the amount due was reduced by the amount of the discount granted.

Example 2.

On February 26, the taxpayer sold the goods to his contractor. The payment deadline is March 26. On March 15, the taxpayer issued an invoice. The buyer paid the entire amount on March 17, ie before the agreed payment date, which resulted in the application of a discount in the form of a cash discount. In this case, the seller is obliged to issue a corrective invoice. The price reduction resulting from the discount applied after the issuance of the original invoice requires the preparation of a correcting invoice. If the discount conditions have been met before the invoice is issued, there is no need to issue a correction.

Discount and VAT correction - shown in the tax declaration

In a situation where as at the date of submitting JPK V7, the taxpayer is not sure whether the discount will apply, the sale should be shown in full. The tax base should therefore cover the entire amount.

However, if later the payment is settled earlier, which will result in the application of a discount and granting a discount, and consequently the correction of the invoice, it will be necessary to additionally correct the declaration for the given settlement period.

As for the principles of recognizing the correction in the JPK V7 file for a given accounting period, it is necessary to recall the principles set out in Art. 29a paragraph. 13 of the VAT Act. The provision states that the reduction of the tax base, in relation to the base specified in the invoice with the indicated tax, is made for the accounting period in which the taxpayer issued a correcting invoice, provided that the documentation held by that taxpayer shows that he agreed with the buyer of the goods or service recipient, the conditions for lowering the tax base for the supply of goods or services specified in the correcting invoice and these conditions have been met, and the invoice is consistent with the documentation held. If, in the tax period in which the corrective invoice was issued, the taxpayer does not have the documentation referred to in the first sentence, the tax base is reduced for the tax period in which it was obtained.

Example 3.

The taxpayer made the sale on January 21. The due date is set for February 21st. The taxpayer issued an invoice on February 1 and submitted JPK V7 for January on February 7. On February 15, the buyer paid the entire amount before the payment date, which obligated the seller to issue a corrected invoice. The buyer received the correction on February 20. The seller is therefore obliged to correct JPK V7 for January and include the amount of the discount granted in it. The application of a discount, as a result of which it is necessary to issue a correcting invoice, entails the obligation to correct the VAT declaration.

Discount and VAT correction on payment of tax

Interestingly, taxpayers using the split payment mechanism may receive a discount as part of their tax liability towards the tax office. Article 108d of the VAT Act provides for the reduction of the tax amount in the event of payment in full from the VAT account earlier than the date of tax payment.

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In accordance with the above provision, if the payment of the tax liability due to tax is made in full from the VAT account earlier than the date of payment of the tax, the amount of the tax liability due to tax may be reduced by the amount calculated according to the formula:


S = Z x r x n / 360

in which individual symbols mean:

S - the amount by which the amount of the tax liability due to tax is reduced;

Z - the amount of the tax liability resulting from the tax resulting from the tax declaration before the reduction of this liability;

r - the reference rate of the National Bank of Poland in force two business days before the date of tax payment;

n - the number of days from the day on which the bank account or the account in the cooperative savings and credit union for which the VAT account is kept was debited, excluding that day until the tax payment deadline, inclusive of this day. The provisions of the VAT Act provide for the possibility for taxpayers to apply a discount for payment of tax from the VAT account before the statutory payment date. Moving on to the summary of the above considerations, we can indicate that the discount granted to the buyer has different tax consequences depending on when it is applied.

Granting a cash discount after issuing the original invoice, which was shown in the submitted JPK V7 file, makes it necessary to both correct the invoice and correct JPK V7.