About VAT calculated for documents with cash discounts

To meet the requirements of European value-added tax (VAT) legislation on discounts for early payments (also known as prompt payment discounts, or cash discounts in Visma Net), in documents (such as invoices) for which the full payment has been received within the cash discount period, the VAT amount must be calculated based on the discounted taxable amount. If the payment is received after the cash discount period, the VAT amount is calculated based on the non-discounted taxable amount of a document. Thus, VAT is to be calculated based on the payment that was actually received by the supplier; as a result, the customer recovers the amount of VAT that has been actually paid.

How it works in Visma Net

In Visma Net, when you initially enter a document (such as an invoice), the system shows the VAT amount calculated on the full document amount, because when you enter an invoice, you do not know whether the discount will be taken. However, in the invoice, you specify the appropriate cash discount terms (in the Terms field), so the system calculates the discounted taxable amount and tax amount that can be applied if the terms are met. You can view these discounted amounts (VAT on discounted price and Discounted taxable total) in the Cash discount info section on the Financial details tab of the Purchase invoices (AP301000) window.

If the invoice is fully paid within the cash discount period or if the Payment for the invoice is released in the Customer payments (AR302000) window, the cash discount is to be applied to that invoice. In this case, the system leaves the status of the invoice as Open and makes its balance equal to the appropriate cash discount amount (which has been specified in the Cash discount field). This invoice appears in the list of documents in the Generate VAT on cash discount (AR504500) window. In this window, you should generate the credit note for the invoice in which the corresponding cash discount amount is specified. This credit note will be automatically applied to the invoice, and after that, this invoice will be Closed.

Configuring a VAT used for documents that are paid early

If a VAT applies to your company and your company offers cash discounts to documents for which the payment is made in time to qualify for the discount, then you need to configure the appropriate VAT in the system.

You configure the tax of the VAT type in the VAT (TX205000) window and select the Reduce taxable amount on early payment option in the Cash discount field. Later, if a document with this tax applied is paid in full before the cash discount date specified in the invoice (Cash discount date), you will be able to generate a credit note to adjust the VAT and taxable amounts of the invoice.

Generating credit notes

In the Generate VAT on cash discount (AR504500) window, you can view the list of the documents for which the full payment has been made before the final date of the cash discount period. In this window, you can process the generation of a credit note or credit notes (for a document or documents that you select) or credit notes (for all listed documents) by clicking Process or Process all, respectively.

Depending on whether you clear or select the Consolidate credit notes by customer check box in the Generate VAT on cash discount (AR504500) window before processing, you can generate a credit note for each particular document or one credit note for a group of documents with similar properties, such as branch, customer, customer location, currency, customer account (and customer subaccount, if applicable), and VAT zone.

Setting up the automatic release of credit notes

Generated credit notes can be released automatically by the system if you select the Automatically release credit notes check box in the VAT recalculation settings section in the Customer ledger preferences (AR101000) window.

Related tasks

Create a value-added tax

Related reference

VAT (TX205000)