 |
| ||||||||
Suppliers that take advantage of dynamic discounts in countries with VAT or other indirect tax law are entitled to adjust tax. European Union Council Directive 2006/112/EC of 28 November 2006 provides the legislative framework for early payment discounts. More specifically, Article 79 of the Council Directive 2006/112/EC states:
"The taxable amount shall not include the following factors:
(a) Price reductions by way of discount for early payment;
…”
Within the above legislative framework, each EU Member State designs, implements, and applies domestic VAT law. European countries that don't belong to the EU (for example, Switzerland, Norway, and Iceland) are not bound by this framework, but have implemented equal or similar principles. For example, Swiss VAT Law Article 24 paragraph 1 states, "The tax is calculated on the consideration actually received. The consideration includes in particular the reimbursement of all costs, even if they are invoiced separately, and the public law charges payable by the taxable person."
The nature of dynamic discounting is that buyers or suppliers can initiate ad-hoc offers any time after the buyer approves the invoice. As result, discount, taxable, and tax amounts are uncertain until both parties agree on the early payment date.
In order to align to VAT and similar indirect tax law, Ariba Discount Professional calculates early payment VAT adjustments when buyers make offers to supplier to set expectations on the settlement amount including the discount and tax credit.
To illustrate this functionality, consider the following invoice sent by a Swiss supplier to a Swiss buying organization:
| 1000.00 CHF | Purchase amount of goods |
| 80.00 CHF | VAT (8%) |
| 1080.00 CHF | Total Invoice Amount |
1000.00 CHF Discount Basis
As are result of the above invoice and the buyer’s 0.1% daily rate, Ariba will make the following offers to suppliers:
|
Settlement Date |
Discount % X% |
Discount Basis |
Discount Amount X% of discount basis
|
Tax Adjustment X% of VAT (CHF) |
Settlement Amount |
|
15 Aug 2016 |
2.1% |
1000.00 CHF |
21.00 CHF |
1.68 CHF |
1057.32 CHF |
|
16 Aug 2016 |
2.0% |
1000.00 CHF |
20.00 CHF |
1.60 CHF |
1058.40 CHF |
|
17 Aug 2016 |
1.9% |
1000.00 CHF |
19.00 CHF |
1.52 CHF |
1059.48 CHF |
|
… |
|
|
|
|
|
After the supplier selects the offer, SAP Business Network indicates the supplier’s selection, including the selected amounts, in the payment proposal sent to both buyer and supplier to support each parties' tax postings. SAP Business Network also includes these amounts in the supplier's "Early Payment Detail Report," which helps suppliers reconcile early payments and make manual, offline tax adjustments in countries that don’t require credit memos for early payment discounts, such as Austria and Switzerland.
SAP Business Network for Procurement & Supply Chain