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Reconciling VAT on Discounted Orders

Wed, 05/05/2010 - 15:54 — jamesparker

Say I have the following order (all prices VAT-inclusive):

product1 €100 (vat standard)
product2 €80 (vat reduced)
product3 €70 (vat zero)

The company wants to offer a €10 discount.

The final price will be €240. According to VAT rules, how much standard VAT should be produced and how much reduced VAT should be produced? This will be done for Ireland but, eventually, I will need to do this for the entire EU. Is there some place in the VAT documentation that answers this?

Thanks so much.

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Fri, 07/05/2010 - 13:25 — admin

VAT on discounts

Hi jamesparker

The VAT treatment will depend on the type of discount and the contractual arrangement between you and your customer. Different EC countries may also have different rules and - as with all things EC - you will have to check out the rules for each country separately. Unfortunately I can only help out a bit with the UK position, although I suspect that the rules will be similar for each country. But hopefully I can at least give you a couple of useful links to start.

Here's the link for information on VAT and discounts in the UK: http://www.hmrc.gov.uk/vat/managing/charging/discounts-etc.htm.

You say that you will initially commence your discounts in Ireland, here's the link to the VAT section of the Irish Revenue Service http://www.revenue.ie/en/tax/vat/index.html. I've had a quick look and can't find anything about discounts but I'm sure that the information will be on there somewhere and you'll find it when you've time to have a proper look.

Hope this helps you find the information that you need.
Marie

Fri, 07/05/2010 - 14:59 — jamesparker

Thanks for the info.

Thanks for the info.