VAT settlement discount basis

When a cash or settlement discount is available on a sales invoice or purchase invoice, the VAT on the invoice can be calculated using one of these methods:

VAT for cash or settlement discounts on sales or purchase invoices is calculated using one of these methods:

  • Gross of any settlement discount. When the payment is received, a VAT adjustment is made only if a discount was taken.
  • Gross of any settlement discount. When the payment is received, no VAT adjustment is made.
  • Net of any settlement discount. When the payment is received, no VAT adjustment is made.

United Kingdom specifics

Previously, VAT was calculated on the net of a settlement discount. When payment was received, no VAT adjustment was made regardless of whether discount was taken. The assumption was that the settlement discount would be taken, but there was no adjustment for VAT when discount was not taken.

VAT is now calculated on the gross of a settlement discount. When payment is received, a VAT adjustment is made only if discount is taken. This applies to telecommunication and broadcasting services, where there is no obligation to provide a VAT invoice.

How Infor meets the requirement

See Tax setup in Tax User Guide.

In a Payables company record, on the Options tab, select the Tax Recovery on Discount check box. See the Financials Setup and Administration Guide.