Trade notes division

The total payable amount can be divided into multiple trade notes of smaller denominations. Instead of issuing one trade note for the entire amount, companies issue multiple trade notes that together cover the amount.

Trade notes can be divided for two reasons:

To create trade notes of smaller amounts that can be endorsed or discounted. The denomination of such trade notes depends on the agreement between the company and the business partner.
To minimize the amount of stamp tax to be paid. Instead of issuing one trade note for the entire amount, multiple trade notes are issued that together cover the amount.

For each business partner, you can indicate the trade notes division data in the Pay-by Business Partner (tccom4114s000) session, for the following:

Predetermined values supplied by the business partner
To divide the trade notes amount, select the Predetermined Values option, in the Trade Note Division Method field.
Stamp tax tariffs
If you must pay stamp tax on trade notes, you can set up stamp tax as described in Stamp tax.

Division data on predetermined values

Some suppliers instruct your company's accountant about the maximum number of trade notes that they wish to receive for one transaction, as well as the denominations of the trade notes.

For example, the supplier does not wish to receive more than four trade notes to cover one invoice. If the invoice amount is up to 100,000 EUR, the amount can be split into trade notes of 25,000 EUR. Invoice amounts of up to 1,000,000 EUR can be split into trade notes of 100,000 EUR. And so on.

The following table shows the data of this agreement. All the values are in the local currency.

Up to Amount	Trade Note Denomination	Maximum number
100,000	25,000	4
1,000,000	100,000	4
10,000,000	1,000,000	4

Based on this data, an invoice of 85,000 EUR will result in:

Three generated trade notes of 25,000 EUR each.
One trade note for the remaining amount, which is 10,000 EUR.

If the maximum number of trade notes is three, an invoice of 85,000 EUR will result in:

Two generated trade notes of 25,000 EUR each.
One trade note for the remaining amount, which is 30,000 EUR.

Division data by stamp tax tariff

If the business partner does not supply predetermined values for the trade note division, you can set up the optimal trade note division to minimize the amount of stamp tax to be paid.

In some countries, the stamp tax on a trade note is determined based on a graduated calculation table, for example:

Up to Trade Note Amount	Stamp Tax Amount
10,000 EUR	2 EUR
100,000 EUR	20 EUR
1,000,000 EUR	200 EUR

Stamp tax amounts are expressed in the local currency.

Note

Stamp tax is usually either gradually decreasing or linear. In other words, as the trade note amount increases, the tax percentage is either fixed or decreasing. As a consequence, when trade notes are split, trade notes must always be generated for the highest possible trade note amount.

To save on the stamp tax to be paid, you can calculate the optimal structure of the number of trade notes and their denominations.

For example, if the amount to be paid is 40,000 EUR, you can do one of the following:

Issue one trade note of 40,000 EUR and pay 20 EUR stamp tax.
Issue 5 trade notes of 8,000 EUR and pay 5 *2 = 10 EUR stamp tax.