Early payment discount

Description

Usage of payment terms which allow for a discount on early payments are very common in Germany.

Discounted amounts have to be posted to dedicated general accounts for discounts according to the underlying tax matter of the original document.

Discounted amounts are split in accordance with the underlying VAT code (i.e. in case of invoices with several VAT rates).

A fully German GAAP compliant solution requires dedicated general accounts for discount per tax code. The German localization provides the ability to define separate general accounts for discount for different tax codes.

A deduction of discount for products sold at a regular rate will be posted to a general account for discount at regular rate. A deduction for products sold at a reduced rate will be posted to a general account for discount based on a reduced rate, etc.

In addition, German fiscal law also requires a tax adjustment (claw back) to be made when receiving or issuing discounted payments.

A customer pays an invoice issued for a total of €1,190 (19% VAT on €1000 net) with an early payment discount of 1%:
The early payment discount is €11.90, meaning the payment amount will be €1,178.10.
Now, only the net amount of the discount will be posted to the PL account. The VAT amount contained in the early discount will be corrected:
€10.00 to account "Sales discounts VAT regular rate"
€1.90 to account "VAT (sales tax) regular rate"
The corrective posting will be made when posting the payment and the corrected VAT will be considered in the VAT declaration for the period the payment has been received.

Setup

In order to achieve the necessary behavior for early discount, the parameter DEPMGTMOD (chapter TC, group INV) must be set to "Breakdown by VAT (account level)" for German companies.