Adjustments vs credit notes
29.06.2011Company: Amcham
Bulk discounts, rebates and bonuses are very popular tricks, especially in wholesale and production. We often encounter retrospective discounts on the price (they are called different names) that are applied additionally, upon meeting certain additional conditions.
The ways to document and account for these discounts differ based on the daily business practice. This implies, however, that the tax administrator doesn't always know their way around in the given system well and the tax administration can sense possible evasions here. So next time, discounts, rebates and bonuses will be invoiced in a slightly different way.
The Ministry of Finance issued a release in the middle of March stating that “the existing construction of the VAT in respect of bonuses and rebates expressing the agreed payment conditions (e.g. due to exceeding the limit of purchased goods, advance payments etc.) shall not be changed, i.e. they should still represent financial performance in respect of which Section 42 or 43 is not followed in terms of VAT” – this means that it is not necessary to make a tax adjustment related to the change of the original entitlement to tax deduction.
At the end of April, however, the General Financial Directorate issued the completely opposite release regarding the VAT application for rebates and bonuses which, in accordance with Section 42 of the VAT Act, implies a duty to adjust the tax base and the tax. The Ministry of Finance subsequently included this information in its previous release.
The supplier can therefore reduce the tax base and the previously returned output tax in the regular return for the period in which they deliver the tax adjustment document (credit note) to their customer. On the contrary, the customer is obligated to adjust the tax deduction in the period in which they learnt of the circumstances decisive for the creation of the duty to make to the adjustment, irrespective of whether they received the tax adjustment document or not.
Daniel Kovačovič, TAX Consultant
Mobile: +420 739 182 283
E-mail: daniel.kovacovic@tacoma.eu#mce_temp_url#
