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Successfully navigating the VAT Dynamic Discounting minefield

November 20, 2017  |  Compliance, Legal

The theory of dynamic discounting is highly appealing.

Suppliers can elect to get paid when they want at a discount rate they can clearly see and accept. Buyers benefit from discounts on a much larger scale which reduce their costs. However, there are some complex compliance hurdles to overcome when deploying these programs, especially when they are deployed in multiple countries.

Anyone considering deploying a dynamic discounting program should ensure that their solution partner fully understands and incorporates country compliance requirements into the program roll-out and treatment of discounts that are generated dynamically. Failure to ensure this key aspect of a program is very likely to lead to the program being non-compliant under country VAT/GST laws.

But: different countries have different rules for applying VAT or GST to discounts

Today, early payment discounts are commercially accepted and commonly used globally with some jurisdictions having established processes. Businesses deploying dynamic discounting, either as buyers or suppliers, need to be mindful of country specific rules on handling tax, which vary according to in-country VAT/GST law and/or code of practice.


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