Hey guys! I've been looking into how discounts and VAT (Value Added Tax) work together in online shopping, especially in the EU. From what I understand, discounts should technically apply to the pre-tax price (known as HT), and VAT should be calculated on that discounted amount. However, I've noticed that on major e-commerce platforms, the discounts seem to be applied directly to the total price including VAT (which is called TTC). For example, if an item costs €50 TTC and there's a €10 discount, the customer sees a final price of €40 TTC. I'm curious how these sites are able to show the discount in this way while still complying with regulations that say discounts should be calculated from the HT price. Do they present the discount differently, or is there some accounting trick at play? I'd love to get a clearer picture of this! Thanks!
2 Answers
It's interesting you're asking about this. Just to clarify, there isn't a universal 'EU law' regarding discounts; the actual laws vary from country to country based on EU directives. But, your mention of the EU VAT Directive is correct. It states that VAT must be calculated on the net price after discounts have been applied. So the big e-commerce sites may be simply marketing the discount in a way that looks straightforward to consumers, while handling the accounting correctly behind the scenes.
You're not alone in being confused by this! The way these discounts are shown can seem simple, but it involves some clever math. With VAT being a percentage, you might think that subtracting the discount after VAT is added wouldn't make a difference. Yet, when you break it down, that's not the case because discounts are typically fixed amounts (like €10 off) rather than percentages. So, for accurate compliance, they must subtract the discount before calculating the VAT to ensure the correct final price is shown. It’s all about balancing legal requirements with user-friendly displays!
Thanks for explaining that! So it's really about making sure the calculations are done right while also giving customers clear pricing? That makes sense!