Reduction of consideration
A reduction in consideration is a subsequent decrease of the agreed price through a discount, cash discount, deduction for defects or rebate; it reduces the tax base and therefore the VAT owed.
Definition
The practical error is booking it as an expense: whoever puts a cash discount on an expense account reports turnover and tax too high and pays tax on money never received. The correct treatment is a reduction of turnover at the corresponding tax rate.
In the return the reduction has to be recorded in the period in which it occurred. Under accounting by payments received the two coincide; under accounting by agreed consideration they do not.
Where to read it
What the software must be able to do
The check is whether the software assigns cash discounts and rebates to the correct tax rate automatically. A program that knows only one collective «discount» item produces a wrong return as soon as several rates are in play.
Checked Aug 2026
More terms under VAT and customs: Acquisition tax Customs declaration Effective method Exempt supplies Flat-rate VAT method Input tax Margin taxation Non-consideration Own use Place-of-recipient rule Takeaway 2.6 vs. eat-in 8.1 Value added tax VAT 3.8 % accommodation VAT 8.1 / 2.6 / 3.8 % VAT liability