Invoice discount on fixtures

Can the immediate discount on the invoice be advantageous for both the customer and the window maker? In this complete guide we will see how to deal with the new tax breaks provided for by article 10 of the 2019 Growth Decree.

Guide last updated: September 2019.

We recommend that you also see the video:
Discount on the invoice: is it convenient for the window maker?

What does article 10 of the Growth Decree say?

Since its inception, all the trade associations in the world of frames have fought against the genesis of the infamous Article 10 of the Growth Decree. But what do you propose that is so catastrophic? Article 10 provides for the possibility for the customer, in case of replacement of windows respecting the pre-Ecobonus requirements, to request a discount on the invoice equal to the amount of the deductions. That is 50% , an amount that will then be reimbursed in the form of a tax credit to be used as compensation in 5 annual installments . In addition, there is the possibility to pass this tax credit to your supplier, as long as this accepts.

Everything you read today has become law . Like it or not, this discount on the invoice can currently be requested by the customer. The window maker has no obligation to agree to do so but surely he must at least know what it is.

Will the immediate discount on the invoice change the selling price of the windows?

In our opinion, there is no doubt about one thing: cashing in in 5 years is a cost. But will this burden necessarily increase the selling price? Sure!

In fact, the selling price of a window consists of the following items:

1. Production costs;
2. Installation costs;
3. Selling costs;
4. I earn;
5. Payment terms.

The installer who decides to make an immediate discount on the invoice of 50% and recoverable in 5 years, will have a worsening of the payment terms (point 5). Therefore, whoever carries out the work will necessarily increase the amount on the invoice . How much? This is an assessment that every operator in the sector must make by carefully evaluating their particular position. We recommend that you increase your invoice by around 30% .

Is a 30% increase on the invoice in case of a 50% discount on the invoice?

The customer asks for the immediate discount on the invoice, the installer answers okay but he must increase the amount by 30% before discounting it due to the worsening of the payment terms. The customer might turn up his nose but we know that for him it was still a convenient choice because:

1. It has a 35% discount compared to the 50% recoverable in 10 years (so it pays less cash).
2. If the customer has no capacity, he receives an advantage immediately instead of a right to deduction from which he will not be able to benefit.
3. He doesn't have to wait 10 years but he gets the discount right away.

Curiosity: if the customer decided to invest the immediate discount in treasury bills with a yield of 3%, he would obtain in ten years an amount higher than 50% that he could have recovered through the normal tax breaks.

Is a 30% increase in the invoice in the event of a 50% discount on the invoice convenient for the window maker?

To find out we have to compare the "normal situation" with the "discount situation on the invoice". By "normal situation" we mean the classic find in 10 years by the customer provided for by the previous tax breaks that still remain valid if you do not want to proceed with the immediate discount on the invoice.

EXAMPLE NORMAL SITUATION:
Windows supply of 100 Euro + VAT 10 Euro = tot. 110 Euros of which 55 Euros recoverable in 10 years.

EXAMPLE OF SITUATION WITH DISCOUNT IN INVOICE PROVIDED FOR BY ART. 10 OF THE GROWTH DECREE:
Windows supply of 100 Euro + VAT 10 Euro = tot. 110 Euro to which we add 30% which must be discounted by 50% on the invoice. So the collection will be 71.5 euros and the missing amount is 38.5 euros (110 - 71.5). Considering about 8 Euros of higher taxes due to the increase in the invoice, we will have about 63.5 Euros of tax credit to be recovered in 5 years. The interesting thing is that the profitability on the tax credit that I collect in 5 years after increasing the invoice by 30% is about 10.5% .

So if you are a window maker you might think: very well, from now on I will always make the discount on the invoice! A financial investment that has an annual interest rate of 10.5% is really interesting! There is a problem, however: liquidity decreases in the first year by about 30% due to the lower collection and the immediate payment of more taxes due to the increase in the amount on the invoice.

So, in summary, if a window maker has the necessary liquidity or finds an interested supplier to which to transfer the tax credit, the discount on the invoice could be beneficial for both the customer and the operator. This as long as you increase the invoice amount by at least 30%.

We say "could" because the situation of each company is different, so it is always right to ask your accountant for advice and evaluate based on your specific liquidity and taxation.

ATTENTION : if you decide to apply the discount on the invoice, we remind you that:

1. The invoice must mention "50% discount pursuant to article 10 of Legislative Decree 34/2019";
2. Some steps described today have not yet been fully clarified and may change over time, so you need to keep up to date;
3. ALWAYS ask your accountant for advice and, if possible, also trade associations.

Finally, we recommend that you read our Guide to Tax Deductions , updated according to the laws in force.