Aqid ERPMeaning
A discount (خصم) is an amount taken off the price. A trade discount is agreed before the sale and shown on the quotation or the invoice, on one line or on the total; the taxable amount is the price after it, so VAT is computed on what the customer pays. Two discounts stack on each other, not on the original: 15 percent then 10 percent is 23.5 percent, not 25. A discount on the total is spread across the lines in proportion when the lines carry different VAT treatments, because each line's VAT must be right on its own.
A settlement or early-payment discount is different: it is offered after the invoice is issued, for paying within a stated time. Under ZATCA's rules the invoice shows the full amount, and if the customer takes the discount the seller issues a credit note for it, VAT included; the invoice is never edited. A discount is not a price cut hidden in cost, and it is not a free item, which is a supply of its own.
Also called: trade discount · cash discount · settlement discount · early payment discount · خصم
Example
Al Noor quotes 10 chairs at 450.00 with a 12 percent trade discount: the line is 4,500.00 less 540.00, a taxable amount of 3,960.00, VAT 594.00, total 4,554.00. The customer pays within 10 days and takes a 2 percent settlement discount of 79.20 on the taxable amount; Al Noor issues a credit note for 79.20 plus 11.88 VAT.