Learn more about fixed discounts/surcharges for private and business customers

If you offer goods for private and business customers in your shop, you may already have noticed that fixed surcharges or discounts for payment methods have a different effect. This depends on whether gross or net prices are used as a basis.

Fixed surcharges and discounts are absolute values that are at initially independent from the type of taxation. Instead, it depends on when the taxes are calculated. This article aims to help you to better understand this circumstance and the reasons for it.

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For more information on how to set fixed surcharges or discounts for payment methods, see Payment methods.

How prices are calculated with a fixed discount

For business customers, the fixed discount is applied before the calculation of taxes, in other words to the net price. The total amount is thus reduced before the value added tax (VAT) is added. Since the tax is calculated as a percentage of the total amount, the tax burden is lower.

1	The total net amount for the products in the basket.
2	Fixed discount deducted from the total price of the basket before taxation.
3	The total amount consisting of the total net amount minus the fixed discount (£16.80 - £5.00 = £11.80). The VAT is calculated based on this amount.
4	The total amount including 19% VAT.

For private customers, the fixed discount is applied to the already taxed amount, in other words to the gross price. Therefore, due to taxation, the discount is deducted from a higher starting amount. Thus, the amount that has to be paid is higher in the end, even though the discount is theoretically the same as for business customers.

1	The total gross amount for the products in the basket.
2	Fixed discount deducted from the already taxed total price of the basket.
3	This sum is calculated by dividing the discounted total gross amount by the tax rate (£15.00 : 1,19 = £12,61).
4	The total amount including 19% VAT.

How prices are calculated with a fixed surcharge

The smaller the gross amount, the lower the amount of tax that need to be paid for that gross amount. But in the same way, the larger the gross amount, the higher the amount of tax that need to be paid for that gross amount. Therefore, for fixed surcharges, the previously described scenario gets reversed for business customers.

1	The total net amount for the products in the basket.
2	Fixed surcharge added to the total price of the basket before taxation.
3	The total amount consisting of the total net amount plus the fixed surcharge (£16.80 + £5.00 = £21.80). The VAT is calculated based on this amount.
4	The total amount including 19% VAT.

Compared to business customers, the total amount for private customers is lower, as the surcharge is added to the already taxed total price of the basket.

1	The total gross amount for the products in the basket.
2	Fixed surcharge added to the already taxed total price of the basket.
3	This sum is calculated by dividing the total gross amount by the tax rate (£25,00 : 1,19 = £21,01).
4	The total amount including 19% VAT.