VAT from bad debts to be “recoverable”


The 2019 tax package already approved by the Chamber of Deputies extends the opportunities for VAT on unpaid invoices to be recovered.

These extensions cover three areas. The first is receivables that were enforced in enforcement proceedings, but that ended with a suspension due to the debtor’s lack of funds or because the claim was not fully recovered in the enforcement proceedings, and at least two years have elapsed since the first execution order was issued.

The second is the debtor’s insolvency. Here the creditor can claim the VAT paid if the insolvency court has decided to declare bankruptcy over the debtor’s assets or to reorganise the bankruptcy. Next debt relief or suspended insolvency proceedings were also approved on the grounds that the debtor’s property was totally inadequate to satisfy the creditors.

Third is the debtor’s death, when it is clear from the completed estate proceedings that the claim will not be fully or partially satisfied.

The amendment, on the other hand, also defines when the payer is not responsible for repair, on the basis of which VAT can be recovered. In addition to capital-linked persons with a share of at least 25 % or close persons, this is also the case where the creditor knew or had to know and could have known, at the latest on the date of delivery of the goods or services, that the taxable payment would not be duly paid. However, judgment of the Supreme Administrative Court 5 Afs 60 / 2017-60 makes it clear that this must be proven by the tax administrator.

The correction of the tax base in the case of bad debts contains eight paragraphs dealing with this issue. Do not hesitate to contact us if you are offered the opportunity to use this form of tax refund. We will be happy to help you apply it.

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