VAT refund for bad debts

From 1 January 2021, after an amendment to the VAT Act, VAT may be refunded on the supply of goods or services if the supplier (VAT payer) has received no payment or partial payment for the supply and the supplier’s claim has become non-recoverable. The amendment also applies to receivables which arose or became non-recoverable before 1 January 2021, therefore, we also advise analysing your older unpaid receivables.

When does a receivable become non-recoverable?

  • Low-value receivable with a value of up to EUR 300, including VAT, which is overdue for more than 12 months;
  • The receivable is collected in enforcement proceedings;
  • The debtor is bankrupt or discharged from debt;
  • A resolution has been published on the completion of restructuring proceedings to which the receivable was not submitted;
  • The debtor (legal entity) has been dissolved without a legal successor;
  • The debtor (natural person) has died.

When can VAT be corrected?

The new regulation only applies to domestic supplies of goods or services for consideration, for which the supplier has paid VAT, but has received no payment and the supplier’s receivable has become non-recoverable. The VAT payer’s right to claim a VAT refund, ie to correct the tax base expires three years after the last day of the deadline for filing the VAT return for the tax period in which the goods or services were supplied. The law also stipulates circumstances under which this three-year period for a tax correction is suspended.

How can the correction be made?

The supplier requests a VAT refundon a non-recoverable receivablein a VAT return that contains specificlines to correct the tax base in such circumstances. The supplier is also obliged to prepare a special corrective document, which must be sent to the customer.

How can Deloitte help?

  • We will analyse your receivables and identify those that are non-recoverable.
  • We will check that the three-year limitation period has not expired, taking into consideration special circumstances under which the limitation period is suspended.
  • We will assist you with preparing corrective documents and their correct posting and reporting in a VAT return and in the VAT transactions statement.
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