Article (64) – Adjustments of Bad Debts under UAE VAT Law
The VAT Law makes provisions for a bad debt write-off and discount of output tax paid on a supply for which consideration has not been received, either fully or in part after 6 months from the date of the supply. Certain conditions must be met in order for a supplier to be able to write off a bad debt and claim the output tax back.
Conditions:
- Goods or services must have been supplied and the output VAT must have been charged and paid to THE AUTHORITY.
- Consideration for the supply has been written off in full, or part, as a bad debt in the accounts of the supplier.
- More than 6months from the date of supply has passed.
- The supplier has notified the recipient, of the goods or services, of the amount as consideration for the supply that has been written off.
Records Required
- Records of all supplies of goods & services.
- All tax invoices and alternative documents relating to supplies made and supplies received.
- Records of goods & services received on which input tax has not been recovered.
- Record of adjustment made to tax invoices or accounts.
- Record that shows the tax due or recoverable after any correction or adjustments.
Debtors’ obligation
Art. 64(2) of the Law also provide that on notification from the supplier of the goods or services, the recipient shall reduce the relevant recoverable input tax for the current period provided:
- The supplier has reduced the output tax accordingly and has properly notified the recipient of the amount being written off.
- The recipient has previously accounted for input tax in his tax return submitted to THE AUTHORITY.
- The consideration was not paid by the recipient for over six months. Clearly the reduction in output tax made by the supplier must equate to the reduction in input tax made by the recipient.
