VAT on Bad Debts

by | May 6, 2020 | English Topics, Uncategorized

There are many reasons for non-payment like customer may end up his business, not satisfied by what he purchased, etc. in this situation supplier will face difficulties in filing VAT returns because of bad debts.

The registered supplier charges VAT to the customer at the time of sales, and the amount of VAT will be shown in its vat return as output vat. This amount is normally paid to the tax authority (FTA) within the respective VAT return period (after adjustment against the eligible input credit).

Article 64 of the 2017 Federal Decree Law No. (8) on the value added tax in the UAE contains provisions concerning adjustment for bad debts. A registered supplier may lower the output tax on the bad debts if the supplier satisfies the following conditions.

  • Supplier has to write off the receivable amount as bad debts from the books of accounts
  • Supplier should notify the customer that the consideration amount has been returned off.
  • Receivable amount should be longer than six months old from the date of supply.

If supplier meet with this all the above conditions then he can request the tax authority (FTA) for the refund through the UAE VAT Return by way of an adjustment.







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