Tax Lawyers / Fiscalisten

Thursday, 22 December 2016

VAT treatment of unpaid invoices

VAT is due on the supply of VAT taxable services or goods. The supplier pays the VAT due to the Dutch Tax Authorities (‘DTA’) and issues an invoice charging VAT to the purchaser. In case the invoice remains (partly) unpaid by the purchaser, the supplier will not be reimbursed by the purchaser for the VAT already paid to the DTA.

1. Current regulation

Currently the supplier should file a separate refund request including supporting documents with the DTA within one month following the period the claim becomes irrecoverable. A claim is irrecoverable at the moment reasonably can be assumed that it is not and will not be paid anymore. Whether and when this is the case, is regularly subject of discussion with the DTA. The DTA is reluctant with these refund request also because a refund to the supplier does not correspond with a repayment of the VAT deducted by the purchaser.

2. Simplification as of 2017

As of 2017 a refund of VAT to the supplier and the repayment by the purchaser are extended to/by  cancellation, severance, termination, (partial) non-payment and price-reduction. The supplier as well as the purchaser should -based on a fiction- include the refund/repayment in the VAT return one year after the claim became payable. A claim is payable on the (final) agreed payment date or otherwise 30 days after receipt of the invoice. In case the claim is (partially) paid later on, the refund/repayment will (partially) be corrected. As of 2017, the refund for the supplier correspondents with the repayment for the purchaser.

In case of factoring, it will be possible that the assignee is reclaiming the VAT on its own behalf. However, in this case the assignee could not include it in their VAT return but still a separate refund request should be filed with the DTA.

3. Transitional regime

For claims that became payable before 1 January 2017 and in which respect under the former regulation not yet a refund has been granted to the supplier or a correction has been made by the purchaser, a transitional regime applies.

For claims that became payable before 1 January 2017, the supplier is entitled to a refund of VAT in the first return of 2018 (unless it previously appeared that the claim is irrecoverable).For claims that became payable in 2015 the purchaser is required to repay the VAT in the first VAT return of 2017. For claims that became payable in 2016 (and onwards), the purchaser is required to repay the VAT in his VAT return one year after the claim has become claimable. This transitional regime causes a discrepancy between the moment of refund or repayment for VAT on claims dated before and after 1 January 2017.  For an overview, please see our scheme below.

4. Practical impact

This new regulation is a simplification as compared to the previous system wherein separate refund requests needs to be filed. However, the new regulation also requires adjustments to your VAT filing process. Each time a VAT return should be filed, it is necessary to check whether there are creditors who still have not paid their invoices for over one year. In that respect refunds should be included in the VAT return. In addition it should be checked whether there are debtors which invoices have not been paid for over one year. The VAT charged by this debtor which has be claimed as input VAT should then be repaid to the DTA by including it in the VAT return. It is yet not clear whether for these corrections a separate box will be introduced to the VAT return.

Taking into account the transitional regime, the aforementioned will have the following practical effects.

  Claim payble Being supplier Being purchaser
8 May 2014 Separate refund request at the moment the claim is irrecoverable, at the latest include the refund request in the VAT return over January 2018/ first quarter 2018 Repayment (at the latest) in the VAT return of May 2016/ second quarter of 2016
During 2015 Include the refund request in the VAT return over January 2018/ first quarter of 2018* Include the repayment in the VAT return over January 2017/ first quarter of 2017*
During 2016 Include the refund request in the VAT return over January 2018/ first quarter of 2018 Include the repayment in the VAT return one year after the claim becomes claimable/ at the latest in the last VAT return over 2017
5 March 2017 Include the refund request in the VAT return over March 2018/ first quarter of 2018 Include the repayment in the VAT return over March 2018/ first quarter of 2018
8 September 2017 Include the refund request in the VAT return over September 2018/ third quarter of 2018 Include the repayment in the VAT return over September 2018/ third quarter of 2018

* Unless it previously appeared that the claim is irrecoverable

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