The current regime makes VAT recovery on unpaid invoices faster, but any lack of monitoring can quickly make recovery impossible
2024/06/15
A “double‑edged sword”
The 2013 reform simplified VAT recovery on invoices issued but not collected. However, deadlines and formalities are strict: without timely follow‑up, companies lose the right to reclaim VAT.
First step: internal control
Businesses must implement robust maturity controls. Accounting and collection teams should:
- Monitor customer accounts regularly.
- Flag overdue invoices early.
- Isolate doubtful debts in the accounts.
- Keep evidence of collection efforts (emails, registered letters, enforcement actions), which is essential for recovery.
When is a debt considered bad?
- Credits in arrears (mora) are treated as uncollectible when:
- More than 12 months have passed since due date, with objective proof of impairment and collection attempts; or
- More than 6 months have passed, if the amount is ≤ €750 (VAT included) and the debtor is a private individual or an exempt entity.
- Insolvency bad debts arise when the customer is declared insolvent and the final distribution confirms definitive non‑payment. This route only applies if insolvency occurs before the credit reaches 12 months in arrears.
Recovery procedure
- Credits in arrears – Within 6 months after the debt becomes uncollectible, the company must request prior authorization from the Tax Authority (AT), supported by a Statutory Auditor’s certification or, for recovery ≤ €10,000, an independent Certified Accountant. The AT has 4 months to respond:
- Silence on invoices < €150,000 = request deemed approved.
- Silence on invoices ≥ €150,000 = request deemed rejected.
- Insolvency bad debts – VAT may be recovered within two years from 1 January of the following year, without prior AT authorization, based on the insolvency certificate and court judgment.
Why legal support matters
Given the technical complexity and many “grey areas”, regular follow‑up by certified accountants and lawyers is crucial to avoid losing VAT solely due to procedural errors.
Rita Duarte | [email protected]
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