Article 64 of Decree Law stipulates conditions for claiming relief under bad debts. Following needs to be satisfied: a. Goods and Services have been supplied and the Due Tax has been charged and paid. b. Consideration for the supply has been written off in full or part as a bad debt in the accounts of the supplier. c. More than six (6) months has passed from the date of the supply. d. The Registrant supplier has notified the Recipient of Goods and the Recipient of Services of the amount of Consideration for the supply that has been written off You can issue a Tax Credit note to notify the customer about the write off as bad debts.

As per Article 64, the amount paid to FTA at the time of issuance of invoice can be adjusted if sales subsequently turn into bad debts. This is to ensure there is no cash loss to the businesses. There are few conditions which should be satisfied for this adjustments which are mentioned in Article 64. The important aspect is that the customer will have to be notified about amount being written off as bad debts which can be done post 6 months from date of supply.

As highlighted by the fellow professionals, there are specific conditions under article 64 of the Decree-Law to claim VAT Bad Debt relief. Issuance of a Tax Credit Note is a mechanism for Output Tax adjustment (Article 62.2 Decree-Law). Output Tax can be adjusted only in specific cases mentioned in article 61.1 of Decree-Law. Bad Debts is not one of the particular circumstances mentioned in article 61.1. Hence, a Tax Credit Note cannot be issued to give effect for Bad Debts as there is no change/reduction in the value of the original supply. The customer can be notified for writing off the receivables in your books through normal communication modes. The relief of tax paid is claimed through the adjustment column in the VAT return. All amounts entered should be VAT amounts only and can only be negative amounts. These adjustments should be reported for each Emirate as applicable.