Treatment of Bad Debts under UAE VAT Law
If in case, company filled cases against its few customers and output/recovery is uncertain. it can be/can not be and there is no realistic & defined time period of recovery.
1. Company has not writen off as Bad Debt but can provide provision for bad debt in future but did not provide provision yet. Debts are overdue more than 6 months
Company can make Adjustment of VAT Now if non of anything happened as per Point No.1?
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One of the conditions to claim bad debt relief is that the company needs to notify the recipient that the consideration has been written off so that the recipient can reverse the input claim. Hence mere provision alone would not suffice unless the recipient is notiffied about write off to claim the relief.
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1. In case where is recipient is ran away/discontinued/shut down/insolvent/. 2. There may be a court case and overdue more then 2 years and Auditors suggested to provide Provisions What should do when notification to the recipient is not possible?
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Creating a provision is not an issue for VAT unless the output VAT related to the same is reversed. In the case where the recipient has absconded i would suggest sending the notification to the official communication address/email of the recipient and also retain documentation related to cases filed.
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