What about VAT and corporation tax with unpaid invoices?
Every company comes across unpaid invoices from time to time. You have sent the invoice to your customer, with good general conditions, correctly and on time. Well done! But unfortunately, this does not guarantee (correct) payment. The payment is in the hands of your customer. Once you have sent the invoice, it is in your accounts and will be included in the VAT statement. It can therefore happen that you pay VAT and even taxes for an invoice that has not yet been paid by your customer.
An annoying situation but ... it can be managed. It only becomes a real problem if the invoice is not paid at all. What can you do then? Can you reclaim the transferred VAT? Can you avoid paying taxes on it or reclaim any taxes paid?
Your customer does not pay your invoices. If you do not react, your company will be taxed on this anyway. For tax purposes, all invoices issued are eligible, including those that have not yet been paid. You can therefore have to pay VAT on unpaid invoices.
Is your business a company? Then fortunately there are solutions. It is sometimes possible to (partially) exempt the invoice from corporation tax and reclaim the VAT. How does this work?
There are two possible scenarios:
The due date
The due date is the date you issue the invoice. This is the moment when the VAT due can be claimed. To identify this time, you need to determine the nature of your customers. Are they customers-businesses (B2B), customers-private individuals (B2C) or customers-government institutions (B2G)?
In this article, we focus on the business-to-business relationship (B2B). Within the B2B context, the VAT becomes, in principle, payable from the moment the invoice is issued. This applies to invoices issued after delivery or services as well as to advance invoices.
It is certain that the invoice will not be paid (the loss is certain)
If you are really sure of the loss, you can write off the invoice definitively. This can happen if your customer goes bankrupt and the receiver cannot pay anything to you as a creditor. You will usually receive a certificate from the receiver or the bailiff stating that you will not receive any more payments.
For a file in the Unpaid procedure where this situation occurs, you can also obtain this certificate of irrecoverability through us.
In the event that you are certain that the invoice will never be paid, you can also reclaim the VAT. You do this in your VAT return via box 62 'regularisations in favour of the taxable person'.
Attention! You can only reclaim the VAT in the following cases:
- Your customer is bankrupt.
- Your client is in a judicial reorganisation (formerly known as the Continuity of Enterprises Act or WCO).
- You have clearly demonstrated that your customer cannot pay while you have done everything to collect the money. You can demonstrate this, for example, by means of a certificate of irrecoverability.
For B2B customers it is, in principle, compulsory to issue a credit note for the outstanding amount of an unpaid invoice in order to reclaim the VAT. Only in the case of a customer who is in default is a credit note not a legally valid means of reclaiming VAT, as a certificate of irrecoverability is then required.
Another way of demonstrating that the invoice will not be paid is to come to an agreement with your customer via an amicable settlement or through the court. If you work via the court, you must wait for the final judgement before you can reclaim the VAT. No appeal is possible against the court's ruling. Is the invoice definitively unpaid? Then you can submit the lost amount as a professional expense.
Tip: jyou can include a retention of title in your invoice conditions or delivery notes. This lets your customer know that you remain the owner of the goods that have been delivered until the invoice is paid in full.
It is not certain that the invoice will be paid.
Are you not sure that the invoice will be paid (in full)? This does not automatically mean that you can definitively write this invoice off. In this case, you or your accountant must create a 'value reduction'. This will remove the invoice from your income for the time being. If the invoice is paid at a later date, the 'depreciation' must be taken back.
In order to reclaim the VAT, you must be able to prove that the claim is actually irrecoverable. It is extremely important that you can show that you have done everything to get the invoice paid. In principle, a simple reminder letter will not suffice for the Administration to justify your VAT recovery claim. If your client does not respond to a formal notice from a lawyer or a bailiff, the administration will, in principle, accept that you have sufficient evidence. If your file with Unpaid is closed due to a negative solvency investigation, the invoice for this investigation can also be used as evidence.
Definitively writing off an invoice and recovering the VAT is only possible if the invoice will definitely not be paid. If your customer is bankrupt or undergoing a judicial reorganisation, this is not a problem. If it is not certain that your invoice will be paid, you must provisionally write it off with a 'reduction in value'.
Being able to reclaim the VAT on an unpaid invoice is a good thing. Of course, it is even better if your outstanding invoices simply get paid. Unpaid can help you with that!
Speed is of the essence when recovering unpaid invoices. The quicker you react, the greater the chance of a positive outcome. That is why we take immediate action for you. Submit your unpaid invoice via our website and five business days later, the bailiff will be at your customer's door. That makes an impression.
From that moment on, your customer is in the IOS procedure and has one month and eight days to pay the invoice amoun. We recover the advance payment that you pay us in full from your customer. So, at the end of the day, you pay nothing.