Non performing loan or doubtful debts
Recovering the VAT on bad debts is possible when:
1. it is acknowledged in enforcement proceedings that there are no seizable assets;
2. an insolvency decree is made and the classification which is conferred is limited in character or after the approval by resolution of the creditor’s meeting at the liquidation stage;
3. they are covered by the business recovery process after the recovery plan is approved by the judge, or
4. an agreement is entered into in accordance with the terms of SIREVE (Extra-Judicial Company Recovery System).
Recovering VAT on doubtful debts is possible when the debts have been in arrears for longer than:
1. 24 months (provided that all the steps necessary to collect them have been taken and these are documented);
2. 6 months when they do not exceed € 750.00 (including VAT) sand provided that the debtor is a private individual or is a VAT taxable person that carries on exempt transactions that do not confer a right of deduction.
Debts are considered to have fallen due when they are in arrears:
1. on the date stipulated in the contract
2. in the absence of any fixed term, after the debtor has demanded payment.
In order for it to be possible to recover these debts, the taxable person must:
1. provide the information about the debt, i.e., the invoice for the amount in question, the identity of the acquirer, the amount of the invoice and the tax assessed, as well as proof of the steps taken to collect it and the failure to do so;
2. this information must be certified by an auditor (ROC);
3. where debts are in arrears for more than 24 months, it is necessary to submit a request for authorisation to the Tax Authority within six months of the date on which the debt was deemed to be doubtful.
3.1. this request is considered to have been rejected if it is not appreciated within a period of eight months.
3.2. the request is considered to be tacitly approved after eight months if the debt is less than €150,000.00.
4. submit the approved schedules with the breakdown of the legal basis for each regularisation and the corresponding basis for the tax, as well as the amount in question and the identity of the acquirer/debtor.
Diana Abegão Pinto