💡 What is Bad Debt Relief?
If you've charged VAT on an invoice and paid that VAT to NBR, but your customer hasn't paid you, you may be entitled to recover the VAT portion as bad debt relief.
Conditions
1. VAT was declared and paid on the original supply
2. Payment has not been received (wholly or partly)
3. At least 12 months have passed since the later of the supply date or payment due date
4. The debt has been written off in accounting records
5. Reasonable collection efforts have been made and documented
How to Claim
Step 1: Write Off
Write off the bad debt in your accounting system. Document collection efforts (demand letters, legal notices, etc.).
Step 2: Adjust VAT Return
Reduce output VAT in the return period when conditions are met. Report the VAT amount as a negative adjustment in the VAT return.
Step 3: Claw-back
If customer later pays (wholly or partially), you must repay the recovered VAT to NBR in the return period of the payment.