Creditors face uncertainty when selling receivables below nominal value, sparking disputes with tax authorities over VAT bad debt relief.
Clear Provisions in VAT Law
Article 89a, section 4 of the VAT Act appears straightforward: when a creditor recovers part of their receivable, they must withdraw the bad debt relief for that specific portion. The same applies when selling part of an uncollectible receivable—the relief is adjusted for that part.
Disputes Over Partial Recovery
The contentious issue arises when creditors sell all their receivables but at a price below nominal value. This creates ambiguity: should they withdraw the entire relief because they sold all receivables, or only part of it because they recovered less value?
Tax Authority Disputes
These questions are at the center of ongoing disputes between taxpayers and the tax administration, as the current legal interpretation isn’t fully clear on this specific scenario.
