Recovering output VAT from unpaid invoices: Everything you need to know

Unpaid invoices and VAT refunds: Everything you need to know

Starting from January 1, 2023, suppliers of goods and services will have the possibility of recovering the VAT charged on issued invoices that remain unpaid, subject to compliance with the following requirements:

• One year must have passed since the VAT accrual, without the supplier having collected all or part of the amount. (The period starts counting from the due date of the unpaid installment(s): Six months (optional) or one year (at the supplier’s choice) from the tax accrual, in cases where the volume of transactions is less than 6,010,121.04 euros.
• The unpaid invoice must be recorded in the supplier’s accounting books.
• The recipient of the supply of goods or services must be classified as a business or professional, or the taxable base of the transaction must exceed 50 euros in the case of a private individual.
• The issuance of the corrective invoice, for those declared unpaid/uncollectible, must be carried out within six months from the expiration of the one-year period mentioned above, or the six-month period, as applicable
  • Additionally, within one month from the date of issuance of the corrective invoice, the VAT modification must be reported to the AEAT through a special procedure as a result of the rectification.
• The supplier is obliged to start a legal claim or notarial request against the debtor (recipient of the goods or services) or any other procedure that reliably and convincingly proves that the supplier has requested the payment from the debtor. The procedure must also prove the forwarding of the content, the identity of the sender and addressee, as well as the amount due and the date of delivery. The General Directorate of Taxes (DGT) following the Supreme Court criteria has confirmed that the use of a Burofax may be accepted as proof of the claim for unpaid invoices.

The DGT, following the criteria set by the Supreme Court, confirms the use of burofax as a valid example to prove the claim of unpaid invoices.

VAT recovery is not applicable when the credits are:

• Secured credits, whether secured by collateral, guaranteed by credit institutions or mutual guarantee companies, or covered by a credit or surety insurance contract.
• Credits between persons or entities related for VAT purposes.
• Credits whose recipient is outside the territorial scope of the TAI, as well as in the Canary Islands, Ceuta or Melilla.
• In the event that the customer has been declared in insolvency proceedings, the modification of the taxable base is not allowed, although a reduction → Specific procedure according to Article 80.Three of the VAT Law.