VAT, Recover from unpaid invoices

Recover VAT on unpaid invoices

Did you know that you can recover VAT on invoices that your customers have not paid? Many companies face the challenge of paying VAT on transactions never collected to the tax authorities, which generates a considerable financial impact. However, a recent ruling by the Court of Justice of the European Union (CJEU) reinforces the right of companies to modify the VAT taxable base due to non-payment, even if national regulations do not provide for it. If this is your case, read on to understand how to protect your liquidity.

The financial cost of unrecovered VAT

When a company issues an invoice, it must declare and pay the corresponding VAT, even if the customer has not made the payment. This situation can lead to:

• Liquidity problems: The company assumes a fiscal cost without having received the expected income.
• Insolvency risks: In SMEs and startups, this type of mismatch can be particularly damaging.
• Administrative burden: VAT reclaim procedures are often complex and daunting.

What European law says
The CJEU has ruled that Member States must allow the modification of the VAT taxable amount in case of definitive non-payment, even when national laws do not expressly include it. This implies that:

1. You can reduce your taxable income: Once the non-payment is considered final, you are entitled to adjust your tax returns.
2. The Treasury assumes the risk: The “cost” of unpaid VAT should not be borne by the entrepreneur.
3. The entitlement includes interest for late payment: If no clear time limit is regulated in the national regulations, you can claim interest from the date you exercise your entitlement.

How to proceed to reclaim lost VAT
Although the European legal framework supports this right, in Spain it is essential to know the specific steps:

• Correct the initial invoice: Be sure to issue a corrective invoice when the non-payment is final.
• Communicate the non-payment: It is usual to inform the debtor about the cancellation of the VAT, although this should not be an insurmountable barrier.
• Comply with the time limits: According to the CJEU, the time limit for exercising this right must begin when you have the capacity to act reasonably.

In case of doubts or difficulties, having an expert advisor in collaborative taxation, such as Cigarrán Abogados, can make the difference to ensure that you take advantage of all your tax rights.

The financial impact of non-payments should not compromise the health of your business. The possibility of recovering lost VAT is a right backed by European regulations, and managing it effectively can significantly improve your liquidity. At Cigarrán Abogados, we help you to integrate this management in your accounting processes through tools such as Holded, guaranteeing a total and simplified control.

Are you facing this problem? Contact us to ensure that uncollected VAT is returned to you.

¿Do you need help? At Cigarrán Abogados we can help you (+34) 91.355.85.15