Most companies are subject to Value Added Tax (VAT) on payments for the transfer of goods and services made in Portugal for valuable consideration, imports of goods and intra-Community transactions carried out in Portugal.
However, what happens if a company issues an invoice whose amount is never paid by the debtor, and the company has borne the corresponding VAT?
In these cases, companies can deduct the VAT on doubtful debts, i.e:
Companies will also be able to deduct the VAT relating to those considered uncollectible in the following cases and with the following documents:
iii. in bankruptcy proceedings or special revitalization proceedings, when a judgment is handed down approving the bankruptcy plan or recovery plan which provides for the definitive non-payment of the claim, a court certificate is required and can also be requested via the CITIUS platform;
In the case of other credits, taxable individuals can also deduct VAT, as long as:
iii. The credits are greater than €750.00 and less than €8,000.00 (VAT included), there has been an enforcement order in injunction proceedings or recognition in condemnation proceedings and the debtor is a private individual or a taxable person who exclusively carries out exempt transactions that do not confer the right to deduction;
It is therefore necessary to carry out a thorough assessment within the company in order to understand which credits may be considered doubtful and/or uncollectible and whose VAT can be deducted. It should be noted that credits covered by insurance, credits relating to entities in the same economic group, credits in which the purchaser or recipient is on the public access list of executions, has been declared bankrupt or insolvent in previous legal proceedings and credits relating to the State, autonomous regions and local authorities or those in which these entities have provided a guarantee do not qualify as uncollectible or doubtful debts.
There are, however, deadlines to be met in order for VAT to be settled, and these vary according to the context of the credit in question.
However, what happens if a company issues an invoice whose amount is never paid by the debtor, and the company has borne the corresponding VAT?
In these cases, companies can deduct the VAT on doubtful debts, i.e:
- Credit that has been in debt for more than 12 months since its due date and there is objective evidence of impairment and that efforts have been made to collect it;
- Credit that has been in debt for more than six months since the due date, the value of the credit does not exceed €750.00 (VAT included), and the debtor is a private individual or taxable person who carries out exclusively exempt transactions that do not confer the right to deduction.
Companies will also be able to deduct the VAT relating to those considered uncollectible in the following cases and with the following documents:
- in execution proceedings, requiring computer registration in the public list of executions, indicating the date of extinction of the execution;
- in bankruptcy proceedings, when the bankruptcy has been decreed to be of a limited nature or when the proceedings have been closed due to insufficient assets, a court certificate is required and can be requested via the CITIUS platform;
iii. in bankruptcy proceedings or special revitalization proceedings, when a judgment is handed down approving the bankruptcy plan or recovery plan which provides for the definitive non-payment of the claim, a court certificate is required and can also be requested via the CITIUS platform;
- when an agreement subject to the Extrajudicial Business Recovery Regime (RERE) has been signed and deposited at the Commercial Registry Office, in which case a copy of the agreement and evidence of its deposit at the Commercial Registry Office is required.
In the case of other credits, taxable individuals can also deduct VAT, as long as:
- The amount of the credit does not exceed €750.00 (VAT included), the delay in payment extends beyond six months and the debtor is a private individual or a taxable person who exclusively carries out exempt transactions that do not give rise to a right of deduction;
- The credits are greater than €750.00 and less than €8,000.00 (VAT included), when the debtor, being a private individual or a taxable person who exclusively carries out exempt transactions that do not confer the right to deduction, is listed in the computerized enforcement registry as a defendant against whom previous enforcement proceedings were filed, which have since been suspended or extinguished because no attachable assets were found;
iii. The credits are greater than €750.00 and less than €8,000.00 (VAT included), there has been an enforcement order in injunction proceedings or recognition in condemnation proceedings and the debtor is a private individual or a taxable person who exclusively carries out exempt transactions that do not confer the right to deduction;
- The debts are less than €6,000.00 (VAT included), the debtor is a taxable person with a right to deduction and they have been acknowledged in an action for an injunction or claimed in enforcement proceedings and the debtor has been served with official summons.
- The debts are greater than €750.00 and less than €8,000.00 (VAT included), when the debtor, being a private individual or a taxable person who exclusively carries out exempt transactions that do not confer the right to deduction, appears on the publicly accessible list of executions extinguished with partial payment or because no attachable assets were found at the time of deduction.
It is therefore necessary to carry out a thorough assessment within the company in order to understand which credits may be considered doubtful and/or uncollectible and whose VAT can be deducted. It should be noted that credits covered by insurance, credits relating to entities in the same economic group, credits in which the purchaser or recipient is on the public access list of executions, has been declared bankrupt or insolvent in previous legal proceedings and credits relating to the State, autonomous regions and local authorities or those in which these entities have provided a guarantee do not qualify as uncollectible or doubtful debts.
There are, however, deadlines to be met in order for VAT to be settled, and these vary according to the context of the credit in question.
