Although it is still a proposal, the law is likely to come into force in 2017. We list the changes and points of interest for you in advance.
Time of irrecoverability recorded
The right to a VAT refund arises from the moment it becomes irrecoverable, but when exactly is that? It varies from one situation to another and may even take years in the case of bankruptcy. To clarify this, the government proposes in the new law that the right to a refund arises if the claim has not yet been paid one year after being due. If it is established before this one-year period that the claim will not be paid, the right to a refund will arise at that earlier moment.
Do it yourself instead of separate refund request
Currently, as a business owner, you must apply to the tax authorities yourself for a VAT refund in case of an irrecoverable claim. When the new law comes into force, a request will no longer be necessary. You may then deduct the amount of the refund yourself from the periodic VAT return. It is as yet unclear exactly how this should be included in the return.
Transfer of bad debt
You might want to hand over the bad debt. If the receivable is transferred within the one-year period, the acquiring party can reclaim the VAT on it (as now, it must submit a separate request to the tax authorities). If the claim is only transferred after the one-year period has expired, you, as the transferring party, may reclaim the VAT on this. If the claim is subsequently settled, the VAT must still be paid to the tax authorities.
What does this mean in practice?
We expect the law to take effect in 2017, but it is not yet certain. When the law comes into force, you would be wise to check whether the set-up of your administration (systems) is in line with the new rules. We will keep you updated on developments.
