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V3427-16 20 July 2016 · SG de Impuestos sobre el Consumo Criterion in force
IVA · base imponible

Zero-rated credit notes may be issued to reduce taxable base due to bad debts

A local council enquired whether a supplier could issue credit notes for the full taxable base and VAT amount when invoices become uncollectible but the supplier continues to pursue payment. The Directorate-General for Taxes (DGT) ruled that it is possible to reduce the taxable base provided the requirements for bad debts are met, and that the credit note may reflect either the amount being rectified or the resulting balance.

The question raised

Whether it is appropriate for said credit notes to be issued for the total amount of the base and tax charged, given that the supplier continues to claim payment of the same.

The DGT's ruling

To reduce the taxable base due to bad debts, one year must have elapsed since the accrual without collection having occurred. In the case of debts with public entities, the requirement for judicial claim is replaced by a certification from the entity acknowledging the debt. The credit note may state the amount of the rectification or directly show how the tax amount remains after the modification, which may be zero.

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