A customer’s unpaid invoice does not automatically become a VAT adjustment. UAE bad-debt relief is available only when the supplier satisfies the legal conditions and can demonstrate them with reliable records. The practical work therefore starts long before the VAT return: reconcile the invoice, separate the unpaid consideration, document collection activity, approve the write-off and notify the customer in the required way.
The Federal Tax Authority’s official bad-debt relief guidance explains the conditions under Article 64 of the VAT Decree-Law. The FTA clarification says the supplier must have supplied goods or services and accounted for VAT, more than six months must have passed from the date of supply, the consideration must have been written off in full or in part as a bad debt, and the supplier must notify the customer of the amount written off. Businesses should use the latest legislation and their tax adviser for their own facts.
Test every condition separately
| Condition | Evidence to review | Common risk |
|---|---|---|
| Taxable supply and output tax | Contract, invoice and filed return | Claiming before confirming VAT was accounted for |
| Six-month period | Date-of-supply calculation | Counting from a reminder or write-off date |
| Debt written off | Ledger entry and approval | Leaving the amount as merely overdue |
| Customer notified | Copy and delivery evidence | Using an informal message with no amount |
| Relief amount | Unpaid consideration and VAT working | Adjusting paid or non-VAT amounts |
Partial payment needs particular care. Identify what remains unpaid and how the payment was allocated under the agreement and accounting records. Do not apply the original invoice total if part has been settled. The UAE business-records guide explains the benefit of a clear transaction file.
Bad-debt relief file checklist
- Contract, purchase order and tax invoice.
- Evidence that the supply occurred.
- Return showing the original output tax.
- Customer ledger and bank reconciliation.
- Credit-control correspondence and collection notes.
- Approved accounting entry writing off the amount.
- Customer notification and proof of sending.
Calculate six months from the date of supply
The FTA clarification indicates that the six-month period runs from the date of supply, not automatically from the payment due date. Date-of-supply rules can be complex where there are advance payments, continuous supplies or multiple invoices. Record the legal date used and the reasoning; do not rely on the age shown by an accounting dashboard without checking how it was configured.
The UAE VAT return guide explains why every registrant must confirm its own tax period and deadline. A bad-debt adjustment does not change the return due date.
Write-off must be real and documented
An overdue receivable is not necessarily a bad debt. The amount must be written off in the supplier’s accounts, wholly or partly. Keep the journal entry, internal approval and supporting collection history together. If the business later recovers all or part of the consideration, review the corresponding VAT consequence in the period required by law.
Use controlled access and retention rules from the small-business document guide. The cyber-incident guide is relevant because altered bank details or invoice fraud may be the reason a balance appears unpaid.
Notify the customer clearly
The notification should identify the amount written off and be sent through a channel that creates evidence. It is not the same as an ordinary payment reminder. Retain the final notice, address used, sending record and any delivery response. If the customer is also VAT registered, the notification may affect its input-tax position, which is why vague language creates risk.
The business communication guide reinforces the value of factual, professional language. Do not publish a debtor’s identity or use public pressure as a substitute for a lawful collection process.
Review the return before submission
Prepare a reconciliation showing the original invoice, VAT accounted for, payments received, amount written off, adjustment claimed and remaining balance. Have a second person review the conditions and period. Keep the working paper with the return evidence so a future reviewer can reproduce the calculation.
For invoice fundamentals, use the UAE tax-invoice guide. Small businesses should also compare the receipts and evidence guide for practical record habits, while remembering that consumer disputes and tax adjustments are different processes.
Questions people often ask
When can a UAE supplier claim VAT bad-debt relief?
Only after all legal conditions are met, including accounting for the original VAT, more than six months from the date of supply, writing off the debt and notifying the customer.
Does six months run from the invoice due date?
The FTA clarification refers to six months from the date of supply. Confirm the correct date of supply for the transaction.
Can relief be claimed for part of an invoice?
Potentially, when that part is genuinely unpaid and written off and all other conditions are met. The calculation must exclude amounts already paid.
What should the customer notification contain?
It should clearly identify the debt and amount written off and be sent in a way that leaves reliable evidence.
What if the customer pays after relief was claimed?
The supplier must review and make the VAT adjustment required by the current law for the recovered amount in the appropriate tax period.
