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Monday, 06 April 2020

What are the possibilities to claim a VAT refund if an invoice is not paid or will not be paid within due time?

Stijn Vastmans

Stijn Vastmans

Partner
Ghent
Loulou Geboers

Loulou Geboers

Senior Associate
Brussels

As a result of the COVID-19 crisis, suppliers and service providers will be more often confronted with unpaid invoices or invoices that may only be paid long after the due date expired. To the extent that VAT is charged on these invoices, this VAT will already be due and payable. This VAT should then be paid to the Belgian Treasury by the supplier or service provider, regardless of whether the invoices have already been paid.

However, the VAT legislation provides for the possibility of claiming a VAT refund when, among other things, the following situations occur:

  • The contract with the customer has been terminated before the delivery of the goods or the performance of the service has taken place. This is the case, for example, when an advance invoice has been issued by the supplier/service provider, which remained unpaid before any delivery of goods or performance of services has taken place;
  • The agreement is annulled or terminated amicably or by a court decision, in particular due to non-payment of the price by the customers;
  • It is certain that the claim for the price has gone lost, in full or partially, without the agreement being annulled or dissolved. This is the case when the customer is in bankruptcy or judicial reorganisation, but in practice it is also more widely accepted that the loss of the claim is certain when it is registered in the account "Loss and profit" (in this context it is not sufficient that the claim is registered under "Provision for doubtful debts"). The supplier/service provider will also have to prove the loss of the claim by all possible facts or legal means (e.g. e-mail traffic, repeated reminders, etc.).

Important: except in the situation of bankruptcy of your customer, in principle in each of the above cases, as a supplier or service provider, you should issue a credit note to your customer stating the VAT amount that is being reclaimed.

If your customer should nevertheless proceed with the payment at a later time, the VAT due on the amounts received will still have to be paid to the Belgian treasury.

In case of unpaid invoices for the supply of goods or services to private individuals, the situation is slightly different. In principle, you are only obliged to pay the VAT once the private customer has paid the invoice, except in cases where there is an obligation to issue invoices. If you have already paid VAT on sales to private individuals that are cancelled, a refund is possible, but in principle this is linked to an obligation to refund this amount to the private customer.

If you have any questions on this subject, please contact the authors of this article.

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