What are the conditions for VAT bad debt relief?

Answered by TI from the Federal Tax Authority’s own law · 25 September 2026. Guidance, not tax advice: rely on the official text.

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You can claw back the VAT you already paid on an unpaid invoice once it's been written off as a bad debt, more than six months after the invoice date, and after you've told your customer it's been written off.

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The detail

Under Article 64 of Federal Decree-Law No. 8 of 2017, a registrant supplier may reduce Output Tax for a prior supply if four conditions are all met, and the customer must correspondingly reduce its recovered Input Tax. The reduction is limited to the tax attributable to the amount actually written off as a bad debt.1

What the law says

Article 64(1) allows a registrant supplier to reduce Output Tax where the goods/services were supplied and the tax charged and paid, the consideration was written off wholly or partly as a bad debt in the supplier's accounts, more than six months have passed since the supply date, and the supplier has notified the recipient of the amount written off.1
Article 64(2) requires the recipient to correspondingly reduce recoverable Input Tax once the supplier has reduced Output Tax and notified them, provided the recipient had originally deducted the Input Tax and payment remains outstanding for over six months.1
The reduction is capped at the tax proportionate to the consideration actually written off (Article 64(3)).1

What it depends on

All four conditions in Article 64(1) must be met together: tax charged and paid, amount written off as bad debt, more than six months elapsed since supply, and customer notified.1 2
The FTA's guidance confirms the first condition is satisfied where the supplier has charged and accounted for the VAT on the original supply.2 Based on FTA guidance

Check before you rely on it

Confirm the invoice VAT was actually declared and paid to the FTA
Confirm more than six months have passed since the supply date, not just since the invoice due date
Keep evidence that the customer was notified of the write-off

Sources (2) — read the official text

1VAT LawArticle 64Law

Article 64 - Adjustment for Bad Debts

Read the article
Article 64 - Adjustment for Bad Debts 1. A Registrant supplier may reduce the Output Tax in a current Tax Period to adjust the Output Tax paid for any previous Tax Period if all of the following conditions are met: a. Goods and Services have been supplied and the Due Tax has been charged and paid. b. Consideration for the supply has been written off in full or part as a bad debt in the accounts of the supplier. c. More than 6 months has passed from the date of the supply. d. The Registrant supplier has notified the Recipient of Goods and the Recipient of Services of the amount of Consideration for the supply that has been written off. 27 Article amended as per Federal Decree-Law No. 18 of 2022 Federal Decree-Law No. 8 of 2017 and its amendments – As published by the Ministry of Finance 31 2. The Registrant Recipient of Goods or Recipient of Services shall reduce the recoverable Input Tax for the current Tax Period related to a supply received during any previous Tax Period where the Consideration has not been paid and all of the following conditions are met: a. The registered supplier reduced the Output Tax as stated in Clause 1 of this Article and the Recipient of Goods and the Recipient of Services has received a notification from the supplier of the Consideration being written off. b. The Recipient of Goods and Recipient of Services received the Goods and Services and the Input Tax charged in respect thereof was deducted. c. The Consideration was not paid in full or in part for the supply for over 6 months. 3. The reduction stated in Clause 1 and 2 of this Article shall be equal to the Tax related to the Consideration which has been written off according to Paragraph (b) of Clause 1 of this Article. Chapter Five – Tax Invoices

Official PDF, pp. 31–32Captured from the FTA website on 9 Sep 2026Found by following a reference in another source
2Adjustment on Account of Bad Debt ReliefFTA guidance

Read the article
If that invoice is not paid and a bad debt situation ،ًوفي حال لم يتمّ سداد تلك الفاتورة وتم اعتبارها دينا ً معدوما occurs, the VAT accounted for by the supplier is فمن المتوقع أن تصبح الضريبة المحتسبة عنها من قبل likely to become a real cost to the business. The ولذلك فإن نظام خصم.المورّ د تكلفة حقيقة على األعمال Bad Debt relief scheme seeks to provide a relief to الديون المعدومة يهدف إلى التخفيف عن المورّ د في مثل هذه the supplier in such instances by permitting an الحاالت من خالل السماح له بتسوية ضريبة القيمة المضافة adjustment of the VAT charged but not paid by the .المحتسبة غير المدفوعة من قبل العميل customer. In order to benefit from the Bad Debt relief فإنه يستوجب،ولالستفادة من نظام خصم الديون المعدومة :استيفاء الشروط األربعة التالية scheme, the following four conditions must be met: a. The goods and services should have been تم توريد السلع والخدمات واحتساب ضريبة القيمة .أ .المضافة المستحقة على التوريد وسدادها supplied and VAT on the supply should have been charged and accounted for; b. The consideration for the supply should have تمّ شطب مقابل التوريد كليا ً أو جزئيا ً في حسابات.ب .ًالمورّ د باعتباره دينا ً معدوما been written off in full or in part as a bad debt in the accounts of the supplier; c. More than six months should have passed from .) ستة أشهر من تاريخ التوريد6( انقضاء أكثر من.ج the date of the supply; d. The supplier should have notified the customer . قام المورّ د بإبالغ العميل بمقابل التوريد الذي تم شطبه.د of the amount of consideration for the supply that has been written off. VAT should have been accounted for and paid on احتساب ضريبة القيمة المضافة المستحقة على التوريد وسدادها the supply The first condition requires that the VAT on the يقتضي الشرط األول أن يكون قد تمّ احتساب ضريبة القيمة supply must have been charged and paid by the .المضافة المستحقة على التوريد وسدادها من قبل المورّ د supplier. The FTA considers that this condition will وترى الهيئة أن هذا الشرط سيكون مُ ستوفى إذا قام المورّ د be satisfied where the supplier has charged VAT on Page 2 of 7

Official PDF, p. 2Captured from the FTA website on 9 Sep 2026

Helpful?

What the law says:
- Article 64(1) allows a registrant supplier to reduce Output Tax where the goods/services were supplied and the tax charged and paid, the consideration was written off wholly or partly as a bad debt in the supplier's accounts, more than six months have passed since the supply date, and the supplier has notified the recipient of the amount written off. [1]
- Article 64(2) requires the recipient to correspondingly reduce recoverable Input Tax once the supplier has reduced Output Tax and notified them, provided the recipient had originally deducted the Input Tax and payment remains outstanding for over six months. [1]
- The reduction is capped at the tax proportionate to the consideration actually written off (Article 64(3)). [1]

What it depends on:
- All four conditions in Article 64(1) must be met together: tax charged and paid, amount written off as bad debt, more than six months elapsed since supply, and customer notified. [1, 2]
- The FTA's guidance confirms the first condition is satisfied where the supplier has charged and accounted for the VAT on the original supply. [2]

Check before you rely on it:
- Confirm the invoice VAT was actually declared and paid to the FTA
- Confirm more than six months have passed since the supply date, not just since the invoice due date
- Keep evidence that the customer was notified of the write-off

Sources:
1. VAT Law — Article 64
2. Adjustment on Account of Bad Debt Relief — p. 2

Written by AI from the FTA sources above and checked before display. Not tax advice or official FTA information - confirm with a tax adviser before you act. Full disclaimer

What are the conditions for VAT bad debt relief?

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