What happens to input VAT when a customer does not pay - is there 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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If you haven't paid your supplier within 6 months of the invoice, you must repay (reverse) the VAT you'd already claimed back on that purchase - once the supplier writes it off as a bad debt and tells you.

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The detail

Under Article 64(2) of the VAT Decree-Law, a registrant recipient must reduce its recoverable input tax in the current tax period for a supply received in an earlier period where it has not paid the consideration, the supplier has correspondingly reduced its output tax and notified the recipient, and the input tax was originally claimed. The reduction equals the VAT on the amount written off as unpaid. This is the mirror-image obligation to the supplier's bad debt relief under Article 64(1).1

What the law says

A recipient must reduce recoverable input tax where it received the notification from the supplier of a written-off bad debt, had originally deducted the input tax, and has not paid in full or part for over 6 months.1
The GCC Framework Agreement permits Member States to allow tax value adjustment for total or partial non-collection of consideration, subject to each state's bad debt conditions.2

What it depends on

The obligation only arises once the supplier itself has reduced its output tax and formally notified the recipient of the written-off amount.1
Non-payment must exceed 6 months from the date of supply before any adjustment is triggered.1
The reduction is limited to the input tax proportionate to the consideration actually written off, not the full invoice.1

Check before you rely on it

Check whether you have received a written notification from the supplier that they wrote off the debt
Confirm how long the invoice has been outstanding (over 6 months triggers the adjustment)
Check the original input tax claimed on that invoice to calculate the correct reversal amount

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
2Common VAT Agreement of the States of the Gulf Cooperation Council…Article 27GCC Agreement

Article (27)

Read the article
Article (27) Adjustment of Tax Value A Taxable Person may adjust the value of the Tax imposed upon any of the following events taking place at a date later than the Supply date: 1. Total or partial cancellation or rejection of a Supply; 2. Reduction of the Supply value; Page 10 of 26 26 من10 صفحة 3. Total or partial non-collection of the Consideration in accordance with the conditions applicable to bad debts in each Member State.

Official PDF, pp. 10–11Captured from the FTA website on 9 Sep 2026

Helpful?

What the law says:
- A recipient must reduce recoverable input tax where it received the notification from the supplier of a written-off bad debt, had originally deducted the input tax, and has not paid in full or part for over 6 months. [1]
- The GCC Framework Agreement permits Member States to allow tax value adjustment for total or partial non-collection of consideration, subject to each state's bad debt conditions. [2]

What it depends on:
- The obligation only arises once the supplier itself has reduced its output tax and formally notified the recipient of the written-off amount. [1]
- Non-payment must exceed 6 months from the date of supply before any adjustment is triggered. [1]
- The reduction is limited to the input tax proportionate to the consideration actually written off, not the full invoice. [1]

Check before you rely on it:
- Check whether you have received a written notification from the supplier that they wrote off the debt
- Confirm how long the invoice has been outstanding (over 6 months triggers the adjustment)
- Check the original input tax claimed on that invoice to calculate the correct reversal amount

Sources:
1. VAT Law — Article 64
2. Common VAT Agreement of the States of the Gulf Cooperation Council… — Article 27

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 happens to input VAT when a customer does not pay - is there bad debt relief?

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