Bad debt
A bad debt loss arises when a customer receivable is finally irrecoverable; it has to be written off through the income statement, and the VAT remitted on it can be corrected in the return.
Definition
Timing is the hard question. A loss has not arisen simply because a customer does not pay, but when irrecoverability is established — for instance with a certificate of unsatisfied claim from debt enforcement or the closure of a bankruptcy. Before that the correct answer is a value adjustment, not a write-off.
Whoever does not correct the VAT pays tax on turnover never received. That correction is tied to evidence — another reason to document the enforcement route.
Where to read it
What the software must be able to do
Check whether the software knows a write-off with tax correction, whether the loss stays attached to the customer — for future credit assessment — and whether value adjustments are kept separate from final losses.
Checked Aug 2026
More terms under Invoicing, payment and banking: Advance payment Allowance for doubtful debts camt.053 Cancellation invoice Cash discount Certificate of shortfall Credit note Creditor Current account Debt enforcement Debtor Default interest Delivery note Dunning eBill Final invoice IBAN Invoice number ISO 20022 / camt Open items pain.001 Part payment Payment term Pro forma invoice QR reference QR-bill QR-IBAN Quotation Receipt Tips TWINT as a payment method Visitor taxes