BAD DEBTS RELIEF
The Cyprus Tax Authorities, acknowledging the decision of the European Court of Justice (ECJ) C-127/18, A-PACK CZ s.r.o, released on the 13th of June 2019 Circular 234, replacing Circular 204, providing further guidance on VAT recovery on bad debts.
The three significant points added in Circular 234 compared to Circular 204, are the following:
As per the provisions of Circular 204, a taxable person could claim bad debt relief, only if the customer was as at the time of the claim registered with the VAT authorities. As per the ECJ Decision on the case C-127/18 A-PACK CZ s.r.o however, such condition was against article 90 of the EU VAT Directive.
Therefore, Circular 234 states that a taxable person can claim bad debt relief, even if the customer does not possess an active VAT number at the time of the claim.
Under the new circular, the taxable person, except from the obligation to notify the customer that bad debt relief is being claimed within 7 days of the bad debt claim, he also has the obligation to notify the Commissioner of Taxation of this action, disclosing also the VAT registration number of the customer.
It is also clarified in Circular 234 that bad debt relief can be granted to the taxable person irrespective of the percentage of recoverability of Input VAT of the customer.
The alignment of the practice to be followed by the Cyprus VAT Authorities with the EU Case Law, extents the possibilities of businesses to recover VAT, in cases that it was not possible before.
How Kinanis LLC can assist:
Our professional VAT team, amongst others, can advise you on Bad debt Relief matters.
More explicitly our team can:
Consider the specific facts of your case, in order to examine the possibility of VAT recovery;
Prepare the relevant supporting documentation for the claim for bad debt recovery;
Liaise with the VAT authorities on any relevant matters that may arise.
Associate – Accounting & VAT Department
This publication has been prepared as a general guide and for information purposes only. It is not a substitution for professional advice. One must not rely on it without receiving independent advice based on the particular facts of his/her own case. No responsibility can be accepted by the authors or the publishers for any loss occasioned by acting or refraining from acting on the basis of this publication.
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We consider ourselves as ‘traditional pioneers’ and our motto is to foresee and anticipate any issues that may potentially impact our clients’ business and to offer effective advice and solutions proactively.
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refers to the service mark through which Kinanis LLC of Cyprus, Kinanis Fiduciaries Limited of Malta and their affiliated
companies are conducting business, each of which is a separate legal entity.