Can I Reclaim VAT on an Invoice My Client Never Paid?
Last updated:
Yes. UAE VAT is accounted for when you issue the invoice, not when you get paid — so if the money never arrives, you have paid VAT out of your own pocket on income you never received.
Bad debt relief gets that VAT back. It has four conditions and no shortcuts.
This is general guidance, not tax advice. For your situation, check the UAE Federal Tax Authority (FTA) or a qualified tax advisor.
Quick answers
The four conditions
You charged the VAT and accounted for it. The invoice was issued correctly and the VAT was declared and paid to the authority in the right period. Relief is a recovery of tax you actually handed over.
You have written the debt off in your accounts. Not "given up on it" — written off, as a bad debt, in your books. If you write off only part, you recover only that part.
More than six months have passed since the date of supply. Not since the due date. Not since the last chasing email. The date of supply, which for most invoices is the invoice date.
You have notified the customer. In writing, stating the amount you have written off.
All four. Missing one and the adjustment is not available.
Six months from supply, not from the due date
This is the condition people get wrong, and it costs a quarter.
An invoice issued in January with 60-day payment terms is not eligible in September because it went unpaid for six months after it fell due. It became eligible in July, six months after the supply.
The clock is longer than people assume in one direction and shorter in the other. Check the supply date rather than the ageing report.
And you must wait the six months even when there is no doubt at all — a client that has closed, disappeared or refused outright does not shorten the period.
It is not a credit note
This trips up businesses that know the credit note mechanism well.
A credit note reduces a supply that genuinely shrank — a return, a discount, a cancellation, a billing error. Bad debt relief covers a supply that happened exactly as invoiced and simply was not paid for.
Issuing a credit note for an unpaid invoice records a reduction that did not occur. The supply was made, the customer owes for it, and the debt is still theirs. Use the adjustment, not the note.
Only the VAT, and only to the extent written off
The relief recovers the VAT amount, not the value of the supply. The unpaid revenue is a commercial loss and stays one.
And it scales with the write-off. On an invoice of AED 105, being AED 100 plus AED 5 of VAT, writing off the whole amount recovers the AED 5. Recovering half the debt and writing off AED 52.50 recovers AED 2.50.
Notifying the customer has consequences for them
The notification is not a formality, and it does something on their side: a VAT-registered customer who receives it must reverse the input VAT they already claimed on that invoice.
There is no prescribed format. A letter or an email is accepted, and it should state the tax invoice number, the invoice date and the amount written off. You do not need them to acknowledge it — but you do need to be able to show you sent it, so keep the evidence with the rest of the file.
How the adjustment is made
Through the VAT return rather than by application. The adjustment goes in the adjustments column of the standard-rated supplies section, split by emirate the same way the supplies were.
Keep with it: the original invoice, proof the VAT was declared and paid, evidence of your attempts to collect, a copy of the notification, and the accounting entry writing the debt off.
What to do in the six months
The period exists on the assumption that you are trying to collect, and the evidence of trying is part of what supports the claim later.
Send reminders and keep them. Escalate in writing rather than by phone, or follow the phone call with an email. None of this is bureaucracy for its own sake — a file that shows six months of genuine effort is what distinguishes a bad debt from a debt you never chased.
Where Fatura Go fits
Fatura Go tracks which invoices are paid, which are outstanding and how long they have been outstanding, and it can send payment reminders on a schedule so chasing does not depend on you remembering.
What it does not do is make the adjustment. Writing the debt off is an accounting entry in your books, and the relief is claimed on your return.
Frequently asked questions
Can I get VAT back on an invoice a client never paid in the UAE?
Yes, through bad debt relief, provided you accounted for the VAT, wrote the debt off in your accounts, waited more than six months from the date of supply, and notified the customer of the amount written off.
When does the six months start?
From the date of supply, which for most invoices is the invoice date — not from the payment due date and not from when you gave up chasing.
Can I claim earlier if the client has clearly gone?
No. The six-month period applies even when recovery is obviously hopeless.
Should I issue a credit note instead?
No. A credit note reduces a supply that actually shrank. An unpaid invoice is a supply that happened and was not paid for, which is what bad debt relief is for.
How much can I recover?
The VAT amount, and only to the extent you wrote the debt off. A partial write-off gives partial relief. The unpaid revenue itself is not recoverable.
How do I notify the customer?
In writing, by letter or email, stating the tax invoice number and date and the amount written off. No acknowledgement is needed, but keep proof that you sent it.
What does my customer have to do?
A VAT-registered customer who receives the notification must reverse the input VAT they previously claimed on that invoice.