VAT Consulting AG

Theaterstrasse 18

CH-4051 Basel
Phone: +41 (0) 61 225 90 50
Fax: +41 (0) 61 225 90 51

5 Bad debt relief

In case of a correction of the consideration paid or agreed by the customer of the supply, the VAT due has to be adjusted at the time when the correction is booked or the corrected consideration is collected (Art. 41 para. 1 VAT Law).


Till date no code of practice has been published by the FTA as regards the mentioned provision, especially as to how the bad debt rule is to be applied. However, in the former “Instructions 2008 as regards VAT” applicable before the new VAT Law came into force, the FTA defined that in case of a loss the consideration can be corrected in the VAT return, only at the time when the supplier qualifies the outstanding debts as bad debts and, therefore, cancels the outstanding debts definitely from the books (Instructions 2008 Z 252). It is not necessary that the supplier received an official notice of loss.


No correction can be done in case the supplier books an allowance for bad debts (i.e. a delcredere risk), but the outstanding debt is still in the books.


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