Adjustment of VAT base for insolvency clients

Under current legislation, a company that holds a claim from an insolvent client must adjust the tax base of the VAT on that claim, which may be the amount of an invoice or cumulative invoice issued but not cashed.

The adjustment of the tax base of the VAT is made according to the provisions of art. 287 lit. d) of the Fiscal Code.

“The taxable amount shall be reduced in the following situations: … .d) if the value of the delivered goods or the services rendered can not be collected as a result of … the implementation of a reorganization plan admitted and confirmed by the following: a court sentence, whereby the creditor’s claim is changed or removed. Adjustment is allowed from the date of the court decision confirming the reorganization plan, … „

The adjustment provided for in Art. 287 lit. d) of the Fiscal Code shall be made within 5 years from 1 January of the year following that in which the Court decision confirming the reorganization plan was pronounced, namely the court decision to close the insolvency proceedings under the sanction of the decay.

The adjustment is permitted even if the subsequent verification reserve has been canceled, in accordance with the Fiscal Procedure Code.

In the case of persons applying the VAT system at collection, the non-taxable duty related to deliveries of goods / services performed. ”

To adjust the tax base for VAT, a correction invoice (cancellation) of the invoice issued initially is issued. As a cancellation invoice, the invoice is issued with the minus sign, applying the same VAT rate as the original invoice was issued.

If the amount of the total claim is made up of several invoices, a cancellation invoice is issued for each invoice originally issued, without issuing a global invoice for the total amount of the claim. It is advisable to include in each invoice issued with the minus sign information on: VAT rate; no. and date of the original invoice. Therefore, the supporting document underlying the accounting records is the invoice, issued on the basis of the court decision establishing the reorganization plan.

Thus, the adjustment is made in the period in which the respective sentence was issued, the tax is exigible at the time of any event, and the tax regime, the applicable rates and the foreign exchange rate are the same as the basic operation that generated these events. “

Thus, the negative adjustment of the tax base is made by issuing bills with the minus sign, respecting the same tax regime and applying the VAT rate in force at the date of the initial invoice, for example 24 or 20%.

The value of the bills issued, with the minus sign, is distinguished in the sales journal prepared for the month in which the adjustment invoice is issued (for example, February 2019) and is reported, both through VAT return code 300 for February 2019, in the 16th row , called “Regularization of the collected tax”, and by the informative declaration code 394, in the C-card allocated to the taxable persons registered for VAT purposes, with a valid VAT code.

A copy of the adjustment invoice is also sent to the client undergoing reorganization, even if that customer is not required to adjust the deductable amount of VAT, regulated by the rules of the Fiscal Code.