Bankruptcy client. How do we proceed to correctly adjust the invoices?

When one of the clients goes bankrupt, the Administrator of the company must adjust certain fiscal activities

For a more precise clarification, we analyze what is the correct procedure for adjusting the invoices not collected from the point of view of the VAT and the profit tax, but also when the respective adjustment can be made.

Clients who went bankrupt

According to art. 287 letter d) from the Tax Code, the VAT tax base is reduced if the value of the goods delivered or the services provided cannot be collected as a result of the beneficiary’s bankruptcy or as a result of the implementation of an approved reorganization plan and confirmed by a Court decision, by which the creditor’s debt is modified or eliminated.

The adjustment is allowed starting with the date of the court decision confirming the reorganization plan, and, in the case of the beneficiary’s bankruptcy, starting with the date of the sentence or, as the case may be, the conclusion, by which the bankruptcy has been decided, according to the insolvency legislation.
 
The adjustment is made within 5 years from January 1 of the year following the one in which the Court decision confirming the reorganization plan, respectively the one in which it was decided, by sentence or, as the case may be, by entry bankrupt.

The adjustment is allowed even if the necessity of the subsequent verification has been dismissed, according to the Fiscal Procedure Code.

By making the adjustment, the necessity of the subsequent verification is renewed for the fiscal period in which the enforceability of the value-added tax for the operation subject to the adjustment took place. In case, after adjusting the tax base, amounts related to the respective receivables are collected, the adjustment made, corresponding to the amounts received, will be canceled, by the statement of the fiscal period in which they are collected.

According to art. 330 paragraph (2) of the Fiscal Code, in the situations provided in art. 287 suppliers of goods and/or service providers must issue invoices, with the values registered with the minus sign or, as the case may be, a statement stating that the respective values are negative when the tax base is reduced or, as the case may be, without the sign minus or without the mention that the respective values are negative, if the tax base is increased, which is transmitted to the beneficiary, except for the situation provided to art. 287 letter d).

Based on this provision, the adjustment invoice is not transmitted to the beneficiary. Not having an operation related to the delivery of the goods, you will not declare the invoice on form 394 (nor does the customer declare it because they should not have received the respective invoice).

From the point of view of the profit tax, the provisions of art. h) of the Fiscal Code that has not undergone modifications. The removal of the rest of the debt (value without VAT) will be made at the moment when there is the certainty that it will not be able to be collected (at the date of pronouncing the definitive and irrevocable court decision to close the procedure provided by the insolvency legislation).

The conclusion is that on the date of bankruptcy (within 5 years from January 1 of the following year), you must adjust VAT by issuing an invoice according to Art. 330 paragraph (2) of the Fiscal Code, but you cannot remove the debt (value without VAT) because you are still trying to recover the respective amounts.