The lives of many companies are bitter with bad debts. In some cases, this can be fatal. And it is not enough that the legitimate income has never been received, but even the VAT on it had to be paid. There is now a significant turnaround in this subject.
First time ever, the Curia of Hungary (Supreme Court)
made decisions in the topic of the refund of VAT on bad debts - in
favour of taxpayers. These resolutions can help companies to reclaim the VAT never collected.
New rules came into
force in 2020 regrading the refund of VAT on irrecoverable receivables, after several special cases before the European Court and also in the Hungarian courts. The tax authority (NAV) rejected to refund this VAT with various reasons, such as time-barred refunds, infringing the principle of the proper exercise of the right, responsibility of the taxpayer to sell to bad debtors, lack of due care etc.
The decisions of the Curia defended the companies and did not accept the opinion of NAV. The Curia says that the refund of irrecoverable VAT in not against the proper exercise of the right, and the taxpayers do not get any tax advantage on these reclaims.
However, every case is different, and you should discuss this issue with professionals. We are in contact with several legal offices who can help you in the reclaim of this VAT. For further information, please contact us