UAE VAT Bad Debt Relief 2026: Reclaim VAT on Unpaid Invoices

• 26 July, 2026
• By Safvan, Managing Partner
• Tax Compliance

The VAT you can get back on invoices no one paid

Under Article 64 of Federal Decree-Law No. 8 of 2017, a VAT-registered supplier can recover VAT it already paid to the FTA on an invoice the customer never paid. All four conditions must be met: the goods or services were supplied and output VAT accounted for and paid; the amount has been written off as a bad debt in the supplier’s accounts; more than 6 months have passed since the date of supply; and the supplier has notified the customer of the amount written off. The customer must then reduce its own recoverable input tax.

Every Dubai SME has that one invoice the customer never paid. Paying VAT on money you never received stings twice. UAE VAT law lets you claim that VAT back, but only if you tick every box. Here is exactly how.

The four conditions

The conditions at a glance

How to claim it

You reclaim the VAT by making an adjustment in the “Adjustments” column of Box 1 of your VAT return, the VAT amount only, not the net value. Keep evidence of the write-off, the age of the debt, and the notification to the customer, in case the FTA reviews the claim. In practice, the claims that come unstuck are almost never wrong on the maths. They are missing the notification to the customer, or the write-off in the ledger.

The customer's side

Bad debt relief is symmetrical. When you notify the customer, that customer (if it had recovered input VAT on your invoice) must reduce its recoverable input tax by the same amount. That is why the notification condition matters: it triggers the customer’s obligation to reverse the input VAT it never actually paid you for.

A worked example in AED

Say your Dubai agency invoiced a client AED 210,000 on 10 January: AED 200,000 for the work plus AED 10,000 of VAT at 5%. You reported the invoice in that period’s return and paid the AED 10,000 to the FTA. The client paid AED 105,000 in March, then went quiet. By September the chasing has failed, so you write off the remaining AED 105,000 in your accounts, AED 100,000 net plus AED 5,000 VAT. More than 6 months have passed since the January supply, so you send the client written notice of the amount written off and claim AED 5,000, the VAT element only, as a negative adjustment in Box 1 of your next return.

Two details matter here. The claim is only the VAT share of the amount actually written off, not the net value, and not the VAT on the whole invoice, because the client did pay half. And the earliest period you can claim is the one in which all four conditions are finally met. In this example, that is the period of the write-off and notification, since the 6 months had already run.

When the 6 months start, and why it matters

The clock runs from the date of supply, not from the invoice date, the payment due date or your financial year-end. A supply made in January with 60-day payment terms still becomes eligible in July, not September. Getting the start date wrong in either direction causes problems: claim too early and the condition simply is not met; assume the clock starts later than it does and you leave recoverable VAT sitting with the FTA for months longer than necessary.

How to reclaim cleanly

1. Confirm you paid the output VAT: the invoice must have been in a filed return.
2. Write off the debt: record the bad debt in your accounts.
3. Wait the 6 months: from the date of supply.
4. Notify the customer: in writing, of the amount written off.
5. Adjust Box 1: claim the VAT amount and keep the evidence.

Common mistakes

The legal basis

Bad-debt relief is Article 64 of Federal Decree-Law No. 8 of 2017, applied through FTA Public Clarification VATP024: output tax accounted for and paid, the consideration written off in the accounts, more than six months passed since the date of supply, and the customer notified. The supplier adjusts in Box 1 of the return; the recipient reduces its input tax correspondingly. If unpaid invoices are stacking up, our VAT return filing team builds the relief claim into the next return and our bookkeepers document the write-off trail the FTA expects.

Frequently Asked Questions