26 July 2026 · Conditions
The Four Conditions to Claim
To claim VAT bad debt relief under Article 64, a supplier must satisfy all four conditions together, not just one or two. First, the goods or services were supplied and the output VAT was accounted for and paid to the FTA in a filed return. Second, the consideration has been written off, in full or in part, as a bad debt in the supplier's accounts. Third, more than six months have passed since the date of supply — not the invoice date, the payment due date or the financial year-end. Fourth, the supplier has notified the customer of the exact amount written off. Missing even one condition means the claim fails, and the FTA can reject or later claw back a claim made before all four were met.
Exiloz Management & Tax Consultant · Dubai-based FTA-focused advisory · VAT, corporate tax & accounting
Supply and write-off
The first two conditions are about getting your own accounting right before you can even consider a claim. The output VAT on the original supply must have been properly accounted for and paid — meaning the invoice was reported in a VAT return that was actually filed, not just raised internally. Then the unpaid consideration must be written off as a bad debt in the accounts, reflecting a genuine business judgement that the amount will not be recovered, rather than a routine ageing adjustment. Both a full write-off, where nothing at all was paid, and a partial write-off, where the customer paid something but not the whole invoice, satisfy this condition on the unpaid portion.
- Output VAT accounted for and paid to the FTA.
- Invoice reported in a return that was actually filed.
- Debt written off in the accounts, not just aged in a report.
- Full write-off applies where nothing at all was paid.
- Partial write-off applies to the unpaid balance only.
- The write-off should reflect a genuine, documented decision.
Time and notice
The final two conditions are about timing and communication. More than six months must have passed since the date of supply on the original invoice — this clock is fixed by law and cannot be shortened by agreement or hardship. Once that period has run and the debt has been written off, the supplier must notify the customer of the exact amount written off; this is not a courtesy but a hard legal condition, because it is what triggers the customer's own obligation to reverse any input VAT it had recovered. Notification should be in writing and dated, so there is a clear record of when the customer was told and what amount was involved.
- More than six months since the date of supply, not the invoice or due date.
- The six-month clock cannot be shortened by agreement.
- Notify the customer of the exact amount written off.
- Notification should be written and dated for evidence.
- Notification triggers the customer's input tax reversal.
- All four conditions must be met in the same claim period.
Do the conditions have to happen in sequence?
The four conditions do not have to occur in a fixed chronological order relative to each other, but the claim can only be made once all four exist simultaneously. A business might write off a debt at month four but still have to wait until month seven to claim, because the six-month test has not yet run its course. Equally, a business might pass the six-month mark long before it gets around to formally writing off the debt in its accounts, in which case the claim waits on the accounting entry, not the calendar. The earliest period in which a claim can be made is always the period in which the last of the four conditions falls into place.
- Conditions can arise in any order, but all must exist together.
- Writing off early does not shorten the six-month wait.
- Passing six months early does not replace the write-off requirement.
- The claim period is set by whichever condition is met last.
- Track each condition separately so the trigger date is clear.
What happens if a condition is not really met
Claiming relief before all four conditions are genuinely satisfied is a common and avoidable error, and it exposes the business to more than just a rejected claim. If the FTA reviews the position and finds a condition was not actually met at the time — for example, the debt had not yet been formally written off in the accounts, or notification to the customer cannot be evidenced — the claimed VAT can be clawed back, potentially with penalties for an incorrect return. Because the four conditions interact, businesses should treat bad debt relief as a checklist to work through and document at the time of the claim, not a box to tick from memory months or years later.
- A premature claim can be clawed back on review.
- Penalties can apply on top of the reversed VAT.
- Undocumented notification is hard to defend if challenged.
- Treat the four conditions as a checklist, evidenced at claim time.
Related guides
Frequently Asked Questions
Common questions on checking whether an unpaid invoice actually qualifies.
How many conditions are there?
Four, and all must be met together: the output VAT was accounted for and paid, the debt was written off in the accounts, more than six months have passed since the date of supply, and the customer has been notified of the amount written off.
Does a partial write-off count?
Yes. The consideration can be written off in full, where the customer paid nothing, or in part, where the customer paid some of the invoice but not all of it — the relief applies to whichever portion remains genuinely unpaid and written off.
What starts the six months?
The date of supply shown on the original invoice, not the invoice issue date if different, not the agreed payment due date, and not your financial year-end. Getting this start date wrong is one of the most common reasons a claim is made in the wrong period.
Can I claim before six months?
No. More than six months must have passed since the date of supply — there is no exception for a debt you are confident will never be paid; the time condition applies regardless of how certain the non-payment looks.
What if I never formally write off the debt?
Then the claim cannot proceed, no matter how long the invoice has been outstanding. The write-off must be an actual accounting entry reflecting a decision that the amount is irrecoverable, not simply an aged, unpaid line on a debtors report.
Do I need proof I notified the customer?
Yes, in practice. Keep a dated written notice — an email, letter or formal notification — recording the amount written off, so you can demonstrate the condition was met if the FTA reviews the claim.
Can Exiloz verify the conditions?
Yes. We check each of the four conditions against your records before you claim, confirm the correct claim period, and help you assemble the notification and write-off evidence the FTA expects to see.
Do you meet all four?
Exiloz checks your unpaid invoices against all four Article 64 conditions before you claim, so the relief holds up if the FTA ever reviews it.