If an invoice is not paid and a bad debt arises in a subsequent tax period, then potentially the business will either have to absorb that VAT/GST as a real cost, or alternatively, they will be entitled to ‘write back’ the VAT/GST previously accounted for.
KPMG prepared an overview of the rules regarding the indirect tax treatment of cancellations, ‘no shows’ and bad debts in various countries, providing insight in how businesses can obtain VAT cash flow opportunities, avoid VAT leakages, etc.
Source KPMG
