Reclaiming VAT on Bad Debt When a Customer Never Pays

Reclaiming VAT on bad debt works like this: you do not issue a credit note, and you do not reopen the old return. You keep the original invoice alive as a legal claim, wait until the loss is established rather than merely feared, then reduce your taxable base and output VAT in the return for that period. In Sweden that is the difference between a befarad kundförlust (feared loss, an accounting entry only, no VAT back) and a konstaterad kundförlust (established loss, VAT comes back). On a 62 500 kr invoice — 50 000 kr of work plus 12 500 kr of moms — that distinction is worth 12 500 kr you already handed the state for money you never received.

Why you are out of pocket in the first place

On the invoice method (faktureringsmetoden), the moms falls due when you issue the invoice, not when the customer pays. You invoice 62 500 kr in March, hand 12 500 kr to Skatteverket for the March period, and then the customer goes quiet. You have financed a stranger's tax payment. That is why relief exists: VAT taxes consideration actually received, so if it never arrives, the base was too high. The rule sits in mervärdesskattelagen (2023:200); Skatteverket's kundförlust guidance fills in what counts.

Befarad vs konstaterad kundförlust: the only distinction that matters

Most trades firms lose money here because they treat these as two words for the same thing.

A befarad loss is a prudence adjustment so your balance sheet does not carry a receivable you do not believe in. It is not a VAT event. A konstaterad loss is a factual finding, and only that triggers the VAT correction.

What evidence Skatteverket actually expects

There is no form to fill in and nothing to send. You correct the figures and keep the file — assume you hand it over three years later remembering nothing. Evidence Skatteverket accepts as establishing a loss includes:

• Bankruptcy (konkurs). The strongest evidence. Keep the trustee's bevakningsbrev and any utdelningsförslag. If the trustee states there is no dividend for unsecured claims, the loss is established the moment you have that in writing — you need not wait for the estate to close.
• Kronofogden found nothing. An enforcement attempt returned with tillgångar saknas is a state authority's written finding that the debtor cannot pay.
• Restructuring or composition. A confirmed skuldsanering or ackord establishes the loss on the written-down portion. Get 25 öre on the krona and 75% is konstaterad, 25% is not.
• The company no longer exists. Liquidated and deregistered from Bolagsverket, nothing left to claim against.
• Small claims after documented chasing. Skatteverket's guidance accepts that a small, undisputed receivable can count as established once it is well past due — roughly eight months — and you have sent a reminder and a formal collection demand, where chasing further would cost more than the debt. The threshold has been revised, so read the current ställningstagande on skatteverket.se rather than a number in a blog post, including this one.

What is not evidence: the customer ignoring you, promising to pay next month, a dead phone number, or the invoice simply being old. Silence is not insolvency. And one condition sits above all of these — the debt must be undisputed. If they refuse to pay because they say the work was wrong or the price was never agreed, that is a dispute, not a bad debt, and it has a different route entirely.

Reclaiming VAT on bad debt: why you never issue a credit note

This is the most common and most expensive mistake. Someone tells you to just credit it and let the moms sort itself out. It does not.

• It says the sale changed. A credit note is a price reduction — a statement that the customer owes less. A bad debt is the opposite: they still owe every krona and you keep the right to chase, sell or claim on the debt.
• It can destroy your claim. Hand a bankruptcy trustee a credit note for the invoice you are claiming on and see how that goes. You have documented that the customer owes you nothing.
• It misstates your revenue. The sale happened. Crediting it out pretends otherwise and distorts turnover and margins.

The invoice stays. The receivable stays. The loss is what you book.

Correcting the VAT: current period, not a reopened return

You do not amend the March return. It was correct when filed — the debt was live then. The loss is a new event with its own date, so it belongs in the period it became established. In that period's momsdeklaration:

• Reduce the taxable sales figure (box 05 for standard-rated sales) by the net — 50 000 kr here.
• Reduce the output VAT (box 10 for 25%) by 12 500 kr.
• If that period's sales are smaller than the write-off, the boxes can go negative. That is expected. Your software may fight you; the return will not.

Then the part people forget. If the money later turns up, the VAT goes back. A dividend from an estate two years on, a debt collector's late win — you raise the taxable base and output VAT again in the period you receive it, in proportion to what arrived. Relief is not a one-way door.

Booking the write-off: enskild firma vs aktiebolag

The VAT rule is identical in both. Moms does not care about legal form. What differs is your accounting method and what the loss is worth in income tax.

In an aktiebolag (on the invoice method)

Using standard BAS accounts, at year-end when the loss is only feared:

• Debit 6352 Befarade förluster på kundfordringar 50 000
• Credit 1519 Nedskrivning av kundfordringar 50 000

The moms is untouched, and you provide for the net, not the gross — the VAT portion was never your income. When the loss becomes established, reverse that provision and book the real thing:

• Debit 6351 Konstaterade förluster på kundfordringar 50 000
• Debit 2611 Utgående moms 25% 12 500
• Credit 1510 Kundfordringar 62 500

The receivable leaves the balance sheet, the VAT liability comes down, the loss lands in the profit and loss. At 20.6% corporation tax, a 50 000 kr net loss is worth 10 300 kr in relief on top of the 12 500 kr of moms. So the unpaid 62 500 kr invoice costs you roughly 39 700 kr, not 62 500 kr. That is the number to give your bank.

In an enskild firma

The trap is the accounting method. Smaller businesses — broadly those under 3 million kr in net turnover — may use the cash method (kontantmetoden / bokslutsmetoden), reporting VAT when the invoice is paid rather than when it is issued.

If you are on the cash method and the customer never pays, there is nothing to reclaim. You never reported the output VAT, so you never handed it over. No correction, no 6351 against 2611, no relief — you were never out of pocket on the moms. What you lost is materials and hours, already deducted as costs when you paid for them.

Two caveats. Even on the cash method, unpaid invoices outstanding at the balance-sheet date generally have to be brought in at year-end once they pass a modest threshold; if one dies afterwards, the establish-then-correct logic applies to it. And the loss cuts your business surplus, and with it both egenavgifter and marginal income tax — often worth more than the 20.6% an AB gets, but far more variable.

The ROT complication

If the invoice carried a ROT deduction — Sweden's scheme where the state pays 30% of the labour cost straight to the contractor — an unpaid customer bites twice. The homeowner's share must be paid before you can request the state's share. If they never pay, you cannot request it at all; and if you already received it and their share never arrives, Skatteverket can require it back. Check the current husarbete rules on skatteverket.se.

Outside Sweden: the same shape, different labels

The structure above is yours too — only the names change. In the UK it is VAT bad debt relief: the debt generally has to be six months past due and written off in your VAT bad-debt account, you claim it on the return rather than credit-noting the customer, and you repay it if you are later paid (HMRC Notice 700/18). In New Zealand and Australia it is a GST bad-debt adjustment on the invoice basis: write the debt off, claim the adjustment in that period's return, reverse it if money comes in. Everywhere, the same two principles: evidence before relief, and no fake credit note.

A workflow that survives an audit

The whole thing is a filing discipline. Do this and the tax treatment writes itself:

1. Chase in writing, always. Reminder, then a formal collection demand. Phone calls you did not log did not happen.
2. Never let it get disputed by accident. A job with a signed quote and signed ÄTA variations is a debt. A job with a handshake is an argument.
3. Age the ledger monthly, flag befarad at year-end on the net without touching the moms, then wait for the document that establishes the loss. Save it as a PDF against the invoice, not in your inbox.
4. Correct the VAT in that period's return, book 6351 and 2611 against 1510, and add a one-line memo naming the triggering document and its date — plus a note that if cash ever arrives, the VAT goes back.

Step 2 is where the money actually is. Most bad debts in the trades are not insolvencies — they are disputes that could have been won on paper and were not. OdinTask keeps the quote, the e-signature and audit trail, the ÄTA approvals, the egenkontroll protocol and the invoice on one job, so when a customer goes quiet the evidence is already assembled rather than scattered across a phone and someone's email.

You cannot make a bankrupt homeowner solvent. You can make sure that when one goes under you get the 12 500 kr back instead of donating it.