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EU backs VAT bad debt relief in Hungarian case

  • May 19, 2014 | Richard Asquith

EU backs VAT bad debt relief in Hungarian case

The European Court of Justice (ECJ) has backed the EU VAT basic principle that taxable persons are entitled to a deduction for the VAT element of receivables invoices gone bad.

Hungary denies bad debt VAT relief

The case (Almos Agrárkülkereskedelmi Kft) concerned a Hungarian supplier of rape seed. It incurred a taxable bad debt on one of its customers, and attempted to reclaim through its Hungarian VAT return the output VAT it had lost. The Hungarian tax office refused to, and the case was eventually referred to the ECJ, the highest court for matter concerning EU law.

The ECJ went straight to judgement on this question, meaning it was relatively straightforward question with clear guidance. If found that the EU VAT Directive’s Article 90 supported the company’s claim, and that it was right to make a deduction under the conditions within that article. Furthermore, the ruling underlined the principle that taxable parties could rely upon the condition of the Directive when in contravention with the local tax law of any of the 28 member states.

VP Global Indirect Tax
Richard Asquith
VP Global Indirect Tax Richard Asquith
Richard Asquith is VP Global Indirect Tax at Avalara, helping businesses understand their compliance obligations as they grow globally. He can be contacted at: He is part of the European leadership team which won International Tax Review's 2020 Tax Technology Firm of the Year. Richard trained as an accountant with KPMG in the UK, and went on to work in Hungary, Russia and France with EY.