Unpaid invoices: recovering VAT through insolvency proceedings and fruitless enforcement

Roberto delivered materials to a customer for €5,000 plus €1,100 of VAT. The customer never paid, and in June it was admitted to a composition with creditors. Roberto had already paid that €1,100 over in his VAT settlement. Article 26 lets him recover it with a credit note from the date of the admission decree, without asking the customer for anything.

Non-payment as a ground for adjustment

A supplier under the ordinary regime pays over, in its periodic settlements, the VAT on its transactions, even before the customer pays. If the customer never pays, the supplier has advanced to the State a tax it never collected. Paragraph 3-bis of article 26 offers a way back, but only once specific events occur.

The text says the paragraph 2 adjustment also applies where the customer fails to pay the price, in whole or in part. Missing payment alone is not enough, though: one of the two situations described in letters a) and b) of paragraph 3-bis must arise.

• Letter a): the customer becomes subject to insolvency proceedings
• Letter a): a debt restructuring agreement under article 182-bis of the bankruptcy law is approved by the court
• Letter a): a certified recovery plan under article 67, third paragraph, letter d) is published in the Companies Register
• Letter b): individual enforcement proceedings against the customer have proved fruitless

An unanswered reminder, a payment order not yet enforced, a customer who has disappeared: none of these, on its own, opens the way to a credit note. The supplier has to wait for proceedings to open or for enforcement to fail, and keep the document proving the date.

The text speaks of non-payment "in whole or in part". If the customer paid something on account before the proceedings began, the note covers only the part left unpaid. The tax to recover is then worked out on the unpaid share, not on the full invoice.

Be clear, too, about what the note does not do. It does not cancel the claim against the customer, which is still pursued in the proceedings or the enforcement, and says nothing about income taxes, governed by rules this course does not cover. Paragraph 3-bis gives the supplier back only the VAT advanced and never collected.

From when: the date of the proceedings

Paragraph 10-bis states exactly when a debtor counts as subject to insolvency proceedings. What matters is the date of the act that opens the procedure, not the date the debtor filed its application, nor the date the supplier lodged its claim.

There is also a transitional question. According to the update note published in the Official Gazette, letter a) of paragraph 3-bis and the second sentence of paragraph 5, in their current wording, apply to insolvency proceedings opened on or after 26 May 2021.

Proceedings opened before that date were governed by the earlier wording of the article, which this course has not read and does not describe. Anyone still holding claims against customers in proceedings opened before 26 May 2021 must therefore check separately when and how the note can be issued.

A second update, from Decree-Law 13 of 2023, extends paragraph 3-bis from the moment certain contracts and agreements under article 23 of Legislative Decree 14 of 2019 are published in the Companies Register. For those instruments too, the relevant date is the date of publication.

The date of the act only marks the start. Paragraph 2, which paragraph 3-bis refers to, ties the deduction to entering the note in the purchase register: until the note is issued and recorded, the tax remains advanced. So diary the date of the decree and get the note ready in the days that follow.

The text still uses the word "bankruptcy". The course repeats it as written, without mapping it onto the names procedures have taken in more recent legislation. In a real case, ask the trustee or commissioner to confirm which procedure the customer is subject to and from what date.

Fruitless individual enforcement

Letter b) concerns a creditor that took action alone against the customer, through an attachment, and recovered nothing. To avoid arguments over what "fruitless" means, paragraph 12 lists three situations in which enforcement counts as fruitless in every case.

• Garnishment of third parties: the bailiff's report states that the third party holds no assets or debts to attach
• Attachment of movable goods: the report records that there is nothing to seize, that the debtor's home could not be entered, or that the debtor cannot be found
• After three auctions of the attached asset have drawn no bidders, a decision is taken to stop the enforcement as too costly

In each of the three cases the evidence is a document from the proceedings: the bailiff's report, or the decision to halt enforcement. Keep it with the invoice and the credit note, because it proves that the event required by paragraph 3-bis really happened.

Paragraph 12 lists the cases in which fruitlessness is certain, not the only ones in which it can exist. Outside those three situations, however, the supplier should be able to show through other documents that the enforcement yielded nothing, and taking professional advice becomes the prudent course.

Enforcement has a real cost, and the recoverable VAT is only part of the claim. Before launching an attachment, weigh the sum at stake against the likely legal fees: the credit note recovers the tax, but it does not make up for an enforcement action that costs more than it could ever bring back.

The customer in proceedings does not record the adjustment

The first module showed that a customer receiving a credit note must record the adjustment and put the deducted tax back as owed. Paragraph 5 makes an exception: that obligation does not apply to the insolvency proceedings in letter a) of paragraph 3-bis.

In practice, the tax recovered by the supplier does not come back as a debt of the customer in proceedings. The text gives no reason, and the course does not invent one. The operational point stands: the note is issued, but nobody on the other side has to record it as tax owed.

The exception covers letter a) only. For the fruitless individual enforcement of letter b), paragraph 5 makes no exception: a customer that recorded the purchase and deducted the tax must still record the adjustment, up to the deduction it made.

Paragraph 10 adds that the option in paragraph 2, and so also that in paragraph 3-bis, is available on the same terms to customers liable for the tax under the reverse charge or the other special rules it mentions, with paragraph 5 applying to them. The rule works for whoever accounted for the tax on the transaction.

If payment arrives later

Proceedings can end with a partial payment to creditors, and enforcement can recover something later on. Paragraph 5-bis covers this: if, after the events of paragraph 3-bis, the price is paid in whole or in part, paragraph 1 applies, meaning an upward adjustment.

A supplier that recovered the tax must therefore put it back as owed, for the share matching what it has received. The customer's position mirrors this: if it complied with paragraph 5 by recording the adjustment, it is entitled to deduct the tax matching the upward adjustment.

To find out how much tax a partial recovery contains, take the tax out of the gross figure: the amount received includes both net value and tax, and the net value is the receipt divided by one plus the rate. At the standard rate, €1,220 received holds €1,000 of net value and €220 of tax.

Keeping the adjustment file

A credit note for non-payment takes tax away from the Treasury, so it is naturally among the documents most closely examined in an audit. The supplier should be able to justify it at any time, even years later, with a file that links invoice, event and note without gaps.

• The original invoice and proof that it was recorded
• The act opening the insolvency proceedings, with its date, or the report of the fruitless enforcement
• The electronic credit note, citing the invoice, with the SdI receipt
• Any later dividends or receipts and the upward adjustments they triggered
• For proceedings opened before 26 May 2021, the separate check of which rule applies

The calendar warning applies here as well. The paragraphs cited belong to the consolidated text in force for 2026; with the repeal brought in by the consolidated VAT act from 2027, a non-payment adjustment issued from that year will need mapping to the new numbering before it is recorded.