Doubtful debts: the new challenge for Accountants
Posted: Thu Dec 26, 2024 4:55 am
Companies are required to issue invoices using certified invoicing software, pay Value Added Tax (VAT), make accounting records corresponding to their turnover and pay the tax to the State. This dynamic occurs regardless of whether their customers receive it. For some, it is the VAT mechanism at work, for others, it is simply the State receiving payment ahead of time!
But what if the invoices are not actually received or take too long to be received? What can the company do about the VAT amount that was delivered but was not actually paid by the customer?
The Portuguese legislator has included a legal framework within the VAT code kuwait whatsapp number database defines the rules for the regularization of the VAT amount for doubtful or uncollectible debts. This is not a new topic! In fact, in recent years it has been in the news a lot, as the legislator seems to have failed to devise the secret formula that allows for the creation of legal guarantees for the - already somewhat complicated - process. 2020 is no exception and the State Budget proposal reveals new developments in this regard, which affect Certified Accountants.
OE 2020: challenge or opportunity?
The new developments, in my opinion, are of two types: reduction of deadlines and expansion of powers .
As regards the reduction of deadlines , firstly, doubtful debts now have a duly justified risk of uncollectibility provided that the debt has been overdue for more than 12 months. The deadline for qualifying the debt as doubtful has been reduced from 24 to 12 months. This measure appears to help free up some liquidity in terms of companies' financial needs. The deadline for the Tax and Customs Authority (AT) to assess the request for prior authorisation for deduction of tax associated with debts considered to be doubtful has also been reduced, in this case from eight to four months.
The entire process of regularizing the tax amount in the context of doubtful debts requires certification by an external entity . Until now, this was only permitted by Statutory Auditors. As of the 2020 State Budget, this task can now be performed by an Independent Certified Accountant.
Although the legislator does not clarify what should be understood as an Independent Certified Accountant, I assume that, from the outset, Certified Accountants responsible for the accounting of the company that is requesting the AT to regularize the Tax should be excluded.
I leave it to your discussion whether accountants who work within the same group of companies or the same accounting firm should also be excluded from the role of Independent Accountant!
It should be noted that this extension of powers is limited to doubtful debts, for situations in which the tax regularization does not exceed €10,000.00 per periodic declaration. Above this amount, certification is exclusively carried out by a Statutory Auditor.
New challenge and new opportunity for the Certified Accountant
Regardless of the need for clarification of the concept of Independent Certified Accountant or the discussions about the threshold value, I think that this is, in reality, a new opportunity and challenge for Certified Accountants.
The certification of the conditions for deducting the tax amount presents itself as an opportunity because it allows Certified Accountants to perform tasks with added value for their clients.
This is a challenge, as only an accountant equipped with the appropriate IT tools, training and practical experience will be able to take responsibility for a certification that has an impact on the taxes to be deducted, which ultimately allows companies to reduce their tax bill to be paid to the State. Although some clarifications are needed, this seems to me to be a measure in which the Certified Accountant will certainly deal with their clients' doubtful debts, with great added value .
But what if the invoices are not actually received or take too long to be received? What can the company do about the VAT amount that was delivered but was not actually paid by the customer?
The Portuguese legislator has included a legal framework within the VAT code kuwait whatsapp number database defines the rules for the regularization of the VAT amount for doubtful or uncollectible debts. This is not a new topic! In fact, in recent years it has been in the news a lot, as the legislator seems to have failed to devise the secret formula that allows for the creation of legal guarantees for the - already somewhat complicated - process. 2020 is no exception and the State Budget proposal reveals new developments in this regard, which affect Certified Accountants.
OE 2020: challenge or opportunity?
The new developments, in my opinion, are of two types: reduction of deadlines and expansion of powers .
As regards the reduction of deadlines , firstly, doubtful debts now have a duly justified risk of uncollectibility provided that the debt has been overdue for more than 12 months. The deadline for qualifying the debt as doubtful has been reduced from 24 to 12 months. This measure appears to help free up some liquidity in terms of companies' financial needs. The deadline for the Tax and Customs Authority (AT) to assess the request for prior authorisation for deduction of tax associated with debts considered to be doubtful has also been reduced, in this case from eight to four months.
The entire process of regularizing the tax amount in the context of doubtful debts requires certification by an external entity . Until now, this was only permitted by Statutory Auditors. As of the 2020 State Budget, this task can now be performed by an Independent Certified Accountant.
Although the legislator does not clarify what should be understood as an Independent Certified Accountant, I assume that, from the outset, Certified Accountants responsible for the accounting of the company that is requesting the AT to regularize the Tax should be excluded.
I leave it to your discussion whether accountants who work within the same group of companies or the same accounting firm should also be excluded from the role of Independent Accountant!
It should be noted that this extension of powers is limited to doubtful debts, for situations in which the tax regularization does not exceed €10,000.00 per periodic declaration. Above this amount, certification is exclusively carried out by a Statutory Auditor.
New challenge and new opportunity for the Certified Accountant
Regardless of the need for clarification of the concept of Independent Certified Accountant or the discussions about the threshold value, I think that this is, in reality, a new opportunity and challenge for Certified Accountants.
The certification of the conditions for deducting the tax amount presents itself as an opportunity because it allows Certified Accountants to perform tasks with added value for their clients.
This is a challenge, as only an accountant equipped with the appropriate IT tools, training and practical experience will be able to take responsibility for a certification that has an impact on the taxes to be deducted, which ultimately allows companies to reduce their tax bill to be paid to the State. Although some clarifications are needed, this seems to me to be a measure in which the Certified Accountant will certainly deal with their clients' doubtful debts, with great added value .