VAT Bad Debt Relief in Cyprus
If a customer does not pay your invoice you may be able to reclaim the VAT you already paid over on that supply. Here is how bad debt relief works.
In this guide
How bad debt relief works for Cyprus VAT. When you can reclaim VAT on invoices that have not been paid and what conditions must be met.
- Months per return
- 3
- Late VAT return
- €100
- Late payment, additional tax
- 10%
- Interest on late VAT, a year
- 3.5%
Trigger
Unpaid invoice
VAT already paid over
Minimum age
6 months
Before claim allowed
Evidence
Required
Debt is irrecoverable
Customer impact
Repay input VAT
If they claimed it
What is VAT bad debt relief?
When you issue a VAT invoice and declare the output VAT on your return you owe that VAT to the Tax Department regardless of whether your customer actually pays you. If the customer subsequently fails to pay — goes insolvent, disappears or simply refuses — you have paid VAT on a supply that generated no revenue for you. Bad debt relief allows you to reclaim that VAT once the debt is established as irrecoverable.
Conditions for claiming Cyprus VAT bad debt relief
- The supply was made and output VAT was declared and paid on the relevant return
- The debt has remained unpaid for at least 6 months from the date payment was due
- The debt has been written off in your accounting records as irrecoverable
- You have taken reasonable steps to recover the debt — demand letters, legal action where appropriate
- The customer was not connected to you — related party debts face additional scrutiny
- You retain evidence of the original supply — invoice, contract, delivery evidence
- The customer has been notified that the VAT element of the claim is being reclaimed
How to claim bad debt relief
Bad debt relief is claimed as an adjustment on your VAT return. You reduce your output VAT by the amount of VAT that related to the irrecoverable debt. The adjustment should be made in the return period when the debt is formally written off as irrecoverable — not when you first suspect it might not be paid. Keep documentation of the bad debt write-off, the original invoice, evidence of recovery attempts and confirmation that the customer has been notified.
The customer's obligation — repaying input VAT
When you reclaim output VAT under bad debt relief your customer — if they originally reclaimed input VAT on your invoice — is required to repay that input VAT to the Tax Department. The Cyprus VAT rules include a corresponding obligation on the debtor side. In practice the Tax Department does not always enforce this actively but it is a legal obligation. If your customer is in insolvency proceedings the VAT repayment joins the queue of creditor claims.
Bad debt relief is worth pursuing for significant unpaid invoices. On a €50,000 invoice at 19% the VAT element is €9,500 — a meaningful amount to recover. The administrative process is straightforward if the supporting documentation is in order.
Key takeaways
- ●Bad debt relief allows you to reclaim VAT on invoices that have remained unpaid for 6+ months and been written off
- ●The debt must be genuinely irrecoverable — document recovery attempts and the write-off in your accounts
- ●Claim bad debt relief as a return adjustment in the period the debt is written off
- ●Your customer is required to repay the input VAT they claimed — their obligation mirrors your relief
- ●Maintain full documentation — invoice, recovery evidence, write-off entry and customer notification
Frequently asked questions
Next deadline
VAT return for Q3 2026
10 November 2026
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