Debt waivers and VAT

A company partially waived rental debts to another company. Although the debtor company did not incur VAT on the rents concerned by the writing off, it requested the refund of the related VAT on the ground that VAT became due by the lessor subsequently to the writing off and created a right to deduct VAT in favour of the company.

According to the Court, at the date of the refund request, the debt was not definitively written off since the debt waiver was subject to a better fortunes clause. The transaction could therefore not be considered as a “payment” within the meaning of article 269 of the FTC, rendering the VAT amount due by the lessor. Consequently, the applicant company’s right to deduct VAT could not be regularly exercised.

The VAT consequences induced by debt waivers should therefore be carefully monitored.

Michel Guichard

Michel Guichard, as a Partner, was responsible for the Indirect Tax (VAT Customs) practice and then for the Tax Litigation practice dedicated to assisting clients in national and EU litigation. […]

Bertrand Jeannin

Bertrand Jeannin, Partner, supplies strategic and technical advice to French and foreign multinational groups in all aspects of their VAT and customs policies. He regularly assists his clients in the […]

Nicolas Kazandjian

Barrister registered with the Hauts-de-Seine Bar, he started my career in the indirect tax service line of Deloitte Société d’Avocats in 1999. My current position is Director. My area of […]

Vanessa Irigoyen

With more than 16 years of experience, Vanessa has extensive expertise in the implementation of international efficiency business models for customs, export control and indirect tax purposes. Her functions notably […]

Anne Gerometta

Anne Gerometta is Indirect Tax Partner of Deloitte Société d’Avocats. She advises international groups on their indirect tax issues. Anne notably assists operators from the Financial Sector – bank, insurance […]

Delphine Nicault

Delphine Nicault is an Attorney-at-Law at the French Bar. She joined Deloitte in 2002 and assists her clients on day-to-day VAT issues. She developed an expertise in the VAT and […]