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, Partner, leads the Indirect Tax activity. With more than 30 years’ experience in International and French Tax law, he advises his clients on indirect tax matters. Michel is […]

Odile Courjon

Odile Courjon, Partner, has developed a strong expertise in indirect tax issues (VAT, wage taxes, excise taxes, export control and customs) in France and overseas. She advises her clients in […]

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. Major focuses of Bertrand’s input involve the […]

William Stemmer

William Stemmer, Partner, has more than 15 years’ experience in Indirect Tax matters. William particularly specializes in the real estate and financial sectors. William is a lecturer at the University […]

Anne Gerometta

Anne, Director, has been advising companies on indirect tax issues for more than 15 years. Anne has developed a specific expertise on the manufacturing sector (VAT, customs and Export Control) […]