Hi guys,

 

I have issued some invoices to clients that won't be paid.

 

Essentially, these invoices are revenue on which I will have to pay tax, but of course I don't want to pay tax on something that I won't earn. I want to recognize these account receivable as bad debt.

 

Accountant tells me that I need to send a letter from a lawyer via certified mail. I asked lawyer how much is that and I get a quote of 7,500 THB per letter.

 

It doesn't make sense for me to pay that much because invoices aren't that valuable.

 

Do you have any experience/advice on this?

 

Thanks,

Matt

This is one of the reasons many small companies base their accounting on the receipts and date of actual payment, not on issued invoices. Officially this is not allowed, but that way if you don’t get paid, at least you don’t have to pay VAT.  Apparently the RD is fine with this setup as I haven’t heard of anyone getting into trouble following this approach. 

In the OP case, if you are not going after payment and don’t expect to be paid, then it’s best to just issue a credit invoice with the same invoice value being negative and a negative VAT value as well. If you already paid the VAT, you can use the credit invoice VAT to lessen VAT burden in a future month.

Alternatively you can leave the amount in your accounting as accounts receivable and just write it off after a year or two. You will then have to file a separate statement for VAT to receive that credit. Although it should become clear you overpaid VAT during the year end auditing statement, and can then use the credit for future VAT payments. 

Edited November 16, 20205 yr by Gulfsailor

Matt199,

 

For the VAT side of things, GulfSailor has hit the nail on the head - 

I have been running my own business here in Bangkok for 12 years, I have had a few clients who just refused to pay, bad debt. Eventually they did pay, my solution was quite simple - A quick search on the internet for letters people of posted from lawyers in an attempt to recoup money. I edited this letter to suit my needs, and added in a structured payment scheme xxxx amount per month etc, like a bank loan. I told them that if they don't choose this option, then the police will called to their offices - Failure to pay an official invoice is a crime, (Fraud).  After this email, all 3 of my bad debts, contacted me, said sorry and paid their dues.

 

I hope this helps. It's worth a try.

On 11/16/2020 at 4:13 AM, Matt199 said:

Hi guys,

 

I have issued some invoices to clients that won't be paid.

 

Essentially, these invoices are revenue on which I will have to pay tax, but of course I don't want to pay tax on something that I won't earn. I want to recognize these account receivable as bad debt.

 

Accountant tells me that I need to send a letter from a lawyer via certified mail. I asked lawyer how much is that and I get a quote of 7,500 THB per letter.

 

It doesn't make sense for me to pay that much because invoices aren't that valuable.

 

Do you have any experience/advice on this?

 

Thanks,

Matt

Ask you account if it would be possible just to write a credit note, and of course send that to the customer. Normally a credit note would be deducted in the turnover and v.a.t. calculation. Issuing a credit note is often a much easier way to get rid of small bad debitors.