GmbH Bad Debt Write-Offs in Germany 2026: How to Book Uncollectible Receivables

One customer files for insolvency, another stops responding even after three reminders. For your GmbH that means the receivable is gone – and it has to come off the books cleanly. Skip a step and you end up paying VAT on money that never arrived. This guide walks through when a German receivable counts as uncollectible, how to book it under SKR03/SKR04, and how to recover the over-paid VAT under § 17 UStG.

Key takeaways

• Doubtful ≠ uncollectible. While payment is still possible, you only record an allowance (net, no VAT correction). Once the loss is certain, you write the receivable off in full.
• § 17 (2) No. 1 UStG recovers the VAT. Once a receivable is finally uncollectible, you correct the VAT you already paid – in the return period when the loss becomes certain, not retroactively.
• Final write-off (gross): SKR03 2406 to 1400, SKR04 6936 to 1200. Accounts 2406/6936 are DATEV automatic accounts – the VAT correction runs with them.
• Rule of thumb for uncollectibility: once the payment term is exceeded by two to three times the payment period, but at least by more than six months, the receivable is generally treated as uncollectible under BFH case law.
• Under cash-basis VAT (Ist-Versteuerung) no VAT correction is needed – VAT only falls due on collection anyway.
• The write-off reduces taxable profit and therefore your GmbH's corporate and trade tax.

When is a receivable considered uncollectible?

A receivable doesn't become uncollectible just because the customer is late. It only does once, on an objective view, it can be expected that the claim cannot be enforced in whole or in part for the foreseeable future. Typical triggers:

There is no fixed deadline in the law. The Federal Fiscal Court (BFH) nonetheless allows a correction once the payment term is exceeded by two to three times the payment period, but at least by more than six months. While a realistic chance of payment remains, you must not write the receivable off in full – you only impair it. The right order is payment reminder → dunning order → specific bad-debt allowance → final write-off.

Doubtful or uncollectible? The decisive difference

The most common mistake is blurring the two phases. For bookkeeping and VAT they are clearly separated:

Step 1: Specific bad-debt allowance (Einzelwertberichtigung)

If a loss is likely but not yet certain, you record a specific bad-debt allowance (Einzelwertberichtigung, EWB):

• The receivable is reclassified to a "doubtful receivables" account.
• You record an allowance – net of VAT only.
• VAT is not corrected at this stage.

§ 17 UStG only kicks in once the loss is final. The EWB therefore affects the commercial and tax result, but not the monthly VAT return. The size of the allowance reflects the expected loss – 100% if the customer is insolvent, partial if the receivable is still under negotiation.

Step 2: Booking the final write-off

Once the loss is certain – typically once insolvency proceedings open – the receivable is written off in full. SKR03 entry:

Bad debt loss (Account 2406) to Receivables (Account 1400) – at the gross amount.

In SKR04 the equivalent accounts are 6936 (bad debt loss, 19% VAT) and 1200 (receivables). The full gross amount comes off, because the receivable was carried gross. Note: accounts 2406 and 6936 are automatic accounts in DATEV – book the gross amount there and the VAT is corrected automatically. If you post manually without an automatic account, you record the VAT correction yourself in the next step.

VAT adjustment under § 17 UStG

§ 17 (2) No. 1 UStG requires you to adjust the VAT once the receivable is uncollectible. The adjustment goes into the VAT return for the period in which the loss became certain – it works ex nunc, so not retroactively into the original quarter.

SKR03 booking for the 19% VAT correction:

VAT 19% (Account 1776) to Bad debt loss (Account 2406) – for the VAT portion.

You recover the over-paid VAT through the next VAT return (UStVA). Under cash-basis VAT (Ist-Versteuerung), VAT is only owed on collection – so for an unpaid invoice no VAT was ever due, and no correction is needed. If your customer had deducted input VAT, they must mirror the correction – in practice the insolvency administrator handles it.

Worked example: writing off a €11,900 receivable

An open receivable of €11,900 gross (€10,000 net + €1,900 VAT) becomes finally uncollectible after insolvency opens:

The loss costs you €10,000 net. You recover the €1,900 VAT through the correction – provided you book it. Skip it and you hand €1,900 to the tax office for nothing.

SKR03 and SKR04 entries at a glance

Key bookings per step:

Account numbers vary across charts – see our SKR03 vs. SKR04 comparison. In modern AI bookkeeping software it's enough to flag the receivable as "uncollectible" – the system creates the entries and the VAT correction automatically.

What a bad debt means for your GmbH's tax

The written-off net amount is a business expense and reduces your GmbH's profit. That lowers both corporate income tax (15% plus solidarity surcharge) and trade tax. On a €10,000 loss at a combined rate of roughly 30%, a correctly booked write-off saves you around €3,000 in income tax – on top of the €1,900 VAT you recover. That is exactly why it pays to record the loss cleanly and in the right year, rather than letting it sit.

What if the customer pays later anyway?

If a payment does come in after the write-off – for example as part of an insolvency dividend – you reverse the entry. The cash receipt is recorded as other operating income, and the VAT is owed again in the period the payment lands (§ 17 (2) No. 1 sentence 2 UStG).

Example: a 5% insolvency dividend on a written-off €11,900 receivable (€10,000 net + €1,900 VAT) brings in €595, of which €95 is VAT to remit on the next return.

Frequently asked questions about GmbH bad debts

When is a receivable considered uncollectible? Once it is objectively clear the customer won't pay – for example on insolvency, failed enforcement, or limitation. As a rule of thumb, the BFH accepts a correction once the payment term is exceeded by at least more than six months.

Can I recover the VAT on a bad debt? Yes. Under § 17 (2) No. 1 UStG you correct the VAT you paid and recover it through the next VAT return – in the period when the loss becomes certain. Under cash-basis VAT no correction is needed, since VAT only falls due on payment.

What's the difference between an allowance and a write-off? You record the allowance (EWB) net while the loss is only likely – no VAT correction. The write-off is gross, once the loss is certain, and comes with the VAT correction.

Does a bad debt reduce my GmbH's tax? Yes. The written-off net amount is a business expense and lowers profit – reducing corporate and trade tax. The VAT is refunded separately under § 17 UStG.

What happens if the customer pays later anyway? The receipt is booked as other operating income and the VAT is remitted again – in the period the payment lands (§ 17 (2) No. 1 sentence 2 UStG).

Which accounts do I need in SKR03 and SKR04? For the final gross write-off: SKR03 2406 to 1400, SKR04 6936 to 1200. For the net allowance: SKR03 2400 to 1450, SKR04 6925 to 1247.

Conclusion

Bad debts are unpleasant but the bookkeeping side is well-defined: net allowance during the doubtful phase, gross write-off plus VAT correction under § 17 UStG once the loss is final, no VAT correction under cash-basis VAT. Norman tracks open receivables automatically, suggests the allowance once dunning periods have run, and creates the right entries plus VAT correction when insolvency is confirmed. That keeps you from paying VAT on money you never collected. See our AI bookkeeping and GmbH provisions articles for the related topics.