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.

When is a receivable considered uncollectible?

A receivable doesn't become uncollectible just because the customer is late. It only does once it's objectively clear that no money will come in. Typical triggers:

• Insolvency proceedings opened against the customer
• Appointment of a strong provisional insolvency administrator with disposition restrictions
• Failed enforcement against the debtor
• Statutory limitation period (Verjährung) reached
• Failed dunning order and unsuccessful enforcement attempt

While there's still a realistic chance of payment, 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.

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. In the next step you correct the VAT in parallel — without that correction your GmbH pays VAT on a sale that never funded.

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 — 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.

SKR03 and SKR04 entries at a glance

Key bookings per step:

• Net allowance (SKR03/SKR04): 2400/6925 to 1450/1247
• Final gross write-off (SKR03/SKR04): 2406/6936 to 1400/1200
• VAT correction 19% (SKR03/SKR04): 1776/3806 to 2406/6936

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 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.

Conclusion

Bad debts are unpleasant but the bookkeeping side is well-defined: net allowance during uncertainty, gross write-off plus VAT correction once the loss is final, no VAT correction needed 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.