VAT On Assignment Of Debts

If the debt being assigned is in respect of operations which were originally VAT exempt, proceeds received by the former creditor within the limit of the amount due under the underlying contract are not subject to VAT. In case proceeds under the assignment agreement received by the initial creditor exceed the income which would be received under the underlying contract the difference should be subject to VAT. If the new creditor receives an amount from the debtor higher than the amount he has paid on assignment this difference is also VATable even if this new creditor is a bank.

If debts for goods or services that are subject to VAT are assigned, the full amount of proceeds received on assignment is subject to VAT, which may lead to a double VAT charge if the debtor accounts for VAT on the accruals basis.