The Court of Justice of the European Union ruled in the Mokoryte case that VAT bad debt relief is only available to the original creditor who carried out the taxable transaction, not to an assignee who receives the receivable through assignment.

The case involved a subcontractor who received an assigned receivable that later became irrecoverable when the developer defaulted. The subcontractor sought to claim VAT adjustment relief under Article 90 of the VAT Directive, arguing that the bad debt affected their financial position following the assignment.

The Court emphasized that the right to adjust VAT is intrinsically tied to the original taxable person and the original transaction. The assignment of receivables does not transfer VAT adjustment rights, as the VAT obligations and reliefs remain with the party who initially supplied the goods or services and charged VAT.

The subcontractor's claim was specifically denied because the original supply was made to the contractor, not to the developer who ultimately defaulted on payment. This distinction reinforced that VAT relief mechanisms cannot be separated from the underlying taxable transactions that created the VAT liability.

The ruling clarifies the scope of Article 90 of the VAT Directive and confirms that bad debt relief provisions are designed to protect the original supplier's VAT position, not to provide broader financial protection to subsequent holders of assigned receivables in commercial arrangements.