I think you need to research the accounting rules for "bad debt" in your country. As for being taxed when the invoice was issued, that would be the same as in

I think you need to research the accounting rules for "bad debt" in your country. As for being taxed when the invoice was issued, that would be the same as in US and other countries too for all medium-large companies (although some small businesses would use "cash" accounting). I would be surprised if it was actually required to sue the other party--retailers, banks, etc. everywhere have millions in bad debt every year that is not sued because the amount is too small or there is no reason to believe the other side can pay the ordered amount. In fact, if you were a publicly traded company, you could get in trouble for not writing off bad debt because it makes the company look more successful than it really is. So there should definitely be a clear procedure for it.