You can sometimes set off a business invoice against a claim you yourself have against the other party. That requires more than simply stating that you are still owed money. Check who the parties are, whether the counterclaim is enforceable, which agreements apply and whether you can make a clear declaration of set-off.
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Written by Onur Arslan, attorney at Arslan Advocaten. Registered in the specialisation register of the Netherlands Bar for employment law and personal injury. Last updated: 17 September 2026.
A valid set-off can extinguish two payment obligations up to their common amount. An invalid set-off, on the other hand, can result in payment arrears, with interest, costs and possibly legal proceedings. Careful assessment is needed particularly in the case of damages claims, groups of companies and bankruptcy.
This article deals with business monetary claims under Dutch law. Different rules may apply to international contracts, taxes, wages or consumer relationships. Statutory protection against attachment and special insolvency rules can also restrict set-off.
What is the difference between set-off and suspension
With set-off, opposing claims cancel each other out up to an equal amount. With suspension, you temporarily withhold your own payment or performance. Suspension does not extinguish the debt. It is therefore important that your accounts, your letter and your legal position are consistent with one another.
Suppose your supplier claims €12,000 from you and you have an enforceable counterclaim of €3,000. A valid set-off may mean that a net balance of €9,000 remains. Merely writing off €3,000 internally, however, is not always sufficient. The other party must be able to understand which claim you are relying on and that you wish to set it off.
Do you not yet have an established or sufficiently substantiated counterclaim, but are you demanding that a defect be remedied? Then the question may rather be whether you are entitled to suspend payment. For that, read suspending work or payment. Choose the remedy that fits the actual claim.
The requirements of Article 6:127 of the Dutch Civil Code
Article 6:127 of the Dutch Civil Code (BW) forms the general basis. Among other things, it requires that you can claim a performance corresponding to your own debt, that the same counterparty is involved and that you are entitled both to pay your debt and to enforce payment of your counterclaim.
Where there are two monetary claims in the same currency, the type of performance is usually clear. Different currencies, conditional obligations or other types of performance give rise to disputes more quickly. Also check whether the counterclaim is already due and payable. A possible payment that only arises after a future settlement of accounts cannot simply be used now.
The law also contains restrictions and special cases. A contractual set-off clause can restrict the right or, within permissible limits, extend it. Assess the whole picture before concluding from an online template that every business counterclaim is suitable.
In principle, the same parties must be involved
A common mistake is set-off between different companies. For example, you buy from Handel BV, while your consultancy invoice is outstanding with Holding BV. The fact that both companies have the same director or the same address does not make them the same counterparty.
A group-wide set-off arrangement may be relevant, but requires clear consent and legal assessment. Assignment, transfer of contract and current-account arrangements can also have an effect. An e-mail from a single employee does not automatically bind all companies in a group.
In the case of a sole proprietorship, the entrepreneur is personally the contracting party, even if he uses several trade names. Nevertheless, separate estates, capacities or statutory restrictions may play a role. So look beyond the logo on the invoice and record the full legal names in your overview.
How do you substantiate the counterclaim
An unpaid invoice of your own requires proof of the instruction, delivery, price and the fact that payment is due. A damages claim additionally requires a legal basis, attribution, a causal link and a substantiated calculation of loss. The amount you consider reasonable is not automatically the amount the other party owes.
Distinguish between repair costs actually incurred, replacement purchases, downtime and loss of profit. Turnover is not the same as profit. Deduct costs saved where appropriate and avoid double counting. A limitation of liability or an agreement providing for repair only can also have an effect.
Where a shortcoming can still be remedied, default may be required before you can claim certain damages. Where required, give the other party a proper opportunity to remedy it. Anyone who immediately engages a third party and sets off the bill runs a risk if the original supplier should first have been given the chance to perform.
A disputed counterclaim is not automatically unusable
The other party does not have to acknowledge your counterclaim voluntarily before set-off can be legally possible. Otherwise any right of set-off could easily be blocked by denying the claim. The counterclaim must, however, actually exist and meet the other requirements.
The uncertainty often lies in the evidence. If it later turns out that the claim does not exist, your own invoice may after all have remained unpaid. Interest and other consequences may then run from an earlier point in time. A declaration of set-off is therefore not a way of removing the risk of a weak damages claim.
Substantiate your position as if you had to bring the counterclaim before the court yourself. Enclose the relevant documents and state which parts are still in dispute. Avoid large rounded amounts without a calculation, or statements about losses you cannot yet specify.
What if set-off is excluded by contract
General terms and conditions often contain a provision that payment must be made without set-off. First check whether the terms and conditions were validly agreed and made available in good time. The content and scope of the clause must then be interpreted.
A restriction in a business agreement is not automatically invalid because it works out unfavourably for you. At the same time, no clause is unassailable regardless of context. Reasonableness and fairness and the law on general terms and conditions, among other things, may be relevant. For a small business, special circumstances may be taken into account, but consumer protection does not automatically apply in full.
Before concluding a contract, discuss whether an exception is needed for counterclaims that have been acknowledged or established by a final judgment. During a dispute, you cannot unilaterally add such an exception to the agreement. See also general terms and conditions for self-employed professionals and SMEs.
How do you declare that you are setting off
A declaration of set-off must reach the other party and make sufficiently clear which claims you are setting against each other. State the contracting parties, invoice numbers, amounts, due dates and the legal basis of the counterclaim. Record which balance you still pay or claim.
A declaration can sometimes be inferred from conduct, but a written notice whose receipt can be proven prevents much dispute about evidence. Keep the original message and attachments. A spreadsheet without an accompanying explanation may be unclear to the recipient.
Where several items are outstanding, also check the allocation and the consequences for interest. The law contains rules on the moment at which set-off takes effect and on certain ancillary claims. Do not apply an arbitrary payment date of your own simply because it is convenient for accounting purposes.
Example of a declaration of set-off
The text below can only be used once your entitlement and your counterclaim have been sufficiently examined. It is not a standard solution for a damages claim that is still unclear.
Subject: set-off of invoice [number] against [counterclaim]
Your company [full name] claims from our company [full name] payment of invoice [number] for [amount], due since [date]. Our company has a claim against your company of [amount] arising from [specific agreement, invoice or basis for damages], due since [date]. The substantiation and calculation are enclosed.
We hereby declare that we set off these claims against each other up to an amount of [amount], insofar as the statutory and contractual requirements have been met. According to our calculation, after this set-off a balance of [amount] remains in favour of [party]. We will pay the balance owed by us on [date] or request that you pay the balance owed to us on [date].
This declaration relates exclusively to the items specified above. It does not constitute a waiver of any other claims. If you dispute the basis or the calculation, we would welcome your specific response and the relevant documents.
A reservation that requirements must have been met does not make an invalid set-off valid after all. If in doubt, have the declaration, the amount and any alternative claims assessed together. Sometimes a settlement or a declaration of suspension is more appropriate.
Fictitious example of a partly valid set-off
A wholesaler has to pay €15,000 for a delivery. The supplier, in turn, has to repay an earlier, acknowledged credit item of €2,000. In addition, the wholesaler claims €8,000 for a delayed delivery, but the calculation consists only of an estimate of lost turnover.
The credit item and the damages claim require separate assessment. It may be that the first item is suitable for set-off, while the damages claim still lacks sufficient evidence or a necessary requirement. It is then incorrect to treat all the amounts as one self-evident deduction.
The parties can reach a settlement under which the undisputed balance is paid and the damages claim is investigated separately. Record whether the payment is made under reservation and whether the other party requires a final settlement. A payment “in full and final discharge” can have more far-reaching consequences than intended.
Set-off in the case of assignment, factoring and pledge
If an invoice has been transferred to a factor or another creditor, the analysis changes. The law offers protection for certain defences and set-off positions against a new creditor, but not every counterclaim that arises later remains usable.
Examine when the transfer or pledge took place, when you became aware of it and when your counterclaim arose and became due. The connection with the same legal relationship may also be important. Keep the factor’s notification and the original contract.
Do not pay or set off solely on the basis of a changed account number in an e-mail. Verify the identity and authority of the new recipient through a reliable channel. If there is doubt about fraud or authority, investigation is needed first before a payment can be regarded as discharging the debt.
Set-off around bankruptcy
In bankruptcy a separate regime applies, including in Articles 53 and 54 of the Dutch Bankruptcy Act (Faillissementswet). The question of when the debt and the claim arose, or whether they result from earlier acts, may be decisive. Taking over claims or debts in anticipation of a bankruptcy can also give rise to restrictions.
So do not, without advice, buy a claim against a contracting party in financial difficulty in order to cancel it out against your own debt. What seems possible outside bankruptcy may turn out differently vis-à-vis a bankruptcy trustee (curator). Good faith and the timing of the transaction may be relevant.
Notify the trustee of your set-off position in good time, with all documents. Your own accounting entry does not replace that substantiation. For the broader consequences, read bankruptcy of a contracting party.
What does the court do with a set-off defence
If you are sued for payment, you can in certain circumstances invoke set-off. Article 6:136 of the Dutch Civil Code allows the court to grant a claim notwithstanding that defence if its merits cannot easily be established and the original claim is otherwise allowable.
That does not mean that your counterclaim disappears in substance. It may, however, mean that you have to have it assessed through a claim of your own or an appropriate procedural route. So discuss in good time whether a counterclaim should be brought in the same proceedings and which procedural rules apply to it.
A complicated calculation of damages is not by definition doomed to fail, but it can make the proceedings more expensive and longer. Weigh the importance of set-off against the cost of experts, the risk regarding evidence and the liquidity consequences of a possible order to pay.
Make sure your accounts and VAT remain correct
Set-off is a method of settlement and does not automatically mean that the original supply or fee is reduced. A credit note has a different function from a declaration of set-off. Have your bookkeeper record which items were written off by payment and which by set-off.
When parties agree a price reduction or pay damages, the tax consequences may differ. The civil-law classification and the VAT treatment do not always coincide. Have that processing checked and do not use a credit note merely to make a legal dispute disappear from the accounts.
Also keep the underlying documents after settlement. A later audit, legal proceedings or bankruptcy may again raise questions about the existence, timing and amount of the set-off. Make sure the declaration can be found alongside the invoices concerned.
Practical checklist before you set off
- Are both claims between the same legal parties?
- Do the counterclaim and the right to enforce payment exist?
- Have contractual restrictions, assignment or insolvency been examined?
- Is the amount substantiated and have interest and costs been processed correctly?
- Has the declaration been sent to the other party clearly and verifiably?
- Does an amount remain after set-off that must be paid on time?
Through business law for entrepreneurs you can have it assessed whether set-off is possible and advisable in your situation. Send both contracts, the invoices, the calculation of the counterclaim and any notices of assignment. This allows a targeted review of both the legal entitlement and the risk if the other party rejects the set-off.
Check a balance confirmation before you sign
In a long-standing trading relationship, parties sometimes periodically exchange a statement of account. A signature on it may later be significant for the acknowledgement of amounts or the interpretation of a settlement. So read whether you are only confirming the accounts or are also waiving disputed items.
Include a specific reservation if a counterclaim is still being investigated. State which invoice or item of loss falls outside the confirmation. A general reservation under a document that elsewhere refers to a definitive and complete settlement can again create uncertainty.
Where there are several invoices, have the calculation run through to the final balance. First state the original principal sums, then payments, credit items and set-off. Show interest and costs separately. This allows the other party to check your calculation and shows your bookkeeper which item has actually been settled.
A balance confirmation is also a good moment to check the contracting parties again. With a changed company name or an acquired business activity, a different legal entity can find its way into the accounts unnoticed. That administrative merger does not create any legal entitlement to set off all old and new items against one another.
Frequently asked questions
Can I set off without the customer’s consent?
You can if the law and the agreement give you that right. Consent is not always required, but the counterclaim must exist and meet the requirements. A clear declaration remains important for evidence and settlement.
May I set off a damages claim that is still disputed?
A dispute does not automatically rule out set-off. You do, however, bear the risk that the damages claim later proves wholly or partly unfounded. Substantiate the shortcoming, the loss and the other requirements before you reduce payment.
Can I set off an invoice from the operating company against the holding company?
Not as a matter of course. They are different legal entities. A special arrangement or legal structure may have an effect, but the same owner, director or trade name is in itself insufficient to assume mutuality.
Do I have to issue a credit note?
Not merely because you are setting off. The underlying fee may remain unchanged while payment is settled in a different way. Keep a price adjustment, damages and set-off separate for accounting and tax purposes.
May I still set off if the other party is bankrupt?
Sometimes, but special rules then apply. The timing, origin and any acquisition of the claims are important. Present your position with documents to the bankruptcy trustee and have the requirements under bankruptcy law assessed.
What if my set-off later proves invalid?
Then your original payment obligation may have remained wholly or partly in place. Interest, costs and other consequences may follow. So pay the undisputed balance and assess beforehand how strong the counterclaim really is.
Sources and legal basis
- Dutch Civil Code, Book 6: Articles 127–141 and relevant rules on damages and suspension.
- Dutch Bankruptcy Act (Faillissementswet): Articles 53 and 54.
