Our clients have been recently asking more and more questions about VAT treatment of notices to pay penalty fees and contractual interests for failure to perform provisions of an agreement. Such notices may occur, for instance, when it is necessary to inform counterparties on payment delays. A party who issues a notice, not only charge fees on its issuance, but also settle the tax due for this issuance, including the amount of tax on the invoice. Is this the right thing to do? Since I look at such situations more and more often, I would like to explain in brief how notices to pay shall be settled in respect of VAT.