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A company has enquired whether the annual provision made to cover future redundancy payments can be deducted as an expense. The Directorate General for Taxes (DGT) has ruled that such provisions are not deductible at the time they are made, as they represent an expectation rather than a present obligation.
Companies cannot reduce their taxable base by recording provisions for potential future redundancy costs; only the actual payment of such indemnities will be tax-deductible.
The tax team reviews your specific situation.
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