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V0291-16 26 January 2016 · SG de Impuestos sobre las Personas Jurídicas Criterion in force
IS · ejecución hipotecaria

Impairment of credit against a related party is deductible if insolvency is judicially declared

The taxpayer asks whether an amount provisioned due to the inability to collect from a related party is deductible following the foreclosure of properties held as collateral. The DGT rules that the deductibility of credit impairment depends on the related party being in a state of judicially declared insolvency.

The question raised

Whether the amount paid by the consulting entity to the bank through the sale of real estate, which has been fully provisioned due to the impossibility of collection by the related entity V, is tax deductible in the Corporate Tax for the 2014 fiscal year.

The DGT's ruling

Expenses derived from mortgage foreclosure have tax effectiveness according to the accounting records. The impairment of the right to collect from a related entity shall only be tax deductible if a judicially declared insolvency occurs, in accordance with Article 12.2 of the TRLIS. In this case, the liquidation status of the related entity allows for such deductibility.

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