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V0435-14 17 February 2014 · SG de Impuestos sobre las Personas Jurídicas Criterion in force
IS · provisión

Tax deductibility of provisions for replacement of components depends on accounting recognition

A joint venture (UTE) enquired whether it could create an accounting provision for the obligation to replace plant components and if such an expense would be deductible for Corporate Tax purposes. The Directorate General for Taxes (DGT) ruled that if the obligation constitutes a contingent liability rather than a real liability, it must not be recorded in the accounts and, consequently, is not tax-deductible.

The question raised

It is asked whether the consulting entity may, for accounting purposes, establish a provision to cover the liabilities arising from the obligation to replace plant elements when necessary and whether such a provision would be considered tax-deductible for Corporate Income Tax purposes. Finally, it is asked whether the tax deductibility of said accounting expense is subject to any formal obligation.

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