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V1621-22 4 July 2022 · SG de Impuestos sobre la Renta de las Personas Físicas Criterion in force
IRPF · estimación directa

Impairment losses on receivables cannot be deducted under the cash basis of accounting

A professional has enquired whether they can deduct a capital loss for failing to collect a court costs indemnity. The DGT has ruled that, when applying the cash basis of accounting, impairment losses on receivables cannot be recognised if the income has not yet been received.

The question raised

Impact of the non-collection of legal cost compensation on the Personal Income Tax assessment.

The DGT's ruling

Compensation for legal costs is considered income from economic activity. If the taxpayer applies the cash basis of accounting, the income is only taxed when collected. Therefore, it is not possible to apply the deductible expense for impairment losses on credits due to potential insolvency, as this responds to the accrual basis and not to cash receipts or payments.

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