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V2566-14 1 October 2014 · SG de Impuestos sobre las Personas Jurídicas Criterion in force
IS · deterioro de valor

Impairment of shareholdings, including exchange rate losses, is not tax-deductible

A company has inquired whether it can claim a tax deduction for the loss in value of a shareholding in a Turkish company caused by the devaluation of the lira. The Directorate General for Taxes (DGT) has ruled that such losses are not deductible under current regulations.

The question raised

Whether the depreciation in value caused by the devaluation of the Turkish Lira is tax-deductible following the repeal of Article 12.3 of the recast text of the Corporate Income Tax Law, approved by Royal Legislative Decree 4/2004, of March 5.

The DGT's ruling

Impairment losses on securities representing an interest in the capital or equity of entities are not considered tax-deductible expenses. Both accounting-wise and for tax purposes, the gain or loss on an interest must include the impact of the exchange rate of the local currency of the investee entity. There is no specific rule that allows for the separation of the exchange rate component from the value of the interest.

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