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V4514-16 19 October 2016 · SG de Impuestos sobre las Personas Jurídicas Criterion in force
IS · deterioro de créditos

Deductibility of impairment of trade receivables depends on compliance with Article 13.1 of the CIT Act

A company undergoing dissolution has enquired whether it must reverse impairments of trade receivables and if these are tax-deductible. The DGT has ruled that deductibility depends on meeting the circumstances set out in Article 13.1 of the CIT Act and the general requirements for deductible expenses.

The question raised

Whether the company must reverse the impairment of trade receivables in the year of dissolution, thereby being subject to Corporate Income Tax on the reversal of the impairment, and whether the shareholder must be subject to Personal Income Tax on the impaired collection rights even if it is impossible to collect them, or whether the impairment may be maintained since, for the company, that represents the real value of the asset as it is considered uncollectible.

The DGT's ruling

The accounting impairment of receivables shall be tax-deductible if the insolvency circumstances set forth in Article 13.1 of the LIS (6-month maturity, bankruptcy, concealment of assets, or judicial claim) are met and the exclusions of said article do not apply. If the write-off of the receivable subsequently occurs in accordance with accounting regulations, it shall not be necessary to make adjustments to the accounting result to determine the taxable base.

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