Losses from company bankruptcy require prior dissolution and liquidation

The possibility of deducting a capital loss in Personal Income Tax (IRPF) following the bankruptcy of an entity is a scenario that frequently generates doubts. Recently, the Dirección General de Tributos (DGT) has delimited the strict requirements that must be met for such a loss to be fiscally recognizable.

What the DGT has ruled

The tax administration has determined that, to compute a capital loss in accordance with Article 37.1, letter e) of the IRPF Law, the insolvency or bankruptcy of the issuing company is not enough. It is a necessary condition that the dissolution and liquidation of the company has been previously carried out.

Furthermore, the ruling clarifies two fundamental points:

• The tax period in which the loss must be declared is the one in which the liquidation of the company is formalized.
• The exclusion or removal of securities from a banking entity's securities account does not constitute a transfer of the securities, nor does it imply the loss of ownership of them.

What this means for you

If you are a shareholder in a company that has entered insolvency proceedings or has gone bankrupt, you cannot automatically reflect that loss of value in your tax return. Bankruptcy alone does not generate the right to the deduction if the company's legal personality remains in force or if the liquidation process has not concluded.

This criterion prevents taxpayers from using the mere disappearance of securities from their bank portfolio as proof of the loss. For the Tax Agency, as long as there is no effective liquidation that extinguishes the company and its shareholding, the ownership of the securities remains intact from a tax perspective.

What you should do

In situations of corporate insolvency where holdings are owned, it is necessary to monitor the corporate process. The deduction will only be viable once the definitive liquidation of the entity occurs. It is recommended to assess each particular situation to determine the exact moment when the legal requirements for declaring the capital loss are met.