Losses from unpaid credits can only be recognized after one year of judicial enforcement

The recognition of a capital loss in Personal Income Tax (IRPF) derived from an uncollected credit is not an automatic process following the debt's maturity. The Directorate General of Taxes (DGT) has specified the temporal and procedural requirements necessary for this event to be included in the general taxable base.

What the DGT has ruled

The administration establishes that the mere lack of payment by a debtor does not, in itself, constitute a capital loss. This is because the right to credit continues to exist and the creditor maintains the expectation of collection. For the loss to be attributable to the tax period, a specific temporal requirement must be met: one year must elapse from the start of the judicial enforcement proceedings.

In this sense, the DGT determines that the milestone marking the start of said period is the filing of the enforcement claim before the corresponding judicial body. Only after this year of judicial activity has passed can the taxpayer consider the loss as realized and include it in their tax return.

What this means for you

If you are an individual holding a right to credit and you are facing non-payment, you will not be able to deduct that loss at the moment the debt matures or is declared uncollectible extrajudicially. The regulations require that the claim process goes through the judicial route and that this process maintains continuity for at least twelve months.

This criterion implies that the management of outstanding collections has a deferred tax impact. The resulting capital loss is integrated into the taxpayer's general taxable base, which reduces their tax burden, but its application is strictly conditioned on compliance with the aforementioned procedural deadlines.

What you should do

In the event of overdue and uncollected credits, it is necessary to document the commencement of legal actions. The one-year enforcement period will begin with the filing of the claim, so it is fundamental to have judicial accreditation of said act. It is recommended to assess the situation of each credit and the timelines of the judicial proceedings to determine the fiscal year in which it will be possible to apply the capital loss.