Skip to main content
Practical manual for Income Tax 2022.

8. Losses due to impairment of credits derived from possible insolvencies of debtors

Concept of impairment losses

Impairment is the accounting expression of the estimated loss in value of an asset, other than, in the case of amortizable items, its systematic depreciation due to operation, use, obsolescence or enjoyment (that is, amortization expense).

From an accounting perspective, an asset is considered impaired when its book value is higher than its recoverable amount, a circumstance that requires recognizing an impairment loss in the profit and loss account and the corresponding valuation correction.

See the Resolution of 18 September 2013 of the Institute of Accounting and Auditing of Accounts, which dictates the rules of registration and valuation and information to be included in the annual accounts report on the impairment of the value of assets (BOE of 25 September).

Now, for tax purposes, the general rule is the non-deductibility of impairment losses with one exception: losses due to impairment of credits arising from possible insolvencies of debtors.

Losses due to impairment of credits derived from possible insolvencies of debtors

Regulations: Articles 13.1 LIS  

In 2022, losses due to impairment of credits arising from possible insolvencies of debtors will be deductible when at the time of accrual of IRPF (normally, December 31) any of the following circumstances occur:

  1. That the period of six months has elapsed since the expiration of the obligation.

  2. That the debtor is declared to be in bankruptcy proceedings.

  3. That the debtor is being tried for asset stripping.

  4. That the obligations have been claimed judicially or are the subject of a judicial dispute or arbitration procedure on the resolution of which their collection depends.

The following losses due to impairment of credits will not be deductible:

  1. Those corresponding to credits owed by public law entities, except when they are the subject of an arbitration or judicial procedure that deals with their existence or amount.

  2. Those corresponding to credits owed by related persons or entities, unless they are in a situation of bankruptcy and the liquidation phase has been opened by the judge, in the terms established in Law 22/2003, of July 9, Bankruptcy and, since September 1, 2020, in Royal Legislative Decree 1/2020, of May 5, which approves the revised text of the Bankruptcy Law.

  3. Those corresponding to global estimates of the risk of insolvency of clients and debtors.

Note: See in this regard the Resolution of 18 September 2013 of the Institute of Accounting and Auditing of Accounts, which establishes the rules for recording and valuation and information to be included in the annual accounts report on the impairment of the value of assets (BOE of 25 September).

Note: The owners of small companies may also deduct the loss due to impairment of credits for possible insolvency of debtors up to the limit of 1% of the debtors existing at the end of the tax period, except for those for which the loss due to insolvency has been individually recognised and those for which the impairment losses are not deductible. The determination of the deductible amount corresponding to these impairment losses for owners of small businesses is discussed in this same Chapter.

Transitional regime for the reversal of the impairment of certain assets

Regulations: Fifteenth transitional provision LIS

The reversal of impairment losses on tangible fixed assets and real estate investments, intangible fixed assets that were tax deductible in tax periods beginning before January 1, 2015, will be included as income in the tax period in which their value is recovered in the accounting field.

In the case of intangible assets with an indefinite useful life, the aforementioned reversal will be integrated with the limit of the tax value that the intangible asset would have, taking into account that article 13.3 of the LIS , in force until December 31, 2015, established that the deducted amounts would reduce, for tax purposes, the value of the corresponding intangible asset.

Note: Until December 31, 2015, intangible assets with an indefinite useful life, including goodwill, were not amortized for accounting purposes, but their impairment was taken into account, allowing their acquisition price to be deducted for tax purposes up to a maximum annual limit of one-twentieth of their value. This deduction, which corrected its tax value, was not subject to its accounting entry in the profit and loss account.