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Practical Handbook for Companies 2021

Impairment losses arising from possible insolvency of debtors (art. 13.1 LIS) not affected by article 11.12 or TD 33.1 of the LIS

When there is a risk in the collection of a particular receivable, institutions are obliged to recognise an impairment loss.

On the other hand, article 13.1 of the LIS establishes that only impairment losses on receivables arising from the possible insolvency of debtors will be tax deductible when any of the following circumstances apply at the time of accrual of the tax:

  1. That six months has passed since the obligation fell due.

    Important:

    With effect for the tax periods beginning in 2020 and 2021, Royal Decree-Law 35/2020, of 22 December, on urgent measures to support the tourism, hotel and catering and commerce sector and in tax matters, establishes in article 14 that corporate income taxpayers who meet the conditions of article 101 of the LIS to be considered small companies may deduct, in those periods, the losses due to impairment of credits derived from the possible insolvencies of debtors when three months have elapsed since the expiry of the obligation referred to in letter a) of article 13.1 of the LIS.

    Thus, for small companies, the period established for deducting credit impairment losses arising from the possible insolvency of debtors is reduced in these periods from 6 months to 3 months, the time required to have elapsed between the maturity of the obligation and the accrual of the tax.

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

  3. That the debtor is being prosecuted for the offence of misappropriation of assets

  4. That the obligations have been claimed by the courts or are in litigation or arbitration proceedings, the solution of which depends on their collection.

However, even if the above circumstances are met, will not be tax deductible:

  • Those corresponding to loans due by entities established under public law, except where involved in an arbitration or judicial proceeding pertaining to their existence or amount.

  • Those corresponding to credits owed by related persons or entities, unless they are in insolvency proceedings and the liquidation phase has been opened by the judge, under the terms established in Royal Legislative Decree 1/2020, of 5 May, approving the revised text of the Insolvency Act.

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

Filling in form 200

These differences in criteria between the accounting standard and the tax standard determine the need to make a series of adjustments in the boxes [00321] and [00322] "Impairment losses under art. 13.1 LIS not affected by art. 11.12 LIS or by the DT 33ª.1 LIS" on page 12 of form 200:

  • In the box [00321] of increases, the taxpayer shall include the amount of the losses due to impairment of the value of the credits derived from the possible insolvencies of debtors recorded in the tax period being reported, which are not deductible for tax purposes according to the provisions of article 13.1 of the LIS.

  • Instead, the taxpayer will include in the box [00322] of decreases the amount of these losses accounted for in the period in which they are deductible for tax purposes because they meet the requirements of article 13.1 of the LIS.

  • When in a tax period subsequent to that in which the aforementioned impairment losses, which gave rise to a positive adjustment to the accounting result (box [00321]) due to not being tax deductible, are recorded, the taxpayer must include the amount corresponding to this reversal in the recovery of the value of the impairment, in the box [00322].

A tener en cuenta:

In these boxes [00321] and [00322] "Impairment losses of art. 13.1 LIS not affected by art. 11.12 LIS or by DT 33ª.1 LIS" only the amounts relating to the impairment losses of the credits of article 13.1 of the LIS should appear, provided they are not affected by the provisions of article 11.12 of said regulation, in which case they should be declared according to the provisions of the following section (boxes [00415] and [00211] "Impairment losses of art. 13.1 LIS and provisions and expenses (articles.14.1 and 14.2 LIS) referred to in art. 11.12 and DT 33ª.1 LIS").