Date of publication 1st July 2016
Both qualitative and quantitative parameters regarding tax deductibility of losses on receivables (small amounts) are identified by the law converting legislative decree no. 83/2012 finally approved by the Senate on 3rd August 2012.
Regulatory framework – Law converting legislative decree no. 82/2012 finally approved by the Senate on 3rd August 2012 restates quantitative parameters and extends qualitative parameters of tax deductibility of losses on receivables.
The amendment of article no. 101 of the Income tax act (TUIR) considers that in some expressively identified cases, the company may deduce losses on receivables without specific obligation on documentation due to existing “precise and sure elements” pursuant to the law.
More specifically, the above rule considers the immediate deduction of small amount receivables, comparing debt restructuring to bankruptcy proceedings and automatic relevance for IAS entities to cancel debts from the financial statement after extinguishing events.
Law converting the development decree, namely legislative decree no. 83/2012 changes that issue on deductibility of small amount losses on receivables by establishing relevant objective parameters which may limit disputes and doubts among operators.
As to small amounts receivables the new regulation establishes also those precise and sure elements for its deduction on losses if six months have elapsed since the payment expiration. Those two requirements shall be met together.
Small amounts receivables are:
- An amount higher than 5,000.00 Euro for those companies having significant size;
- An amount not higher than 2,500.00 Euro for other companies;
In order to establish the characteristics of significant size company, the provision refers to a relevant rule, namely article no. 27, paragraph no. 10, legislative decree no. 185/2008, and identifies those companies according to their turnover or earnings (two elements not necessarily similar) not lower than the following:
- 300 million Euro until 2009;
- 200 million Euro until 2010;
- 150 million Euro until 2011;
- 100 million Euro since 2012.
Lastly, two more provisions were introduced on precise elements enabling deductibility of losses on receivables (any amount), that are respectively:
- when the collection right is time-barred according to the provisions of the Italian Civil Code (usually 10 years);
- when the credit is deleted by IAS financial statement due to extinguishing events (i.e. without recourse factoring, transaction, credit conversion in shareholding, waiver).
The above-mentioned provisions have been implemented since 2012, that is for those entities having financial year different from the calendar year, those companies having financial year in progress on 12th August 2012.
article no. 33, legislative decree converted into law no. 134/2012
Comparing debt restructuring to other bankruptcy procedures.
Law converting legislative decree no. 83/2012 puts the agreement for debt restructuring pursuant to article no. 182-bis of Bankruptcy law in the same category of the bankruptcy procedures listed in article no. 101 of the Income Tax Act (TUIR). As a result, the deductibility of losses on receivables has become automatic after the agreement’s approval decree.
Some aspects of the regulation need further clarifications.
Particularly, it shall be determined both the date identifying the period within six-months of the expiry (end of the financial year or approval of financial statement) and the opportunity to consider individually receivables from same customers for minimal threshold. Furthermore, it shall be clarified the period within the deduction is possible and consequently if mandatory to make that deduction at the financial year opening of the procedure or to charge it future financial years (one or more).