Uncollected receivables deductible as of 2005

The losses incurred by companies as a result of uncollected receivables will become fiscally deductible as of next year, though under certain conditions. This will become possible due to the Fiscal Code modifications made by an ordinance recently endorsed by the Government.

Law 571/2003 on the Fiscal Code said these losses could be considered deductible expenses if recorded after January 1, 2007 and only in cases where the debtor went under.

The ordinance to modify the Fiscal Code due to come into force early in 2005 will require a number of conditions that will allow the granting of deductibility. These conditions include the conclusion of the debtors bankruptcy procedure by a court ruling; the death of debtors with no possibility of collecting the debt from the heirs; the disbandment of the debtor company if it is a limited liability company and has a sole associate or its liquidation with no successors.

Companies will be allowed to increase their spending by an amount that equals the losses caused by the failure to collect the receivables from debtors experiencing serious cash troubles affecting their entire patrimony.

The normative act left out of the non-taxable revenue category those revenues made by a company that gets shares from a debtor in exchange for the cancellation of a specific debt.

Besides contributions to work accident and occupational disease insurance required by the law, the deductible expense category includes insurance premiums for occupational hazards.