The possibility of deducting losses on minor receivables

published on 27 July 2021 | reading time approx. 2 minutes

In response to query no. 342, the Italian Revenue Agency once again addressed the topic of whether losses on low-value receivables that have been outstanding for more than six months can be deducted for IRES purposes, and clarified the methods of time apportionment.

In its response to query no. 342 dated 13 May 2021, the Revenue Agency has clarified the procedures for the time apportionment of low-value losses on receivables older than six months.

Based on Article 13, Paragraph 3, of the Legislative Decree 147/2015, the creditor company is responsible for choosing between:

the financial year during which the loss is to be deducted;
the calculation of the corresponding value.

The choice of the financial year in which to deduct the losses that have become relevant for tax purposes is entrusted to the creditor company, with the sole restriction of time represented by the tax period in which the credit is to be written off from the financial statements.

Article 101, Paragraph 5, of the Consolidated Income Tax Act establishes that precise criteria for the deduction of losses exist “in all circumstances”, including when the receivable amount is not significant and a period of 6 months has elapsed since the payment became due (also called “mini-credits”).

The receivable amount is considered insignificant when it does not exceed: