The clarifications of the Ministerial Decision POL 1056/02.03.2015 of the Minister of Finance have been taken into consideration).

The provisions amounts for bad debts amortization and the write-off of those provisions amounts are deductible for tax purposes, thus as per the following cases:

a) In cases of due receivables up to an amount of € 1.000,00, which have not been collected for a period of over 12 months, the tax payer can build a provision for bad debts to a percentage of 100% of the receivable concerned, provided that the necessary actions¹for the assurance of the right to collect the receivable concerned, are undertaken,

b) In cases of due receivables over the amount of € 1.000,00, which have not been collected for a period of over 12 months, the tax payer can build a provision for bad debts, provided that the necessary actions¹ for the assurance of the right to collect the receivable concerned, are undertaken, according to the following table:

Time of delayed

receivable collection

(in months)

Provisions

(in % percentage)

beyond 12 months50%
beyond 18 months75%
beyond 24 months100%

c) It is not allowed to build provisions for bad debtsin the cases of bad debts of / against the share holders or partners of the company with a minimum participation percentage of 10% and of the subsidiaries with a minimum participation percentage of 10%, unless there is a pendency of proceedings before court concerning the claim for those debts or in case the debtor has submitted a claim for declaration of bankruptcy or admission to resolution / sanitation procedure or a compulsory enforcement procedure has been undertaken against the debtor.

Moreover, it is not allowed to build provisions for bad debts which are covered by insurance or any security or any further contractual or collateral security, or regarding debts of the Public Sector or the Regional & Local Authorities or for those given with the guarantee of those public organizations.

The provision for bad debts is reposted in the company’s profits, provided that the receivable:

a) is asserted to be collectable, or

b) is written-off.

A receivable can be written-off for tax purposes, only provided that the following conditions are cumulatively met:

a) an amount corresponding to the debt has already been posted as revenue,

b) the receivable has already been written-off from the tax payer’s official books, and

c) all necessary actions¹ according to the law have been undertaken for the collection of this receivable.

SPECIAL  CASES :

1. The banks can deduct provisions for bad debts to a percentage of 1% on the yearly average amount of the actual financing activity / allocations, as concluded from their monthly accounting statements.

 2. The financial leasing companies can deduct provisions for bad debts up to a percentage of 2% on the total leases amount which arise from the financial leasing contracts concluded during the tax year. This provision amount for each tax year, added with the amount of the provision built in previous tax years and displayed in the company’s official books kept, cannot exceed the percentage of 25% of the company’s paid-up share capital.

(¹) The term of “necessary actions” for the assurance of the right to collect the receivable.

Based on the Explanatory Report of Law 4172/2013, the following are defined as proper / necessary actions for the assurance of the receivable collection:

  • undertaking of legal remedies / appeal
  • application for protective measures or enforcement actions
  • check bouncing from the bank of issuance
  • submission of all necessary documents for the issuance of a payment order

Since the relevant actions have been followed for the assurance of the company’s receivable, they do not need to be repeated and they are taken into consideration for the building of provisions for bad debts which are accepted from the tax point of view.

On the contrary, in the case that the companies did not undertake the aforementioned necessary / proper actions for the assurance of the right to collect their receivable, they should proceed with a tax adjustment of the bad debts provisions, provided that those are built for the purpose of implementing the commercial law, as those are not accepted from the tax point of view.