The deduction for company tax purposes of provision for doubtful debts as regards credit establishments has been clarified as follows:
i) Risks not covered by either the guarantee of state or adequate collateral security: Deduction of the total doubtful debt are spread over a period of three years as follows:
- Year 1 - up to 25%
- Year 2 - up to 50%
- Year 3 - up to 25%
ii) For other risks covered by adequate collateral security, deduction of total doubtful debt are spread over a period of four years as follows :-
- Year 1 - up to 15%
- Year 2 - up to 30%
- Year 3 - up to 30%
- Year 4 - up to 25%
It is important to note that provisions for doubtful debts are matters that are in principle, left to the Judgment of management, although the reasonableness or otherwise of management's judgment can be questioned by the Tax Authorities since the provision should not be over stated. The decision by the tax Authorities to bring this issue into the Legislative domain
