Tax Relief for Irrecoverable Debts

The law has been amended with effect from 1 August 1995 to allow a certain measure of tax relief for receivables which remain unpaid for a period of time and are likely to be to some extent irrecoverable.

According to the amendments, taxpayers are entitled to create various tax deductible provisions and adjustments, with first effect from the calendar year 1995. In general, relief is only available for debts of a trading nature, and the amount of relief available differs depending on the length of time the debt has been outstanding and the position of the debtor.

A 100% tax deductible adjustment can be created with respect to a receivable in the case of the debtor being in bankruptcy where the petition was filed in Court. Also, receivables which are uncollectible due to the specific reasons stated in the law can be 100% expensed.