Following the measures taken by the various governments in Belgium and abroad to fight against the spread of the Covid-19, it can be expected that credit institutions take write-downs on receivables. In this respect, the Belgian tax authorities have published a circular on this topic earlier this week.
In a nutshell, the tax authorities have confirmed that the current situation qualifies as special circumstances, occurring during the current taxable period. However, the circular specifies that the taxpayer still needs to identify each doubtful debt individually and complete the related compliance form. The tax authorities moreover indicate that they will show some flexibility on these conditions, however the practical implications of such flexibility remain unclear at this stage.
Finally, despite the fact that many tax practitioners consider that write-downs on bonds should be deductible, the circular seems to reconfirm that write-downs on receivables incorporated in bonds or similar securities are excluded from the benefit of the tax exemption provided in article 48 BITC. This topic gave rise to much debate with tax authorities further to the 2008 financial crisis and 2011 Euro crisis and an analysis based on specific facts and circumstances was required to assess deductibility of such write-downs.
Of course, PwC remains available to provide its assistance on this matter.