Aware of the significant impact of the pandemic on the economy, the Belgian tax authorities have very recently published an updated circular letter on the exemption conditions for write-downs on trade receivables (Circular 2020/C/45 dated 23 March 2020). In this circular letter, the tax authorities acknowledge the spread of the Covid-19 virus and the drastic measures taken by the government to take back control over the human impact of Covid-19, as exceptional circumstances arisen during the taxable period. This practice note is available in Dutch and in French.
Updated circular letter – Clarification on the conditions to fulfil
The tax authorities first confirm that the existing exemption conditions for write-downs on trade receivables are still applicable with a focus on the clear identification of the specific debtors and the link to an event occurred during the taxable period (and still existing at the end of the taxable period) substantiating the doubtful character of the receivable.
Especially with regard to the second condition, the tax authorities confirm in the circular letter that the spread of the Covid-19 virus and the drastic measures taken by the government to take back control over the human impact of Covid-19, are regarded as exceptional circumstances occurred during the taxable period, justifying the write-down on trade receivables on entities having a backlog in payments following (directly or indirectly from) specific (health) measures taken by the government.
It remains important that Belgian entities still identify each doubtful debt individually and complete the relevant form in the tax return (including a short reference to the circumstances leading to the necessary write-down). If a debtor experienced a serious drop in turnover following the measures of the government, some flexibility will be applied considering the doubtful character of the write-downs as tax free.
As one can only refer to an event occurred during the taxable period from a tax perspective, this clarification will not be applicable to review the exemption of the write-down on trade receivables as per 31 December 2019. However, companies with an accounting year-end after 16 March 2020, can already take into account this flexibility when preparing the tax return of the company.
Following the necessary measures to contain the spread of the pandemic, the Belgian tax authorities take steps to try and mitigate the impact on companies that are now facing major disruption, within the existing framework. In these volatile times, the PwC experts are there to give you guidance on the key considerations you should take into account, so don’t hesitate to reach out.