Bad debts and its deduction.
The term authorized deductions implies various concepts, within which are located the “bad debts“, which must be considered in the annual determination of the Income Tax (ISR). However, in order to apply this assumption, it is important to comply with the requirements set forth in Art. 27, section XV of the LISR.
Bad debts must either allow the limitation period to run its course or, where appropriate, make the practical impossibility of recovery known, which occurs in the following cases:
1.- It will depend on the amount of the credit, whether it passes a year and is greater than 5,000 UDIS, or that the day of its maturity is greater than 30,000 UDIS. For this, a lawsuit must be filed and in both cases, the debtor must be informed in writing that the debt he has with us will be considered deductible. For this reason, the debtor must accumulate it in its income, and must also inform the Tax Administration Service (SAT).
2.- When the debtor has been declared in bankruptcy.
3.- It will be considered impossibility of recovery in credit institutions where the portfolio is punished by the provisions established by the National Banking and Securities Commission, in this case no notice must be presented to the SAT.
4.- It will be considered impossibility of recovery when there is mortgage guarantee.
So if you have bad debts you can deduct them in the determination of the annual Income Tax and thus get a benefit.
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The main purpose of this information is to provide guidance to the general public. It does not replace the provisions of applicable law. Nor does it replace the specialized legal advice or consultancy that can be offered by any of the lawyers and/or accountants of Bandala | Díaz | García