Veversion to print | November 2021
The 2022 tax reform proposes establishing stricter requirements for the deduction of bad debts.
Currently, the Income Tax Law allows for the deduction of uncollectible credits due to “notorious practical impossibility of collection” in debts greater than 30 thousand investment units (approximate value $208,684.98 MX) provided that the debtor has been sued judicially or arbitration. This has allowed taxpayers to apply this deduction from the moment the lawsuit is filed or the arbitration procedure is initiated.
The reform proposes to extend this requirement in order to force taxpayers to obtain a final resolution issued by the competent authority, which demonstrates that they have exhausted all collection efforts or, where appropriate, that it was impossible to enforce the resolution. This means that taxpayers will have to postpone the deduction and that the legal costs they will have to incur will increase.
This treatment will not apply to legal entities under the simplified trust regime proposed by the reform. Since these taxpayers will accumulate their income only until they receive it, they will not have this problem since the deduction of these debts is made by taxpayers who accumulated income that was never collected.
We recommend that you identify your debts that exceed this threshold and analyze the possibility of promoting the legal procedures required for the respective deduction in this fiscal year, that is, before the reform comes into force.
***The publication of this note does not constitute legal advice, nor is it intended to be applicable to particular cases.
If you require additional information, please contact the partner responsible for your matters or one of the lawyers mentioned below:
