In 2023 there are several specific features for writing-off the receivables. Let’s look at specific examples in which cases it is possible or not to take into account debt write-off as part of non-operating expenses.
In accordance with subpoint 3.22–3.24, point 3, article 175 of the Tax Code of the Republic of Belarus extraordinary expense include:
- losses from the write-off of receivables for which the limitation period has expired or the limitation period for the presentation of enforcement documents for execution;
- losses from write-off the receivables, which cannot be (are impossible) for recovery;
- amount of receivables under the decommissioning of legal entity.
In each of these cases it’s ILLEGAL to include accounts receivable in non-operating expenses:
– arising in respect of revenue, non-operating income for which the organization has applied an exemption on income tax (the right to non-payment of income tax);
– in the amount of the organization’s counter obligation (accounts payable) to the counterparty
– arising from transactions that were not previously taken into account in the taxation of profits, including in connection with the application of special taxation regimes by the organization;
– for which the allowance for doubtful debts is taken into account in the taxation of profits.
Some examples from practice are given below:
Example 1
Due to the expiration of the limitation period, the organization in the 4th quarter of 2023 writes off accounts receivable incurred in 2020 for the sale of goods in the amount of BYN 12,000.00. During the sale of goods period, the organization used the labor of disabled people. The number of people with disabilities averaged 56% in 2020, and therefore an income tax benefit was applied.
When writing off accounts receivable in the 4th quarter of 2023, the organization is not entitled to take this amount into account as part of non-operating expenses, because accounts receivable arose in relation to revenue for which the organization applied an income tax exemption.
Example 2
Due to the exclusion the counterparty from the Unified State Register of Legal Entities and Individual Entrepreneurs, the organization in the 3rd quarter of 2023 writes off the receivable that are unrealistic for collection in the amount of BYN 15,000.00. The receivable arose in connection with the provision of services during the period of application of the general taxation system without the application of tax benefits. At the same time, there is an unpaid debt to this counterparty for a penalty for late fulfillment of obligations under the agreement in the amount of BYN 1,000,00.
Due to the presence of a counter obligation to the counterparty, when writing off accounts receivable, the amount of BYN 14,000.00 is included in non-operating expenses.
At the same time this sum accounts payable in the amount of BYN 1,000.00 is fully included in the composition of non-operating income.
Example 3
The commission agent organization carries out the sale of the committee’s goods to customers. Buyers transfer funds for the goods to the settlement account of the commission agent. In the 4th quarter of 2023, the limitation period for accounts receivable for the sale of the committee’s goods in the amount of BYN 7 000,00 expires, in connection with which the debt is written off in accounting.
According to paragraph 3, paragraph 3 of Instruction No. 102, receipts from other persons under commission agreements, orders and other similar agreements in favor of the committee, the principal, etc. Received by the payer-intermediary funds from third parties in favor of the committee are not recognized as income of the organization for profit tax purposes (non-operating income) (Part 6, paragraph 1 of the letter of the Ministry of Internal Affairs dated March 23, 2018 No. 2-2-10/00541 “On recoverable expenses”).
Consequently, the written-off the receivables of the buyer is not taken into account as part of non-operating expenses, because it arose from transactions that were not previously taken into account in the taxation of profits.
Example 4
In 2021-2022, the organization applied a simplified taxation system, and since 2023, the general taxation system has been applied. In May 2023, an application for liquidation was submitted to the registration authority.
Upon liquidation of the organization, all amounts of debited receivables that arose in 2021-2022 are not considered as part of non-operating expenses, since such debts arose from transactions that were not previously taken into account in the taxation of profits in connection with the use of the Simplified Tax System (STS).
Example 5
In the 4th quarter of 2023, due to the expiration of the limitation period, the organization writes off the receivables arising in connection with the transfer of a 100% prepayment for goods in the amount of BYN 1,200,00.
The organization does not have the right to consider losses from writing off the receivables when taxing profits as part of non-operating expenses, since the debt arose from transactions that were not previously taken into account when taxing profits.
Example 6
Due to the presence of the receivables for the sale of goods in the amount of BYN 5,000.00, the organization has created a reserve for doubtful debts in tax accounting. More than 3 years have passed, but the debtor has not repaid the debt, and therefore its write-off is being carried out in the 3rd quarter of 2023.
These receivables are not included in non-operating expenses due to the presence of direct restrictions in the Tax Code.
It should be noted that until 2023, according to the letter of the Ministry of Internal Affairs dated August 29, 2019 No. 2-2-10/01952, the amounts of the receivables that formed reserves for doubtful debts in tax accounting and were accounted for as part of non-operating expenses on the basis of subclause 3.48 of clause 3 of Article 175 of the Tax Code could also not be counted as part of non-operating expenses again for other reasons, for example, provided for in sub-paragraphs 3.22, 3.23, 3.24 of clause 3 of Article 175 of the Tax Code.
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