The Supreme Court reaffirms the requirements for the deduction of bad debts originated in secured loans

The Supreme Court revoked the assessment made by AFIP to Banco Frances. The taxpayer deducted certain bad debts, but AFIP challenged such deductions.

Specifically, the tax authority argued that with respect to certain secured loans, the tax payer should execute the guaranty and prove that it is not enough to cover the amount of the credit due, before deducting such credit as a bad debt.

The taxpayer appealed the assessment made by AFIP through the Tax Court and the Court of Appeals, before reaching the Supreme Court.

The Supreme Court argued that no distinction should be made between secured loans and non secured loans regarding the requirements to deduct such credits as bad debts. The Court considered that the applicable legislation refers to the initiation of judicial proceedings, as a deduction requirement, without making a distinction between the two types of loans.

Consequently, in order to deduct a loan (secured or not) as a bad debt it would be sufficient to initiate a judicial proceeding and it would not be necessary to execute the guaranty as the tax authority pretended.