Write-downs of receivables at 31 December: a write-down in the books is not yet a tax cost

Two Lists That Look Like One

Every December, an office with full-books clients produces a list of receivables to write down. Most offices produce one list. They need two.

The first is the accounting write-down: the amount by which receivables are reduced in the balance sheet because they probably won't be paid. The Accounting Act (art. 35b) requires it by the balance sheet date at the latest, and it reduces the client's result.

The second is the tax-deductible part of that write-down. Under the CIT Act write-downs are, as a rule, not a tax cost (art. 16(1)(26a)). The exception is narrow: a write-down of a receivable that was earlier booked as revenue, where non-collectability has been substantiated (art. 16(2a)). PIT has a parallel rule for full-books taxpayers.

The two lists overlap but are rarely the same. A client with a 25% write-down on everything more than six months overdue may have a tax-deductible part close to zero. One debtor that went into bankruptcy in November can account for most of it.

When the office runs one list, one of two things happens. Either the tax return takes the whole write-down as a cost, which an inspector will reverse with interest, or it takes none of it, and the client overpays on a real loss.

The Accounting Side: Policy, Not Instinct

Art. 35b lists the situations where a write-down is needed: debtors in liquidation or bankruptcy, receivables that are disputed or overdue where payment is not probable, and receivables with a high risk of non-collection where the type of business or customer base justifies it. That last category is what allows a general write-down by age bands.

The Act gives no percentages. A typical policy looks something like this:

Overdue	Write-down
up to 90 days	0%
91–180 days	25%
181–365 days	50%
over 365 days	100%
debtor in liquidation / bankruptcy	100%

The numbers are illustrative. What matters is that they are written down in the client's accounting policy before year-end. Then the December calculation is just a rule applied mechanically, not a negotiation with the client about how good the result should look.

The write-down goes to other operating costs (or finance costs for interest receivable). When the receivable is later paid or written off, the write-down is reversed or used up.

The Tax Side: Substantiated, Not Just Old

For the write-down to be a tax cost, the receivable has to have been recognised as revenue first. That excludes, for example, a write-down on a loan principal or on interest that was never booked as revenue.

Then non-collectability has to be substantiated. The CIT Act gives examples: the debtor is in liquidation or bankruptcy, restructuring proceedings have been opened, the claim is confirmed by a final court judgment and sent to enforcement, or the debtor disputes it in court. The list starts with "in particular", so other evidence can work. But age alone is weak evidence, and the burden is on the taxpayer. An invoice that is 200 days overdue from a debtor who is still trading and answering emails is a good candidate for an accounting write-down and a poor one for a tax cost.

Two mechanics catch offices out:

1. Timing. The cost lands in the year when both conditions are met: the write-down is booked and non-collectability is substantiated. A write-down booked in 2025 for a debtor who goes into bankruptcy in 2026 becomes a tax cost in 2026, not 2025.
2. Reversal. If a write-down that was a tax cost is later reversed because the debtor paid, the reversal is taxable revenue. If the write-down was never a cost, the reversal is neutral. That means the office has to keep track of which write-downs were deducted, sometimes for years.

This is a different list from bad-debt relief in PIT and CIT, which works on its own 90-day trigger and adjusts the tax base directly. The same invoice can appear on both, and the office has to make sure it isn't deducted twice. I covered the VAT side, including the debtor's obligations, in bad-debt relief for the debtor.

KPiR clients don't make write-downs at all. For them the route is the relief, or writing off a receivable once non-collectability has been documented.

The Size of the Job

Take an office with 25 full-books clients. At 31 December they have about 1 900 open receivables between them. Around 260 are more than 90 days overdue. Of those, maybe 30 are from debtors that appear in a liquidation, bankruptcy or restructuring register, or are in court.

By hand, this is two to three days of work in January: export the receivables from each client's ledger, check which were actually paid in the last days of December (the bank statement arrives after the ledger export), sort by age, look debtors up one by one in KRS, CEIDG and the National Register of Debtors, apply the policy and write two lists. Most of that time goes into the steps that don't need judgment.

It also tends to go wrong in the same places. A receivable that was paid on 30 December but not yet matched gets written down. A debtor's bankruptcy announced in October gets missed because nobody checked the register after the summer. Currency receivables get written down at the wrong rate, because the write-down was calculated before the balance sheet valuation of currency items was done.

What the Agent Prepares

An AI agent with read access to the client's ledger, the bank statements and the public registers can have both lists ready in the first week of January:

• Ages every open receivable as at 31 December, after matching the December and early-January bank statements, so paid invoices drop off. Partial payments and offsets are shown separately.
• Checks each debtor with an overdue receivable in KRS, CEIDG and the National Register of Debtors for liquidation, bankruptcy, restructuring or deletion, and records the date and source of each finding.
• Applies the client's policy: the overdue bands, the 100% rule for debtors in insolvency, the order of valuation for currency receivables.
• Splits the result into the proposed accounting write-down and the part that may qualify as a tax cost, with the reason for each line ("bankruptcy announced 14.10, KRZ"; "overdue 210 days, no substantiation").
• Flags overlaps with bad-debt relief and with write-downs made in earlier years, including which of them were already deducted.
• Lists receivables with balance confirmations outstanding or disputed, using the balance confirmation responses where the office collected them.

The agent doesn't decide whether non-collectability is substantiated by "other evidence", doesn't set the policy percentages and doesn't book anything. Those are decisions with a signature under them. Its job is to make sure the accountant looks at the 30 debtors that matter instead of 1 900 lines.

Write the Policy Down in November

The one thing to do before 31 December: check that each full-books client has the write-down bands in its accounting policy, and that the office has a record of every write-down from earlier years that was taken as a tax cost. Without the first, the December number is an opinion. Without the second, the reversal next year is a guess.

If you'd like to see the two lists on one of your clients' data, write to me. I'll run the ageing and the register check on last year's closing balances and show you where the accounting write-down and the tax cost diverged.