63. Deduction of Provision for Doubtful Accounts in Japan 貸倒引当金

貸倒引当金について英語でまとめました。

The table below outlines the treatment of provision for doubtful debts for Japanese corporate tax purposes. 

See this post for more about Japanese tax and accounting.

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Provision for specific doubtful debts 個別評価
	Deductibility  損金算入	The provision is deductible up to the limit (see below) and up to the amount recognized as an expense for accounting purposes.
	Deduction limit 繰入限度額	The deduction limit varies depending on the circumstances as follows:
		1. The payment for the debt is deferred or made in installments based on a plan approved under Corporate Reorganization Act		The amount of the debt minus the amount paid within 5 years after the end of the fiscal year of the approval
		2. Part of the debt is not expected to be collected because the debtor has negative net worth for a significant period and is not expected to turn around the business		The amount of that part
		3. A petition for the commencement of reorganization proceedings is filed against the debtor		50% of the debt
		4. The debt is owed by a foreign government, its economic value has significantly lowered due to non-repayment for a long time and it is significantly difficult to receive payment		50% of the debt
General provision 一括評価
	Deductibility 損金算入	The provision is deductible up to the limit (see below) and up to the amount recognized as an expense for accounting purposes.
	Deduction limit 繰入限度額	General	“Total book value of debts at fiscal year-end” x “Average loan loss rate*” * The rate is the average of loan loss rates for the last two or three fiscal years.
		Small and medium-sized enterprises (SMEs)	Statutory rates of provision (but this does not apply to SMEs with three-year average sales of more than JPY1.5 billion)
Eligible companies 適用法人		The following Japanese companies may deduct the above provisions as a tax expense: 1. SMEs, i.e., corporations with stated capital of JPY100 million or less at fiscal year-end (except for corporations wholly owned by large corporations) or with no capital   2. Corporations with monetary claims related to lease transactions 3. Certain other corporations
Requirements 申告要件		Provision for specific doubtful debts and general provision are available only if the final tax return includes the details of the deductions.
Reversal 益金算入		The amount deducted as an expense for a fiscal year is added back to income for the following fiscal year.
Excluded debts 対象外の金銭債権		Provision is not allowed for the following debts: 1. Monetary claims of corporations with lease related monetary claims (i.e., 2 of “Eligible companies”) other than those related to lease transactions 2. Monetary claims owed by a corporation to another where 100% relationship exists between the two corporations

  

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