The Head of the STOU signed the letter during a meeting of tax office, NBU and Association of Taxpayers of Ukraine officials. Bank representatives were also present.

According to the clarification, further to the provisions of paragraph 159.1.4 of Article 159 of the Tax Code of Ukraine and the order approved by NBU Resolution No.172 dated 1 June 2011, banks have the right to write-off bad debts classified as such according to NBU normative and regulatory acts at the expense of loan loss provisions. This applies to instances when this indebtedness does not meet bad debt criteria set forth by the Tax Code, and when there is no further recognition of insurance reserves as bank taxable income.

According to the prior positions of certain local tax authorities, fulfilment of NBU Resolution No.172 requirements was not sufficient for writing-off bad debt at the expense of insurance reserves. The conditions envisaged by paragraph 14.1.11 of the Tax Code on definition of indebtedness as “bad debts” had to be met as well.

The clarification is meant to eliminate this discrepancy.

We remind readers that according to point 3 of the Order on Reimbursement of Bad Debts at the Expense of Reserves by Banks, approved by Resolution of NBU Board No.172 dated 1 June 2011, a bank has the right to reimburse (write-off) indebtedness at the expense of reserves if it is recognized as bad debt according to NBU normative and regulatory acts, and provided that there is an overdue payment on indebtedness for principal debt and/or accrued interest and/or commissions that has been delayed for over 180 days (except for indebtedness resulting from active bank transactions with related parties, business activity receivable indebtedness and settlements with bank employees).