The write-down of a receivable does not begin with the question of whether the loan is legitimate, but with the documentation proving that the loan exists. A loan agreement, a corresponding liability on the part of the debtor and a consistent entry in both tax returns are not mere formalities, but constitute the evidence itself.
A loan from 2006
A company has been in existence since 1996 and has a single shareholder. That shareholder also holds 50% of the shares in the subsequent debtor, which purchased a former ski jump in 2006. According to the company, it provided a loan for that purchase. Its 2017 annual accounts show a receivable of €95,397 as at the end of 2016, which, with accrued interest of 5%, amounts to €147,544. A year later, that item has disappeared and €142,504 is recognised as an extraordinary expense in the profit and loss account. The debtor is wound up in March 2018.
Burden of proof on the inspector
The inspector does not allow the expense to be deducted. He sets the loss at €116,485 by way of a decision. In his view, the claim constitutes an uncommercial loan, as no third party would accept this credit risk. The court places the burden of proof on the inspector and rules that the inspector has failed to meet it. The loss is set at €258,989, in accordance with the tax return. On appeal, the inspector argues, first and foremost, that no claim exists. This reverses the burden of proof.
Not a trace anywhere
Anyone raising a claim must substantiate it themselves. The debtor’s 2017 annual accounts do not show any corresponding liability. In the corporation tax returns for 2010 to 2014 inclusive, neither of the two companies mentions the loan. Nor do the taxpayer’s 2007 annual accounts – the year following the alleged loan – show any claim against the debtor, but only an equity interest and a few short-term receivables. This is inconsistent with a loan from 2006 for the skid pad. No further supporting documents are available.