The proposed tax reform provides a strong incentive for banks to write off billions, if not tens of billions of kuna in uncollected loans! At the end of last year, debtors stopped repaying about 46 billion kuna in loans – two-thirds of that amount was owed by companies, and one-third by citizens. The Ministry of Finance announces that in 2017 it will reduce the tax obligation of banks if they write off loans that were classified as bad, or uncollectible, on December 31, 2015. European supervisory bodies consider a loan to be bad if the debtor has not paid the agreed installments for more than 90 days.
In the meantime, from December 31, 2015, to June 30 of this year, the value of bad loans has decreased by six billion kuna, which banks have sold or written off, leaving 26 billion kuna in bad loans from companies and 12.7 billion kuna in unpaid debt from citizens in the banks’ portfolios. In less than two years, banks have already written off 12 billion kuna of debt, but half of that write-off was related to the conversion of the Swiss franc. The government wants to encourage a stronger write-off of problematic debt, so it will allow banks to record each kuna of written-off debt in 2017 as a tax-deductible expense on which they will not pay corporate tax, reports Večernji list.
Those who are blocked, people under enforcement, companies in blockade… can hope for a write-off… Damir Odak, Deputy Governor of the HNB, does not want to speculate on how much debt will be written off, but explains that banks can only write off the part of the debt that is covered by reserves.
