Introduction: The Italian Supreme Court (Corte di Cassazione) defines the "time window" for the deductibility of losses on debts in insolvency proceedings
The correct recognition in profit or loss of losses on debts owed by parties subject to insolvency proceedings received fundamental clarification in Order No. 32289 of the Italian Supreme Court (Corte di Cassazione) of 11 December 2025. This ruling establishes the time limits for the deductibility of such losses from business income.Deductibility of losses on debts owed by bankrupt debtors: Time limits and the accruals principle
The Italian Supreme Court (Corte di Cassazione) has established that losses on debts owed by bankrupt debtors are deductible from business income only within a specific "time window". Under Article 101, paragraphs 5 and 5-bis of the Italian Income Tax Code (TUIR), the irrecoverability of the debt is presumed ex lege from the date of the judgment declaring bankruptcy (or an equivalent order).The limits of deductibility
The period for claiming the deduction is not unlimited and is defined as follows:- Opening of the window: This coincides with the financial year in which the opening of insolvency proceedings is declared. The "certain and precise" elements required by the provision for deductibility arise in that financial year.
- Closing of the window: This corresponds to the financial year in which the receivable is definitively derecognised and written off from the balance sheet.
