A provision for loss on works in progress is tax deductible if it is computed by comparison between on the one hand, direct costs already borne linked to the sections of operations already completed and the projected cost of the works remaining to be performed, and on the other hand, receipts expected according to the terms of the agreement.
According to the High Court, if the company has not been able to proceed to such a computation, it simply cannot deduct the provision (CE, 9e and 8e ss, May 10, 1996, req. no.71187, Ste Albouw Hamart).
Through this decision, the High Court confirms again its position on one of the conditions necessary to deduct the provisions for loss on works in progress (CE, Oct. 26, 1983, req. no.34 539: Dr. fisc. 1984, no.11, comm. 537, concl. Ph. Bissara).
With Article 29 of the modified Finance Law for 1991, the lawmaker has reduced the scope of this case law, by way of limiting the amount of the provision to the sole difference between the cost price of works already performed and the selling value of these works, increased by an additional price already agreed at the date of booking of the provision.
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