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6.3. Reserves and Provisions

In general, provisions or reserves are deductible if booked to cover identifiable and realistic future liabilities. The law specifically provides for a number of provisions, including for:

  • Paid annual leave of employees;
  • Foreign exchange fluctuations;
  • Price increases; and
  • Doubtful debts, albeit generally limited to banks and financial institutions with respect to mid-term and long-term lending operations (in which case generally limited to 0.5% of the relevant engagements) as well as mortgage loans and lending to export and construction activities abroad.