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.