The Tax Administration, in recent years, based on its legal faculties of control of the taxes it manages, has questioned in the processes of income tax control, which performs by taxpayers engaged in various economic activities, such as the distribution of energy, production of dairy products, supermarkets or fast food businesses, the tax handling these productive agents provide to the "waste" caused by its productive processes; and is that, in constituting such events decreasing in value, volume, weight or quantity of products, circumstances inherent in any industry, which are justified from reasonable standards and parameters specific to each business, they should be admissible within the category of costs deductible from the income tax of such economic operators, having incurred, in effective costs for the realization of their economy order or activity; it is not appropriate, in the view that it conceptualises those events as capital losses which, under tax legislation, do not turn out to be deductible from that tax.
In view of the above, it is appropriate to address certain normative and doctrinal elements, in order to determine whether the values recorded as losses, turn out to be legal, loss of capital and as a consequence, not deductible from income tax, as part of the cost of selling the taxpayer.
So, we'll say that, the Income Tax Act, in general to determine the provenance of deductions is inspired by a number of guiding principles in tax matters, such as the Principles of (i) Necessity of Expenditure, (ii) Net Enrichment and (iii) of Causality, under which the costs and expenses that are necessary for the generation of income or conservation of the income source are deductible and that also have a relationship with the income generation or conservation of the income source and that also have a relationship with the income generation or conservation of the income effective economic capacity and causality with the turn or activity to which the tax payer is given.
That is, in order for the cost of sale of products reduced or reduced as an inherent consequence of the business, they can be deducted from the income obtained from economic operators, it must be demonstrated, inter alia, that they have participated in the sales of the company or at least in the case of the losses that were acquired in order to generate taxed income and which turn out to be typical of the taxpayer's turn or economic activity.
On the other hand, it should not be overlooked, that there is a conceptual and legal difference between losses and losses of capital, where the latter are characterized by the result of a devaluation of the good (loss of value), which ends up being transferred or sold at a value less than that originally acquired, which is why, where section 29-A numeral 10) of the Income Tax Act refers to capital losses arising from the transactions referred to in Articles 14 and 42 of that law, or to transactions other than them, is referring specifically to transactions in which a good is disposed of and as a result of such transfer, the value of the sale thereof is less than the basic or acquisition cost of that product; which is different from what is a decrease, because it is a decrease, the physical loss, in the volume, weight or quantity of the stocks, caused by reasons inherent in the nature of the goods, the production process or the turning or business of the productive activity; it should not therefore confuse those concepts, because each of them has a different legal treatment from each other, in accordance with the provisions of the tax regulations.
Thus, succinctly following the foregoing legal considerations, we can conclude that the rejection of the deduction of income tax, of the reductions caused as an inherent event of the taxpayer's turnor, under the concept of capital losses, turns out to be legally inappropriate, on the basis of compliance with the above-referred principles in tax matters.
Finally, it is relevant to state that the reductions on the basis of the authentic interpretation made to Article 28 of the Law on Income Tax, by means of Legislative Decree No. 345 dated 29 May 2019, published in the Official Journal No. 99, Volume No. 423, dated 31 May 2019, would be deductible from income tax, to the extent that such securities are duly documented and recognized or accreditedors by the relevant existing bodiesor regulatory bodies; so that, in order to access that deduction, it is relevant for activities that do not yet have a parameter of reductions supported in the industry that the relevant regulatory body sets those parameters to enable it to be deducted.