Tax treatment of provisions for impairment of bad and doubtful debts of banks and financial institutions in Tanzania.
One of the core businesses of banks and financial institutions is lending and offering different forms of credit facilities. In return, the banks and financial institutions charge interest on such loans and advances. It is common, in the ordinary course of lending, for banks and financial institutions to suffer losses when such loans and advances become wholly or partially uncollectible. There are several remedies to the banks and financial institutions where the borrowers default. Such remedies include realization of securities. Sometimes such realization may not take place within a given year of income due to several contingencies, such as litigation, prolonged realization processes or some other reasons. Thus, in that given year of income, the banks and financial institutions may fail to recover the principal sum and interest. Depending on the nature of the default and the practicability or otherwise of realization of the security, this may lead to bad debts or what may be termed as doubtful debts…
