Deduction of losses on uncollectible receivables held by a partner in a general partnership: conditions and details.
In the current economic context, managing financial and tax risks is essential for businesses and their partners. Among the sensitive issues is the deduction of losses on uncollectible receivables held by a partner in a general partnership. A recent decision by the Council of State rendered on March 12, 2025 (CE, 9th-10th ch., n°474824, Sté civile Saint-Louis) simplifies this process for creditor partners while reminding of the proof requirements for uncollectibility.
Loss on receivables held against a general partnership: a complex principle of fiscal solidarity
A General Partnership (SNC) involves the unlimited and joint liability of its partners for social debts. This has made it difficult to recognize a loss on receivables for tax purposes: as long as the partners remain solvent, the receivable against the SNC was not considered definitively compromised.
Traditionally, to deduct such a loss, a partner had to prove not only the uncollectibility of the receivable against the company but also the insolvency of each of their co-partners. A particularly heavy requirement in practice.
A ruling from the Administrative Court had recently reiterated this strict approach in a case involving a Portuguese SNC.
The contribution of the March 12, 2025 decision: easing the burden of proof for the creditor partner
The Council of State, in its decision of March 12, 2025 (reference 2025-04-25T22:00:00.000Z), introduces an important evolution for creditor partners of an SNC.
From now on, a partner holding a receivable against their own SNC no longer has to demonstrate the insolvency of their co-partners. They only need to establish that the receivable has become uncollectible with respect to the SNC itself.
This clarification is significant for several reasons:
- Simplification of procedures: No need to prove the financial situation of each co-partner.
- Acceleration of tax processing: The loss becomes deductible as soon as its reality is proven against the company.
- Reduction of the risk of tax reassessment: By adhering to this case law, the partner secures their situation with the administration.
However, detecting the real uncollectibility of the receivable remains an imperative condition. The proof must rely on solid elements such as:
- Judicial liquidation of the SNC,
- Manifest cessation of payment,
- Collection procedures that have remained unsuccessful.
A simple temporary cash flow difficulty will not suffice to justify a deduction.
What practical consequences for partners in a general partnership?
This evolution regarding the deduction of losses on uncollectible receivables held by a partner in a general partnership has several concrete impacts:
- Better clarity in case of tax disputes: The proof of uncollectibility at the SNC level is relatively more accessible than that of the insolvency of each partner.
- Optimization of financial risk management: Partners can more easily provision, recognize, and deduct a loss.
- Accounting and tax security: By following the methodology recognized by the Council of State, partners limit the risks of reassessment.
However, achieving this benefit requires constant vigilance in the preparation of supporting documents.
Key takeaways
The decision rendered by the Council of State in March 2025 significantly eases the burden of proof for the creditor partner of an SNC wishing to deduct a loss on receivables. Uncollectibility must be demonstrated exclusively against the company, without examining the solvency of the other partners.
It is nevertheless important to remain cautious and methodical in documenting this situation to anticipate any potential discussions with the tax administration.
---
Need personalized support?
At PRAX Avocats, we help businesses and partners secure their tax processes. Contact us for a personalized and expert assessment of your situation.