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6.4. Reserves and Provisions

In determining accounting profit, companies must establish certain provisions, such as a provision for a risk of loss or for certain expenses. These provisions are normally deductible for tax purposes if they provide for clearly specified losses or expenses that are probably going to occur and if they appear in the financial statements and in a specific statement in the tax return. Provisions for bad debts are deductible up to varying maximum amounts, provided that a minimum set of collection procedures have been engaged.