The basic rule
For corporate income tax purposes, expenses incurred in carrying out economic activity are deductible within the limits and conditions of the Fiscal Code. The expense must be genuine, linked to the activity, recorded in the accounts and supported by documents.
- An invoice alone does not always demonstrate the link to the activity.
- Contracts, orders, acceptance records and proof of payment can provide additional support.
- The description of the goods or services must be sufficiently clear.
Common examples
Depending on the activity, deductible expenses may include rent and utilities, accounting and legal services, software licences, equipment, advertising, salaries, training and business travel. Assets used over a longer period may be deducted through depreciation rather than in full when purchased.
- The purchase must have an economic justification for the company.
- Foreign-currency expenses and foreign documents are recorded under the accounting rules.
- VAT treatment is assessed separately from deductibility for corporate income tax.
Limited, mixed-use or non-deductible expenses
Some expenses are deductible only within certain limits, while others are non-deductible. For vehicles not used exclusively for business, deductibility of expenses and VAT is generally limited to 50%. Shareholders’ personal expenses do not become deductible simply because the company pays them.
- Business entertainment, sponsorships and certain benefits have their own rules and limits.
- Fines and penalties payable to authorities are generally non-deductible.
- For mixed use, it is important to separate and justify the business portion.
Official sources
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This is general information. The AZALL team can check your documents, activity and applicable tax regime before you make a decision.