Corporate - Deductions

Last reviewed - 19 March 2024

Depreciation and amortisation

Property should be depreciated at rates according to four classes of assets as specified in the tax legislation. Land is not considered a depreciable asset. The straight-line or the declining-balance method is specifically required to be used for each class of assets.

Assets Method Rate (%)
Building and structures Straight line 5
Computers, electronic information systems, and data handling equipment Declining balance 50
Automobiles, trucks, office furniture, and equipment Declining balance 25
All other tangible property Declining balance 20

Expenditures on intangible property are amortisable over the life of the property or at 10% per annum.

Special depreciation

A Qualified Investment Project (QIP) will be entitled to a 40% special depreciation in the first year of purchase or, if later, the first year the assets are used. However, the special depreciation will only apply to assets used in 'manufacturing and processing' (still to be defined) and only if the taxpayer has elected not to use a tax holiday. A clawback provision exists for assets held for less than four years.


Purchased goodwill is a depreciable intangible fixed asset for CIT purposes. If the useful life of the intangible fixed assets can be determined, the annual depreciation charges shall be calculated on the useful life by using the straight-line method. If the useful life cannot be determined, the annual depreciation rate of 10% shall be used.

Start-up expenses

Preliminary and formation expenses are allowed to be fully deducted in the period in which the expenses arise, or they can be amortised over two years.

Interest expenses

Interest deductibility in any year is limited to the amount of interest income plus 50% of the net profits excluding interest income and interest expense. The excess non-deductible interest expense can be carried forward to the following tax years indefinitely.

Based on the GDT’s instruction, the tax authorities set maximum interest rates for loans from third parties (i.e. 120% of the market interest rate at the time of obtaining the loan) and loans from related persons (i.e. the market interest rate at the time of obtaining the loan). If the interest rate is higher than the maximum interest rate, the surplus interest expense is not deductible.

Bad debt

A loss on a claim (i.e. bad debt) is deductible where the impossibility to recover the loss can be clearly shown and that claim has been written off from the accounting books, except where the giving up of the claim is an ‘abnormal act of management’ (still to be defined).

Charitable contributions

The charitable contribution expense is deductible to the extent the amount does not exceed 5% of taxable income. The taxpayer must have proper evidence supporting the payments.

Fines and penalties

Additional tax, late tax payment interest, and fines of all types incurred for the violation of various legal provisions are not deductible.


Taxes that are not a charge to the enterprise (e.g. WHT, ToS, ToFB, CIT, and additional CIT on dividend distribution) are not deductible.

Loss between related parties

No deduction is available for certain losses incurred on dealings between 51% commonly owned parties.

Net operating losses

Taxpayers may carry forward their losses for five years. The carryback of losses is not permitted. There is no provision for any form of consolidated filing or group loss relief.

To be eligible to carry forward tax losses, a taxpayer must not change its business activities.

If a taxpayer received a unilateral tax reassessment from the GDT, a taxpayer will not be able to utilise the tax losses brought forward in the year of reassessment.

Payments to foreign affiliates

An expense payable to a related party that is not paid within 180 days of the year-end will not be deductible. A deduction can be claimed in the year in which the payments are made. This rule is not applicable for an outlay or expense for inventory, capital property, and depreciable property.