Corporate - Deductions

Last reviewed - 09 February 2024

The net taxable income of an enterprise is determined by deducting all the ordinary and necessary expenses incurred in the generation of income, including amortisation and depreciation; municipal taxes; donations made in favour of the state, the central district, the municipalities, and legally recognised educational institutions, charities, and sporting facilities; mandatory employer-employee contributions to the social security system; and 'reasonable' charges for royalties and management services.

In general, all expenses incurred in the generation of taxable income are considered as deductible for income tax purposes. However, there are some 'non-deductible' expenses, even if incurred in the generation of income (e.g. interest paid to owners or shareholders, capital losses).


Depreciation may be computed using the straight-line method. Companies may also obtain authorisation from the tax authorities to use other depreciation methods. However, after a company selects a depreciation method, it must apply the method consistently thereafter. The following are the applicable straight-line method rates for some common assets.

Asset Rate (%)
Buildings 2.5 to 10
Plant and machinery 10
Vehicles 10 to 33
Furniture and office equipment 10
Tools 25


Goodwill can be amortised over a period of five years.

Start-up expenses

Organisation or reorganisation expenses are deductible for the total amount as long as they do not exceed 10% of the initial capital stock. These expenses can be amortised over five years.

Interest expenses

Interest expenses are deductible as long as they are incurred in order to generate income. Interest paid to stockholders, owners, or their spouses is not deductible.

Bad debt

Taxpayers can record a bad debt provision of 1% of the total credit sales, which will not exceed 10% of the accounts receivable balance.

Charitable contributions

Contributions to organisations legally recognised by the government are deductible.

Capital losses

Capital losses are not deductible to determine the net taxable income. Capital losses can only be netted against capital gains, which are subject to a tax rate of 10% (see Capital gains tax in the Other taxes section).

Contingent liabilities

Provisions for contingent liabilities, such as severance pay, are not deductible for tax purposes; actual payments during the fiscal period, for those liabilities, are considered to be deductible expenses.

Fines and penalties

Fines and penalties are not deductible.


With the exception of the Solidarity Contribution, net asset taxes, CIT, and sales tax (i.e. if sales tax paid is used as a credit to net the sales tax payable to the government), taxes and contributions paid to district or municipalities are deductible expenses when determining taxable income.

Net operating losses

Companies engaged in agriculture, manufacturing, mining, and tourism may carry forward losses for three years. However, certain restrictions apply. Losses may not be carried back.

Payments to foreign affiliates

Payments to foreign affiliates are deductible as long as the service is effectively received.