Taxable income is determined after deducting all expenditure and costs incurred in the realisation of the gross income (for more details on the deemed profit basis of assessment on branches of foreign companies, see the Branch income section).
For any entity (not a foreign branch) seeking to be assessed on an add-back basis, it should ensure, in accordance with Stamp Duty Law, that the majority of its costs can be supported by tax-registered documents (i.e. declared payrolls and registered contracts and invoices).
Depreciation should be calculated in accordance with the Executive Regulations of the law.
|Assets||Depreciation rate (%)|
|Building in which machines are fixed||4|
|Building without fixed machines||2|
|Means of transport:|
|Cargo and freight:|
|Less than 3 tons||15|
|Over 3 tons||10|
|Office, ship, and domestic furniture||15|
|Hotel, restaurant, cafes, and hospital furniture||20|
|Work camps outside of cities||20|
|Food utensils and furnishings for restaurants, hotels, and the like||25|
|Computers and accessories||25|
Purchased goodwill can be amortised on a straight-line basis over five years.
Organisation and start-up expenditure
Organisational and start-up expenditure can be capitalised and amortised over five years on a straight-line basis.
No specific rules apply for the deduction of interest expenses.
Bad debts are only recognised to the extent that they have been recognised as such legally.
Donations to charities recognised by the state are permitted at up to 2% of net income.
Fines and penalties
No specific rules apply for the deduction of fines and penalties.
No specific rules apply for the deduction of taxes.
Net operating losses
Losses may be carried forward and deducted from future profits, for up to five years. The Income Tax Law has no provision for the carryback of losses.
Payments to foreign affiliates
No specific rules apply for the deduction of payments to foreign affiliates.