Corporate - Deductions

Last reviewed - 18 July 2024


Depreciation must be computed using the straight-line method. Depending on the type of construction and the estimated life of fixed assets, annual rates for depreciation are as follows:

Asset Rate (%)
Buildings (rental/commercial/industrial) 3.33/5/10
Vehicles (other/commercial/rental) 12/20/33.33
Plant and equipment (fixed/non-fixed/agricultural) 10/14/20
Other assets (office/other/computer) 10/20/50

Alternative method of depreciation

Taxpayers under the TAP regime (see Customs duties in the Other taxes section) may, at their convenience, request a different depreciation rate (i.e. accelerated depreciation) from the tax authorities. Used fixed assets acquired abroad may also be subject to a different depreciation rate.


Goodwill, meaning the excess paid over book value in the acquisition of an entire business, may be part of the deductible cost for capital gain tax purposes in a future sale, provided the said price would also have been subject to the respective capital gain tax.

Start-up expenses

Start-up expenses are amortised over a three-year period after the beginning of business operations.

Interest expenses

As a general rule, deduction of interest is allowed when derived from loans of financial institutions; however, the interest paid derived from loans of non-financial institutions will be deductible up to the amount resulting from applying the average lending rate of the national bank at the date of obtaining the loan, if fixed, or at the date of each payment, if variable.

In order for interest paid to a non-resident to be deductible, the corresponding 15% WHT must be withheld and paid.

Bad debt

Corporations are allowed a deduction of loss allowance up to 2% of the account receivable balances from customers. Any bad debt written off should be applied against this allowance, as long as there is supporting documentation of the credit, identification documents of the debtor and creditor, and administrative and judicial collection proof.

Charitable contributions

A deduction is allowed, at up to 10% of the corporation's net taxable income, for charitable contributions made to the government and its institutions, the Red Cross, and other organisations.


A deduction of up to 10% of the net profit before this expense is allowed for payments made to employees as bonuses or in addition to their salaries or wages.

Life insurance

A deduction of up to 10% of the wages paid is allowed for collective employee insurance payments made.

Fines and penalties

Penalties or charges made by tax, customs, social security, or municipal authorities are not deductible for CIT purposes.


In principle, income tax expense is not deductible for CIT purposes. Nonetheless, municipal or local taxes (i.e. real estate tax, monthly sales and services tax, annual registration tax) are deductible from CIT.

Net operating losses

Losses may be carried forward and deducted from future profits, for up to three years. The carry back of losses is not allowed.

Payments to foreign affiliates

Payments made from affiliates to foreign related parties are deductible for CIT purposes, provided the following requirements are met:

  • The expenses (i.e. royalties, interest, and services) are needed to generate taxable income.
  • The expenses are duly supported (e.g. agreements, invoices, payment receipts).
  • The expenses are incurred within the fiscal period.
  • The WHT is applied and paid to the tax authorities.