Individual - Deductions

Last reviewed - 02 March 2024

Employment expenses

Aliens, whether residents or not, who are receiving only salary or compensation income are not allowed any deduction against such income.

Personal deductions

Home mortgage interest, medical expenses, contributions, and other personal expenses cannot be claimed as deductions for income tax purposes. However, social security contributions, up to the prescribed amount of maximum mandatory contributions, are excluded from gross income.

Business deductions

In the case of individuals engaged in business or the practice of a profession, and who opted to be taxed at the regular graduated income tax rates, the following expenses are allowed as deductions from gross income:

  • All ordinary and necessary expenses paid or incurred during the taxable year in connection with the trade, business, or profession, including raw materials, supplies, and direct labour.
  • Wages and other forms of compensation for personal services actually rendered, including the grossed-up monetary value of fringe benefits and travel expenses incurred in the pursuit of the trade or profession.
  • Business rentals.
  • Interest paid or incurred within a taxable year in connection with the conduct of a taxpayer’s profession, trade, or business, less an amount equal to a certain percentage of the interest income subject to final tax.
  • Entertainment, amusement, and recreation expenses, not to exceed the following ceilings:
    • 0.50% of net sales for taxpayers engaged in sale of goods or properties.
    • 1% of net revenue for taxpayers engaged in sale of services, including professionals and lessors of properties.
  • Taxes.
  • Losses.
  • Bad debts.
  • Depreciation.
  • Charitable and other contributions, subject to certain limitations.
  • Research and development (R&D) expenditures.

In lieu of these allowable deductions, an individual, other than a non-resident alien, may elect an optional standard deduction (OSD) not exceeding 40% of gross business or professional income.

Individuals who opt to use itemised deductions are required to submit additional documents as an attachment to the tax return to support the deductions claimed. The EOPT Act repealed the withholding tax as a requirement to withhold tax as a requisite to claim the cost as a tax deduction.