In general, all business expenses (e.g. materials, payroll) are allowed as a deduction if the expenses are connected with the earning of income, not of a capital nature, and supported by proper documentation.
The deduction for costs related to fixed assets generally is made through depreciation at rates ranging from 4% to 12.5% using the straight-line method.
The Tax Code allows to deduct expenses on intangible assets if such assets are used for not less than a 12-month period if they have limited useful life. Such assets include, among others, licences, innovative patents, trademarks, agreement on use of legal entity’s name etc. and should be deducted through amortisation.
Start-up expenses are not deductible. However, in case of registration of a branch, the head office can deduct expenses related to the creation of such branch.
Interest deductibility is generally limited to three times the refinancing rate of the National Bank of Tajikistan (currently 10%). For certain entities, additional limitations may apply.
A taxpayer is allowed a bad debt deduction in cases where the income associated with such bad debt is already recognised for CIT purposes. Bad debts are deductible when they are written-off in the accounting books. Special provisions apply for banks and other financial institutions.
Charitable contributions are allowed for deduction in the amount of actually paid contributions, but not more than 10% of taxable income.
Fines and penalties
Fines and penalties paid to the budget of Tajikistan and other states are not deductible.
Taxes paid to the budget of Tajikistan and other states are deductible, except for CIT and individual income tax.
Other significant items
Among other deductions specifically mentioned in the Tax Code are those for research and development (R&D).
Non-deductible expenses specifically mentioned by the Tax Code include meals and entertainment, personal expenses, advertising (marketing) expenses exceeding 5% of the taxpayer's total income for the reporting period, passenger vehicles, and non-business expenses.
Net operating losses
Net operating losses may be carried forward for three years but may not be carried back.
Payments to foreign affiliates
No special provisions for deduction of payments to foreign affiliates exist in the Tax Code; consequently, general rules for deductibility of expenses should apply.