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Expenses deductible from the income of the taxpayer selling school supplies
Expenses deductible from the income of the taxpayer selling school supplies
A company engaged in the sale of school supplies had an approximate income of 115,000 manats in 2024, with expenses related to income generation amounting to approximately 60,000 manats. The company provides some purchased products free of charge along with the sold goods. For example, when a customer buys a notebook, they are given a pen, plastic bag, etc. It is estimated that 3,000 manats of this amount was purchased from an ordinary store. In this case, can this 3,000 manats be deducted from the income?
The State Tax Service under the Ministry of Economy has stated that, according to Article 108.1 of the Tax Code, all expenses related to income generation, as well as mandatory payments stipulated by law, are deductible from income, except for those expenses that are not deductible as per this section. Expenses deducted from income must be formalized in accordance with the procedure specified by law. Expenses that are not formalized in the manner prescribed by law cannot be deducted from income.
It was noted that, according to Article 109.8 of the Tax Code, the deduction of expenses from income is limited to 2% of the highest annual income and expenses of the taxpayer for each case, unless the goods are listed in Article 3.5 of the Law of the Republic of Azerbaijan on "Cashless Payments," such as real estate, vehicles, and movable fixed assets. This limit applies to goods purchased from individuals who are not registered as taxpayers with tax authorities based on a purchase act, or from taxpayers based on the receipt of a control cash register that complies with the requirements of Article 50.8 of this Code. Any amount exceeding this limit cannot be deducted from income.
A company engaged in the sale of school supplies had an approximate income of 115,000 manats in 2024, with expenses related to income generation amounting to approximately 60,000 manats. The company provides some purchased products free of charge along with the sold goods. For example, when a customer buys a notebook, they are given a pen, plastic bag, etc. It is estimated that 3,000 manats of this amount was purchased from an ordinary store. In this case, can this 3,000 manats be deducted from the income?
The State Tax Service under the Ministry of Economy has stated that, according to Article 108.1 of the Tax Code, all expenses related to income generation, as well as mandatory payments stipulated by law, are deductible from income, except for those expenses that are not deductible as per this section. Expenses deducted from income must be formalized in accordance with the procedure specified by law. Expenses that are not formalized in the manner prescribed by law cannot be deducted from income.
It was noted that, according to Article 109.8 of the Tax Code, the deduction of expenses from income is limited to 2% of the highest annual income and expenses of the taxpayer for each case, unless the goods are listed in Article 3.5 of the Law of the Republic of Azerbaijan on "Cashless Payments," such as real estate, vehicles, and movable fixed assets. This limit applies to goods purchased from individuals who are not registered as taxpayers with tax authorities based on a purchase act, or from taxpayers based on the receipt of a control cash register that complies with the requirements of Article 50.8 of this Code. Any amount exceeding this limit cannot be deducted from income.