Deduction and accounting of expenses from income for tax purposes

Deduction and accounting of expenses from income for tax purposes



We inform you that, except for non-deductible expenses, all expenses related to the generation of income, as well as mandatory payments stipulated by law, are deductible from income.

At the same time, in order to accurately reflect the taxable income (profit), the taxpayer is obliged to keep timely and accurate records of their income and expenses based on documented information, and, depending on the accounting method applied in accordance with this section, to allocate income and expenses to the relevant reporting periods in which they were earned or incurred.

Micro-entrepreneurs, depending on their choice, may keep records of income and expenses using either the cash basis or the accrual basis of accounting, whereas small, medium, and large business entities must use the accrual method.

Under the accrual method, an expense is considered to have been incurred when all obligations under the transaction or contract have been fulfilled by all parties involved, or when the corresponding amounts have been paid unconditionally.

A taxpayer using the accrual method must account for income and expenses in the reporting period in which the right to receive the income or the obligation to incur the expense arises, regardless of the actual time of income receipt or expense payment.

Based on the above, the enterprise, applying the accrual method for recording income and expenses, must reflect the expenses incurred and income received in the profit tax return in accordance with the period in which they were actually incurred or earned.