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Can expenses incurred for goods purchased based on a purchase act be deducted from income?
Can expenses incurred for goods purchased based on a purchase act be deducted from income?
“B” LLC purchases agricultural products from rural residents and sells them wholesale to stores. In 2024, chicken eggs worth 10,000 manats were purchased from rural residents. Can the LLC fully deduct these expenses from its income?
The State Tax Service under the Ministry of Economy has stated that, pursuant to Article 109.8 of the Tax Code, except for the goods specified in Article 3.5 of the Law “On Non-Cash Settlements,” as well as precious stones, precious metals and products made thereof, real estate, motor vehicles, and movable fixed assets, the maximum amount of expenses deductible from income for the purchase of other goods from individuals not registered with the tax authorities as taxpayers—based on a purchase act—or for goods purchased from taxpayers based on a cash register receipt that meets the requirements of Article 50.8 of the Code, is limited to 2 percent of the higher of the taxpayer’s annual income or expenses. Any amount exceeding this limit is not deductible from income.
As can be seen, taking into account the relevant exceptions, expenses deductible from income for goods purchased from individuals not registered for tax purposes on the basis of a purchase act are subject to a specified limitation. However, expenses incurred for the purchase of goods specified in Article 3.5 of the Law “On Non-Cash Settlements,” including agricultural products, from individuals not registered for tax purposes on the basis of a purchase act are deductible from income without limitation.
According to the provisions of Article 13.2.61 of the Tax Code, the sale of products obtained from living creatures (including those produced by industrial methods, in specialized broiler farms, automated poultry systems, and other locations) while they are alive, and presented in their original form without any chemical processing, is considered the sale of agricultural products.
Based on the above, in the case specified in the inquiry, since chicken eggs are considered agricultural products, the expenses incurred for their purchase from individuals not registered for tax purposes on the basis of a purchase act are fully deductible from income in accordance with Article 108 of the Tax Code.
The above matters are regulated by Articles 16, 108, and 109 of the Tax Code.
“B” LLC purchases agricultural products from rural residents and sells them wholesale to stores. In 2024, chicken eggs worth 10,000 manats were purchased from rural residents. Can the LLC fully deduct these expenses from its income?
The State Tax Service under the Ministry of Economy has stated that, pursuant to Article 109.8 of the Tax Code, except for the goods specified in Article 3.5 of the Law “On Non-Cash Settlements,” as well as precious stones, precious metals and products made thereof, real estate, motor vehicles, and movable fixed assets, the maximum amount of expenses deductible from income for the purchase of other goods from individuals not registered with the tax authorities as taxpayers—based on a purchase act—or for goods purchased from taxpayers based on a cash register receipt that meets the requirements of Article 50.8 of the Code, is limited to 2 percent of the higher of the taxpayer’s annual income or expenses. Any amount exceeding this limit is not deductible from income.
As can be seen, taking into account the relevant exceptions, expenses deductible from income for goods purchased from individuals not registered for tax purposes on the basis of a purchase act are subject to a specified limitation. However, expenses incurred for the purchase of goods specified in Article 3.5 of the Law “On Non-Cash Settlements,” including agricultural products, from individuals not registered for tax purposes on the basis of a purchase act are deductible from income without limitation.
According to the provisions of Article 13.2.61 of the Tax Code, the sale of products obtained from living creatures (including those produced by industrial methods, in specialized broiler farms, automated poultry systems, and other locations) while they are alive, and presented in their original form without any chemical processing, is considered the sale of agricultural products.
Based on the above, in the case specified in the inquiry, since chicken eggs are considered agricultural products, the expenses incurred for their purchase from individuals not registered for tax purposes on the basis of a purchase act are fully deductible from income in accordance with Article 108 of the Tax Code.
The above matters are regulated by Articles 16, 108, and 109 of the Tax Code.