Based on the following:
- Income Tax Law (Law 118(I)/2002) governs the treatment of business expenses for tax purposes in Cyprus.
- Article 14 of the Income Tax Law specifies the deductibility of business expenses and any limitations imposed on deductions.
Deductible Expenses
| Nature of Expense | Conditions/Requirements | Applicable Law |
|---|---|---|
| Operational Costs | Incurred wholly and exclusively for business purposes | Article 14 of the Income Tax Law (Law 118(I)/2002) |
| Employee Salaries | Paid as compensation for services rendered | Article 14 of the Income Tax Law |
| Marketing Expenses | Incurred for promoting the business | Article 14 of the Income Tax Law |
| Depreciation | Reasonable depreciation on assets used in the business | Article 14 of the Income Tax Law |
| Rent Expenses | Paid for business premises or equipment | Article 14 of the Income Tax Law |
| Utilities | Cost of essential services for business operations | Article 14 of the Income Tax Law |
Non-Deductible Expenses
| Type of Expense | Rationale for Exclusion | Applicable Law |
|---|---|---|
| Fines and Penalties | Punitive nature of the expense | Article 14 of the Income Tax Law |
| Personal Expenses | Not directly related to business operations | Article 14 of the Income Tax Law |
| Donations to Political Parties | Potential influence on political processes | Article 14 of the Income Tax Law |
| Entertainment Expenses | Subjective nature and potential for abuse | Article 14 of the Income Tax Law |
Expenses with Limitations
| Type of Expense | Limitations | Applicable Law |
|---|---|---|
| Interest Expenses | Limited to a certain percentage of taxable income | Article 14 of the Income Tax Law |
| Travel Expenses | Limited to expenses directly related to business purposes | Article 14 of the Income Tax Law |
| Car Expenses | Limited to business-related usage only | Article 14 of the Income Tax Law |
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