Deductible Expenses
| Nature of Expense |
Conditions/Requirements |
Legal Basis (Article/Section) |
| Operational Costs |
N/A |
Income Tax Act, Article 4 |
| Employee Salaries |
Must be for services rendered to the business |
Income Tax Act, Article 4 |
| Rent and Utilities |
Must be directly related to the business premises |
Income Tax Act, Article 4 |
| Marketing Expenses |
Must be incurred for the promotion of the business |
Income Tax Act, Article 4 |
| Depreciation |
Assets must be used for business purposes |
Income Tax Act, Article 4 |
| Professional Services |
Must be related to the business operations |
Income Tax Act, Article 4 |
Non-Deductible Expenses
| Nature of Expense |
Rationale for Exclusion |
Legal Basis (Article/Section) |
| Fines and Penalties |
Punitive nature, not incurred for business purposes |
Income Tax Act, Article 4 |
| Personal Expenses |
Not related to business operations |
Income Tax Act, Article 4 |
| Gifts and Entertainment |
Not directly related to the generation of income |
Income Tax Act, Article 4 |
| Political Contributions |
Not considered ordinary and necessary business expenses |
Income Tax Act, Article 4 |
| Prohibited Activities |
Expenses related to illegal activities are not deductible |
Income Tax Act, Article 4 |
Expenses with Limitations
| Nature of Expense |
Limitations |
Legal Basis (Article/Section) |
| Interest Expenses |
Deductible up to a certain percentage of adjusted income |
Income Tax Act, Article 4 |
| Travel Expenses |
Deductible within reasonable limits for business travel |
Income Tax Act, Article 4 |
| Charitable Contributions |
Limited to a certain percentage of the company's income |
Income Tax Act, Article 4 |
| Meals and Entertainment |
Deductible up to 50% of the expenses incurred |
Income Tax Act, Article 4 |
The treatment of business expenses is governed by the Income Tax Act of Malta, particularly Article 4, which outlines the deductions allowable from chargeable income. Deductible expenses are those considered ordinary and necessary for the operation of the business, aiming to compute the net profits accurately. Non-deductible expenses are excluded based on their nature, not being directly related to the generation of income or violating legal principles. Limitations on deductions ensure that expenses are reasonable and in line with business objectives, preventing abuse of tax deductions.
Malta's tax law provides clear guidelines on the treatment of business expenses, distinguishing between deductible and non-deductible expenses and imposing limitations where necessary. By adhering to these regulations, businesses can accurately compute their taxable income and ensure compliance with tax laws.
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