Website Last updated:

May 15, 2026

This guide establishes the framework for calculating Taxable Income, beginning with Accounting Income as per Article 20 of the Corporate Tax Law. It clarifies the crucial adjustments required, distinguishing between deductible business expenditures under Article 28 and non-deductible items like certain fines under Article 33. The guide details the process for applying exemptions, such as the Participation Exemption under Article 23, and outlines key reliefs including Tax Loss transfers under Article 38. It also explains the application of the General Interest Deduction Limitation Rule (Article 30) and Foreign Tax Credits (Article 47).

Determination of Taxable Income

Corporate Tax Guide | CTGDTI1

July 2024

1. Glossary

2. Introduction

2.1. Overview
2.2. Purpose of this guide
2.3. Who should read this guide?
2.4. How to use this guide
2.5. Legislative references
2.6. Status of this guide

3. Determination of Taxable Income and calculation of Corporate Tax Payable – An Overview

3.1. Introduction
3.2. Determining Taxable Income
3.3. Calculation of Corporate Tax Payable
3.4. Overview of case studies

4. Determination of Taxable Income and calculation of Corporate Tax Payable – Key concepts

4.1. Starting point for determination of Taxable Income
4.2. Tax Period
4.3. Unrealised gains and losses
1. 4.3.1. Election to use the realisation basis
4.4. Exempt Income
1. 4.4.1. Domestic Dividends
  4.4.2. Participation Exemption
  4.4.3. Foreign Permanent Establishment exemption
4.5. Deductible and non-deductible expenditure
1. 4.5.1. Expenditure incurred wholly and exclusively for the Business
  4.5.2. Employment related expenditure
  4.5.3. Expenditure incurred in deriving Exempt Income
  4.5.4. Expenditure incurred for more than one purpose
  4.5.5. Non-arm's length expenditure
  4.5.6. Capital expenditure
  4.5.7. Pre-incorporation or pre-trade expenses
  4.5.8. Creation & reversal of provisions (bad debts, write-off and recovery)
  4.5.9. Non-deductible expenses
  4.5.10. Entertainment expenditure
4.6. General Interest Deduction Limitation Rule
1. 4.6.1. Meaning of Interest
  4.6.2. Application of the General Interest Deduction Limitation Rule
  4.6.3. Calculation of Net Interest Expenditure
  4.6.4. Calculation of 30% of adjusted EBITDA
  4.6.5. Exceptions to the General Interest Deduction Limitation Rule
4.7. Specific Interest Deduction Limitation Rule
4.8. Tax Losses
1. 4.8.1. Tax Loss relief
  4.8.2. Limitation on carry forward of Tax Losses
  4.8.3. Transfer of Tax Losses
4.9. Tax credits
1. 4.9.1. Foreign Tax Credit
  4.9.2. How to calculate Foreign Tax Credit
  4.9.3. Unutilised Foreign Tax Credit
4.10. Taxation of Non-Resident Persons
1. 4.10.1. Income attributable to Permanent Establishment

5. Case Study 1: Deductible and non-deductible expenditure

5.1. Facts
5.2. Determining Taxable Income and calculating Corporate Tax Payable
5.3. Explanatory notes
1. 5.3.1. Expenditure incurred wholly and exclusively for the purpose of the Business
  5.3.2. Capital vs revenue expenditure
  5.3.3. Expenditure not incurred for the purpose of Business
  5.3.4. Expenditure incurred for more than one purpose
  5.3.5. Entertainment expenditure
  5.3.6. Donations, gifts
  5.3.7. Fines, penalties and compensation
  5.3.8. Bribes, illicit payments
  5.3.9. Payments to Connected Persons
  5.3.10. Input Value Added Tax
  5.3.11. Contributions to a private pension fund
  5.3.12. Expenses incurred prior to commencement of Business
  5.3.13. Creation and reversal of provisions

6. Case Study 2: Interest expenditure

Contents