Deductible expense

A deductible expense reduces taxable profit. Across the EU the basic test is similar: the cost must be incurred for the purpose of the business, be supported by a document that meets invoice requirements and be booked in the right period. Salaries, rent, materials, subcontractors, software, professional fees and depreciation are typical deductible items.

Each country then lists non-deductible or partially deductible items: entertainment and gifts, fines and penalties, private use of cars and phones, some interest and certain provisions. VAT on a deductible expense is recoverable only if the business is VAT registered and the item is not blocked from input tax deduction, which is common for passenger cars and hospitality. A missing or defective document is the most frequent reason for a deduction to be refused on audit. Kontevia asks for the missing details when a receipt is incomplete.