Do you need to buy a new computer or something else for the company? If your company is making a profit, it may pay to make the purchases before you submit this year’s company tax return. This is especially true if the company is to buy more expensive machinery or other equipment where the depreciation must be spread over several years. You will certainly get less back in tax refunds, but on the other hand, you will not have to pay tax on the money that is reinvested directly in your company.
There are a variety of deductible expenses in a business. We tell you which expenses are tax-free and how you calculate deductible expenses. The term deductible is most often used when talking about deductible cost , and means a cost that can be deducted from the year’s results in order to obtain tax benefits. Deductible means that, by making deductions, the company’s profit is reduced. This leads to the tax also being lower. However, renting art that is used in the office is deductible.
However, there are rules for what a company can count as a deductible cost. The basic rule is always that a company only receives deductions for costs incurred in order for the company to receive income . The deductible expense must therefore have a direct relationship with the company’s operations and be compatible with the company’s operations. What is considered deductible in the business and how large the amounts are, is always decided by the tax agency.
These can be expenses, for example, dual residence, representation, Christmas presents, business trips or health care. The possibility of having the company pay expenses for representation is worse in trading companies and sole proprietorship’s than in a limited company. You therefore have an easier time making tax deductions for costs in a limited company as a business form. When you represent the company in certain external and internal contexts, it can be considered representation.
The tax agency approves deductible representation if the expenses are directly related to your business activities, such as a staff party, or are included as part of a business negotiation. As a rule, your company is allowed to deduct expenses related to your business, including necessary equipment. An exception to the basic rule, however, is that a company does not receive a deduction for the purchase of inventory that is not considered to decrease in value. Assets that are not considered to decrease in value can include works of art, musical instruments, for example precious antique instruments such as cellos or violins.
