When filing your annual income tax return, you can consider your deductible expenses to reduce your taxable income. However, do you know what your business’s deductible expenses are? It’s important to understand what acquisitions (purchases) entail, since not everything you buy or spend for your business can reduce the tax you owe. Receiving accounting and tax advice will help you reduce errors in your tax return, avoiding fines or penalties.
Deductible and non-deductible expenses
Let’s start by defining what deductible expenses are in a business. Deductible expenses for corporate income tax are those that can be subtracted from your company’s income when calculating the annual tax you owe.
Not all of your company’s expenses are considered deductible. To be so, they must meet a series of requirements, including:
- Be authentic: You must have a document that supports the transaction, such as an invoice, a receipt for fees, among others.
- Be related to your economic activity: This responds to the principle of causality. You cannot declare a personal expense as deductible that is not related to your business.
- Have been paid by your company: The document must be issued in your company’s name, so you must have provided your RUC (Tax Identification Number) at the time of issuance. Additionally, there must be evidence that the expense was paid by your organization.
- Be recorded in your accounting books: It must appear in the fiscal period corresponding to your return.
Examples of deductible and non-deductible expenses
If you’re still not sure which expenses are deductible for your company with SUNAT, here are some examples.
– Examples of deductible expenses:
1. Purchase of production materials
2. Salaries and social benefits paid to employees.
3. Rent for the business premises.
4. Purchase of production materials.
5. Water, electricity, and internet services for the business.
6. Payment of fees to an accountant or legal advisor.
7. Employee training (under certain conditions).
– Examples of non-deductible expenses
1. Personal and living expenses of the taxpayer and their family members.
2. Fines, surcharges, late payment interest, and government penalties.
3. Donations and other gifts of money or products, except as permitted in Article 37, paragraph x, of the law.
4. Expenses without valid or incorrectly issued receipts
5. Expenses supported by payment receipts issued by the taxpayer that, as of their issue date:
a. Are considered “nonexistent,” unless, as of December 31 of the current year, the supplier has complied with the requirement to regularize this situation.
b. If SUNAT deregistered the supplier’s RUC (Tax Identification Number) before issuing the receipt.
Consequences of declaring a non-deductible expense as deductible
It is important to avoid declaring non-deductible expenses as deductible, since SUNAT schedules monitoring and inspection actions to identify this error (intentional or otherwise). If this malpractice is identified, a penalty will be applied, which is generally a fine.