Practice Note No 04/2004 Date of Issue 15th December 2004 ... - TRA

(a)Business expenditure is deductable only when any business iscarried on by the person at any time during the year of income.(b)For the purposes of calculating a person’s income from business forany year of income no deduction shall be allowed for –i) consumption expenditureii) excluded expenditureiii) expenditure incurred by the person in deriving exemptamounts or final withholding paymentsiv) distributions by an entity.(c)For the purposes of calculating a person’s income for a year ofincome from a business, there shall be deducted all expenditureincurred during the year of income by the person, wholly andexclusively in the production of the income.For calculating the income from business, the following deductionsare allowable –i) Interest expense. Interest incurred by a person during a year of incomeunder a debt obligation shall be treated as incurred whollyand exclusively in the production of income from abusiness if the debt obligation was incurred in borrowingmoney employed in the business or to acquire an assetthat is employed during the year of income in theproduction of the income. In any other case, the debtobligation was incurred wholly and exclusively in theproduction of the business income.The total amount of interest that an exempt controlledresident entity may deduct for a year of income shall notexceed the sum of all interest derived by the entity duringthe year of income that is to be included in the entity’stotal income and 70 percent of the entity’s total income forthe year calculated without including any interest derivedor deducting any interest incurred by the entity.