Calculating Taxable Income

Taxable Income Calculation

Starting Point

Taxable income starts with accounting profit (net profit per financial statements prepared under IFRS).

Adjustments

Accounting profit is then adjusted for tax purposes:

1. Add back non-deductible expenses (fines, bribes, personal expenses)
2. Deduct allowable expenses not recorded in accounts
3. Adjust for differences between accounting and tax treatment (e.g., depreciation vs capital allowances)
4. Exclude exempt income (e.g., qualifying Free Zone income)
5. Include taxable income not recorded in accounts

Formula

Accounting Profit
+ Non-deductible expenses
- Exempt income
- Deductible expenses not in accounts
+ Taxable income not in accounts
= Taxable Income