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May 15, 2026

Cabinet Decision No. 39 of 2019, Article 6, addresses the treatment of expenses when a taxpayer generates both exempt and taxable income. It mandates that costs incurred to generate exempt income are deductible only against that specific income. In cases where precise data is unavailable, the article provides a formula: the deductible limit is determined by dividing taxable revenue by total revenue. This ensures a proportional and fair allocation of expenses, preventing taxpayers from using costs associated with exempt activities to unfairly reduce their taxable income base.

SECTION 2 - TAX CALCULATION

Chapter 1 - Taxable Income

Article 6

A taxpayer may deduct expenses and costs incurred to generate exempt income as stipulated in Article 8(1) of the Law. If part of the income is exempt and another part is taxable, expenses and costs are deducted within the limits of the taxable income. This limit is calculated, in the absence of precise and regular data, by dividing the taxable revenue by the total revenue generated by the taxpayer.