| Abstract [eng] |
The Conditions and Recognition of the Allowable Deductions Calculating Income Taxes The main aim of this master's thesis is thoroughly to analyze the conditions and recognition of the allowable deductions calculating income taxes and the implementation in the court practice. According to the Law on Corporate Income Tax of the Republic of Lithuania, deductions are understood as the costs incurred for the ordinary activities necessary for earning income or for obtaining the economic benefit. However, more detailed conditions for the recognition of allowable deductions interpretation could be found in the case-law which sets rules for the explanations deciding which expenses can be recognized as allowable deductions, so this master’s thesis mainly focuses on court case analysis. When deciding on the issue of assigning the corresponding costs to allowable deductions, both the tax administrator and the court often use the substance over form principle, this principle allows taking account into the content of the activity rather than its formal expression. Taxpayers often abuses and distort the real content of accounting documents to recognize certain costs as deductible, thus reducing the payable income tax. Because of that, this principle is very useful to avoid such situations as the basis of this principle of taxation can be played back distort or hide the real content of the transactions. While deciding of the recognition and justification of deductions, it is relevant to find out who has the burden of proof in justifying the allowable deductions. The master's thesis found that the burden of proof implies the principle of competition, which is divided between taxpayer and tax administrator. This means that the tax administrator must base the calculation of the tax or related amounts, and the taxpayer who disagrees with them must provide opposite evidences. This master’s thesis also discusses the recognition of interest on loans as allowable deductions and clarifies some aspects that lead to different specific recognition of interest expense deductions. The master's thesis also discusses new article of the Lithuanian Law on Corporate Income Tax, this article provides that deduction of expenses incurred in carrying out a prohibited act, including bribes, cannot be allowed from the taxable profit of a unit in Lithuania. It has been found that this article has been incorporated to meet the OECD requirements and to combat bribery internationally. The last part of the master’s thesis discusses similarities and differences in the regulation of allowable deductions in the Latvia, Estonia, France and USA. |
