Deductible vs. Non-Deductible Business Expenses: The Most Common Mistakes

One of the questions we hear most often is: “Can I write this off as a business expense?” The rule sounds simple, but in practice it’s a frequent point of dispute — the same expense can be fully accepted or fully rejected depending on the circumstances.

Three Conditions for a Deductible Expense

1. It must relate to the business’s actual line of activity
2. It must be documented with an invoice, e-Archive invoice, or other legally valid document
3. The amount must be reasonably proportionate to the size of the business

If all three conditions aren’t met at once, an expense can be excluded from the tax base even if it’s already recorded in the books.

Expense Items That Most Often Cause Problems

• Vehicle expenses: Fuel, maintenance and depreciation on vehicles not registered to the company, or not used exclusively for business, may be rejected in full; passenger vehicles are also subject to statutory caps on depreciation and lease deductions.
• Representation and entertainment: Client meals and hospitality are accepted when reasonable and documented; amounts that look like personal spending draw scrutiny during an audit.
• Personal expenses: Charging a partner’s or employee’s personal groceries, clothing or holiday costs to the business is one of the most common — and riskiest — mistakes we see.
• Undocumented payments: Cash payments made without an invoice or receipt can’t be deducted, no matter how genuine the expense was.
• Donations: Donations outside the institutions and purposes listed in the law aren’t deductible; even qualifying donations are capped at a set proportion.

What Does “Non-Deductible Expense” (KKEG) Actually Mean?

A non-deductible expense (KKEG) is recorded as a cost in the books but added back to profit when calculating tax — so even though the company genuinely spent the money, income or corporate tax is still calculated on that amount. Failing to correctly identify KKEG items and add them back on the tax return is one of the most common causes of a tax base discrepancy found during an audit.

Is It Different for Home-Office and Self-Employed Taxpayers?

Those working from home can deduct the business-related portion of costs like electricity, internet and rent, but proportional allocation and documentation matter even more in this case. We cover this in detail in our home-office expense guide.

How We Manage Your Expenses With Confidence

Each month, as we review your invoices and documents, we clarify with you which expenses are fully, partially, or not at all deductible, and record KKEG amounts correctly on your tax return. The goal is to make full use of your legitimate tax deductions while minimizing the risk of a tax base discrepancy in a future audit.