The rule is one sentence
Under Article 9 of the Income Tax Law, what was incurred wholly and exclusively for the production of income is deductible.
The word doing all the work is “exclusively”. Two things follow from it:
- An expense with a private element is deductible only in part.
- The apportionment has to be documented, by you.
The item most people fail on: the vehicle
Here the Cyprus rule is stricter than expected.
| Case | Deduction |
|---|---|
| Private motor vehicle | entirely non-deductible |
| Interest on acquiring it | likewise non-deductible |
| Company vehicle used for the business | business element deductible |
| Private element of it | has to be stripped out |
A company vehicle also used privately additionally creates a benefit in kind for the user, to be recorded in payroll.
So the widespread assumption that a car can be “put through the company” applies in Cyprus only under conditions nobody meets in passing.
Entertainment: the lower value counts
Non-deductible is the amount exceeding:
- 1 % of gross income or
- €17,086
whichever is lower.
The word “lower” is regularly read past. Two examples:
| Gross income | 1 % of it | Deductible |
|---|---|---|
| €300,000 | €3,000 | €3,000 |
| €2,500,000 | €25,000 | €17,086 |
For a small company, therefore, the limit is not the figure €17,086 but the one percent.
What that is worth since 2026
The deduction reduces taxable profit, and 15 % has fallen on that since 2026, instead of 12.5 %.
| Expense | Saving to 2025 | From 2026 |
|---|---|---|
| €1,000 | €125 | €150 |
| €10,000 | €1,250 | €1,500 |
The reverse holds too: a non-deductible expense has cost more since 2026. On the new rate see the guide to corporate tax.
Acquisitions run differently
What is used over a longer period is not a running business expense. Computers, fittings, vehicles and buildings are spread through capital allowances, at fixed rates per category.
The rates and the exceptions for energy-efficient investments are in the guide to capital allowances.
No receipt, no deduction
Two things fall away at once:
- the business expense deduction, because the evidence is missing
- the input VAT, because it can only be recovered from a proper invoice
On €1,000 net that can be up to €340 together. What still helps then is in the guide to the lost receipt.
What we could not substantiate
- The increase in the entertainment cap to €30,000. One presentation from 2026 quotes it; no further source confirms it. We continue to calculate with €17,086 and name the conflict.
- A flat rate for a home office. We found none in the sources we checked. The general rule of apportioned deductibility applies.
- The complete list of non-deductible items. Private motor vehicles and the excess part of entertainment are named consistently. We did not work through a conclusive list under Article 11.
- The measurement of the benefit in kind on company vehicles. That it arises is not in dispute; by what method it is calculated we did not check.
With a vehicle or a larger mixed expense the question belongs before the purchase: Cyprus setup from one place.
Bookkeeping: the apportionment has to run along
A mixed expense is no problem as long as the apportionment arises when you post. It becomes a problem when it has to be estimated at the year end.
In Volk Accountant the receipt sits with the transaction, see receipt capture, and the reports show costs by type, so it stands out when an item grows. The tax estimate tracks the running profit on which provisional tax rests.
What there is to do in a month is in the guide to the monthly close.