Deducting expenses is particularly important in Malta, since the application of the tax refund to shareholders implies the distribution of company taxed profits. This is why it is important for the company to have available accounting profits for distribution to ensure the refund of paid taxes.
Expenses and changes that have been effectively and exclusively used for generating company revenue can be deducted when calculating the taxable profit. It is not sufficient to show that a specific expense is a company expense or that it is linked to income; there must be proof that the expense was in fact used to generate income.
Consequently, expenses generated before the start of activity or after the end of activity are not generally deducted.
The tax law contains a series of specific rules that govern deductions of various kinds of expenses.