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(a) Computation of Taxable Income and Deductions

12. The tax is assessed on the basis of a return which includes income of all categories. All individual taxpayers whose gross income exceeds 1,200 florins must file, before April 1st of each year, either personally or, if they do not reside in N.E.I., through a representative, a return of their income. This return must be made whether or not a form has been received from the authorities. As a general rule, the tax-year, or year for which tax is paid, is the current calendar year, but the basis of assessment is the income derived during the preceding year from the sources existing on January 1st of the tax-year. By way of exception, salaries are assessed on an amount estimated on the basis of the salary received at the beginning of the tax-year; further, in the case of income from a profession or trade, the accounting year of the taxpayer, if it overlaps the calendar year by its first half or more, is taken instead of the calendar year.

13. Allowable Deductions. — The following are deductible: cost of repairs and of maintenance in their original state of property exclusively used in the taxpayer’s profession or trade, and also depreciation of those objects, so far as such depreciation is consistent with the efficient management of the business; expenses for wages, gratuities, etc., freights, insurance premiums, store rent, interest on mortgages, debts of whatever nature (including interest paid to bankers on money borrowed for the purchase of securities), and, in general, all disbursements required to obtain the income or to carry on the profession or trade. Foreign taxes paid abroad on foreign income, ground tax and other charges due by the taxpayer in accordance with legal ordinances and local custom are also deductible. A business loss for a fiscal year may be deducted from the profit made during the following two years, starting with the first of these years. Losses suffered in one category of income are deductible from income in all the other categories. Other deductions are: periodical payments, alimonies or other payments due under a legal obligation, premiums on life insurance not exceeding 5 per cent of income and subject to a maximum of 800 florins.

14. Non-allowable Deductions. — The following are not deductible: household expenses of the taxpayer and of his family, personal taxes of whatever kind, the part of the income invested as capital or laid up as reserves, disbursements for purchasing, founding or improving grounds, buildings, etc., disbursements for taking over, buying or extending a profession or trade (capital expenses), interest on the taxpayer’s capital invested in his trade or profession.

15. Abatements. — No allowances are given in respect of minimum of existence, marital status, or dependents, other than ascendants or descendants. An allowance is given for each of such dependents, the amount of which varies with the income of the taxpayer.

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