Art. 70 Tax Law (TL)

1 The Tax on Profit concerns the net profit.

2 The taxable net profit includes

a) the balance of the profit and loss account, eliminating any carryover from the previous year;

b) all deductions made from the commercial result before calculating the balance of the profit and loss account, which do not serve to cover expenditures justified by commercial practice, such as

− acquisition, production, or improvement costs of fixed assets;

− depreciations and provisions not justified by commercial practice;

− allocations to reserve funds;

− the release of equity capital using funds belonging to the legal entity, provided they come from reserves established by profits that have not been taxed;

− open or concealed distributions of profit and benefits provided to third parties not justified by commercial practice;

c) interest on concealed equity capital (Art. 79, para. 2, letter b);

d) capital income and profits, excluding real estate gains, as well as liquidation and reevaluation proceeds that have not been credited to the profit and loss account.

3 The taxable net profit of legal entities that do not maintain a profit and loss account is determined according to paragraph 2, applied by analogy.

4 The services predominantly provided by mixed-economy enterprises fulfilling a public interest task to affiliated enterprises are evaluated at the current market price, at their current production cost increased by an appropriate margin, or at their current final sale price decreased by a profit margin; the result of each enterprise is adjusted accordingly.

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