Deductible expenses
In one sentenceExpenses the law accepts as deductions from income in calculating income tax, because they are actual, related to earning the income and supported by documents.
Simply put
An expense is usually accepted if it is: actual, related to an activity that earns taxable income, backed by a document that proves it, and not capital in nature.
A capital expense, such as buying equipment, is not deducted in one go, but through tax depreciation over several years.
Worked example
A contracting company spent 900,000 SAR, of which 20,000 SAR were fines for violations that the law does not accept.
Total expenses900,000 SAR
Non-deductible fines20,000 SAR
Calculation900,000 − 20,000
Deductible expenses880,000 SAR
Don't confuse it with
Non-deductible expensesDeductible expenses reduce the tax, while non-deductible expenses are added back to profit and so increase it.