Overhead expenses

Overhead expenses are the indirect costs a business must pay to keep its operations running, but these costs cannot be linked to any single product or service. In taxation, overheads can also include expenses incurred by a company’s head office for the benefit of its branches, subsidiaries, or permanent establishments. These costs are often allocated for purposes such as transfer pricing and determining the taxable profits of a foreign branch. Tax authorities usually require such expenses to be reasonable, well-documented, and fairly allocated. In short, overheads are shared costs necessary for the overall functioning of a business, both in regular operations and in international tax settings.

Example: rent, utilities, administrative salaries, office supplies, insurance, and depreciation of office equipment.