PROVISIONAL TAX

Overall

Provisional Tax assessment and payment is a government requirement according to the Assessment and Collection of Taxes Law No.4 of 1978 as amended.

Cyprus Companies should estimate their taxable income for the whole year before the year end and pay in advance their tax obligation. This mechanism is called temporary tax self-assessment and is payable to two equal installments before the following dates:

• 31 July each year
• 31 December  each year

For loss making Companies, the provisional tax assessment and payment is not applicable.

Estimation

For the estimation, the Company needs to apply its own assumptions and budgets. Most common practice is to use the same amounts with previous months (Jan-Jun) and increase or decrease accordingly.

Failure to pay provisional Tax and low estimation

For Companies fail to pay provisional tax, extra tax equals to 10% on the final tax amount will be imposed. In addition, if your estimation is lower than 75% of the actual tax, the 10% is also applies.

Method of payment and declaration

 Currently, the whole process is done electronically. You need to register and log in to the Cyprus Tax Portal (https//:taxportal.mof.gov.cy/). Once you have estimated your tax obligation, you can proceed with payment.

Changes on estimation

Since the 2nd payment is on 31 December, there is always a possibility your estimation will be changed. You can always make a revised estimation and pay the difference. In case the estimation is higher, fixed interest of 5% plus 1.75% on the difference (1st installment) is applicable.