Provisional Taxes in Cyprus for Companies

In accordance with the Cyprus Income Tax Law, all companies with chargeable profit in a year are obliged to pay provisional tax.

This requires companies to estimate the chargeable profit for the year and pay the 12,5% corporation tax on that profit in 2 equal instalments.

The dates of submission and payment of the instalments of provisional tax for any year are as follows:

31 July – Payment of 1^st Instalment

31 December – Payment of 2^nd Instalment

The taxpayer is allowed one month after the due date (i.e., 31 August and 31 January respectively) to pay the provisional tax. Payments can be done as follows using the code 0200:

A) Within the deadline payments can be done via the webpage https://www.jccsmart.com/ or via your internet bank using the Payment Reference Number that you can obtain when you create the liability using the Tax Portal of the Tax Department (https://taxportal.mof.gov.cy/).

B) After the deadline, payments can ONLY be done via the Tax Portal of the Tax Department.

For further instructions on payments, you can see this Article.

Revision of the provisional chargeable profit and provisional tax is allowed before the payment of the 2^nd Instalment and up to 31 December as follows:

C) An Upward Revision creates an additional provisional tax liability for the 1^st Instalment and an increased tax liability for the 2^nd Instalment. As a result, the additional tax liability of the 1^st Instalment will carry interest at 1,75% p.a. on completed months and a fixed penalty of 5%.

Example 1:

On 31 July a provisional chargeable profit of €100.000 was estimated by a Company. The provisional corporation tax liability arose to €12.500 (€100.000 x 12,5%) and the 1^st Instalment of €6.250 (€12.500 / 2) was paid on that date.

On 30 December a revision of the provisional chargeable profit to €175.000 was required. As a result, the provisional tax liability changed to €21.875, and the 1^st Instalment should have been €10.937,50 (€21.875 / 2). Since the Company already paid an amount of €6.250 on 31 July, then the tax liability for the 1^st Instalment is now €4.687,50. The payment of the additional amount is after the deadline and will carry a fixed penalty of €234,38 (€4.687,50 x 5%) and interest of €27,34 (€4.687,50 x 1.75% x 4/12). The interest will apply from August until November, since the deadline is 31 July, and interest is applied on completed months.

On 31 December, the revised 2^nd Instalment of €10.937,50 is due with the allowance of one month after to pay i.e., 31 January of the next year.

D) A Downward Revision can be done only up to an amount that would create a provisional tax liability equal to the sum of payment already made up to the date of revision. This in effect would create a zero payable instalment on the following due date of the year of assessment. The taxpayer should notify the Commissioner of Taxation in writing by completing and submitting a revised provisional tax declaration (T.D.6 2020).

Example 2:

Consider the same numbers as the example 1 above for the payment of the 1^st Instalment, but instead on 30 December we need to decrease the provisional chargeable profit.

Now, the provisional chargeable income can be reduced up to the amount of €50.000 (€6.250 / 12,5%) which is the amount already paid for the 1^st Instalment. As a result, no tax liability would arise for the 2^nd Instalment.

Necessity of Provisional Taxes

E) If the provisional chargeable profit for the year is less than 75% of the final taxable profit of the year based on the audited financial statements, then a 10% additional tax is added to the tax liability payable.

Example 3:

A Company estimated a provisional chargeable profit of €50.000 and paid the provisional tax of €6.250 (€50.000 x 12,5%) in 2 instalments. The final chargeable profit based on the audited financial statements arose to €100.000. Since the provisional chargeable profit is less than 75% (€50.000 / €100.000 = 50%), then an additional 10% charged will apply as follows: