Cyprus Provisional Tax / Self-Assessment Returns

Temporary tax assessments

Taxpayers must submit their temporary tax return before the 31st of July of each year based on their estimated current year’s taxable income and pay the corresponding temporary tax. The temporary tax payments must be made on the estimated current year’s profit in two equal installments, on 31st July and 31st December.

In case the temporary tax payments were made based on an incorrected estimated yearly taxable profit then the estimated taxable income can be revised (upwards/downwards) any time prior to 31st of December of the current tax year.

However, in case the revised provisional tax declaration results in a refund of the provisional tax already paid, the refund will be assessed by the Cyprus tax authorities upon their examination of the submitted final income tax return of the company. Therefore, it is very important that the company calculates its provisional tax declaration on a conservative basis on its taxable profits

It should be noted that if there is no taxable income,then it is not required to submit the temporary tax return.

Final Tax Assessment

The final payment of any tax due must be made on the 1st of August of the following year of assessment, this is required in order to bring the total installment payments to the level of the actual liability due (as per the actual tax liability determined).

Penalties, Interest and Additional Tax

Interest: If the relevant tax installment payment is not paid by the end of the month from the date the payment is due, then there is interest of the tax installment due at 3,5% (for 2017 and 2018) per annum which is calculated on a monthly basis (e.g. if the 1st installment payment is not made by the 31st August 2018, there is interest of 3,5% times 1/12 as the payment has been delayed for one month).

Penalty – Monetary charge: If there is any delay in the payment of any of the aforementioned installments of provisional tax declaration, then there will be an additional 5% flat penalty (“monetary charge”) on the tax due that should have been paid with any of these installments. The 5% penalty charge does not carry any interest charges. The 5% monetary charge is imposed on the outstanding tax after the deduction of the temporary tax, after charging 10% additional tax but before the deduction of the self-assessment due on 1st August next year.

10% additional tax: If the total taxable income declared (and the corresponding temporary tax paid) is less than three quarters (3/4) of the taxable income (and total corporation tax) as finally determined, the taxpayer must pay, in addition to the normal tax, an amount equal to one-tenth (10%) of the difference between the final and the temporary tax.

5% additional tax: For all taxes outstanding on 1st October of the next year, there is an additional 5% monetary charge which does not affect the 5% monetary charge imposed on unpaid tax balances where the tax is not paid within a period of 30 days from the due date.

Additional notes

Taxable losses brought forward from previous years cannot be carried forward after the lapse of five years from the end of the tax year during which the loss occurred (i.e. for tax year 2018, only the losses from 2013 and onwards can be utilised).

The temporary tax form can also be submitted electronically via https://www.JCCSmart.com by paying the amounts under code 0200 for the respective tax year.

The final payment for tax must be made via self-assessment on 1st of August of the year following the year of assessment (i.e. for the tax year 2017 payment must be have been made by 1st August 2018).

Due Dates

Taxpayer Due date for submission of the Income Tax return Due date for self-assessment & payment 5% additional tax for non-ayment of the tax due 5% surcharge for non-ayment (monetary charge) of the tax due
Employed Individual 30/4 following tax year 30/6 following tax year 1/8 following tax year 1/8 following tax year
Employed individual online submission 31/7 following tax year 30/6 following tax year 1/8 following tax year 1/8 following tax year
Self-employed individual with no requirement to prepare financial statements 30/6 following tax year 30/6 following tax year 1/8 following tax year 1/8 following tax year
Self-employed individual with no requirement to prepare financial statements – online submission 30/9 following tax year 30/6 following tax year 1/11 following tax year 1/8 following tax year
Self-employed individual with requirement to prepare financial statements (Online submission only) 31/3 of the year after the following tax year 1/8 following tax year 1/5 of the year after the following tax year 1/9 following tax year
Companies (online submission only) 31/3 of the year after the following tax year 1/8 following tax year 1/5 of the year after the following tax year 1/9 following tax year

Illustration / Example

Information relating to Cyprus incorporate company for the year ended 2016:

  1. During 2016 the company paid provisional tax of €252,000 by two installments of €126,000 each.
  2. On 31 July 2017 the company paid tax by self-assessment for the year 2016 amounting to €5,000.
  3. On 10 October 2018, the audit by the company’s auditors was completed and the preparation of the 2016 tax computation indicated taxable income of €3,550,000 for the year 2016.
  4. As at 31 December 2015 the company had taxable losses of €150,000 to carry forward.
  5. The company did not submit its tax return or pay all taxes due for the year 2016 until 28 May 2018.

Calculate total tax due, including all penalties and interest.

Solution

Corporation Tax payable for the year 2016      €
Taxable income 2016    3,550,000
Tax losses for 2015    (150,000)    
Taxable income for 2015 after losses brought forward    3,400,000  
Corporation Tax at 12,5%    425,000
Provisional Tax paid    (252,000)   
     173,000
Additional tax 10% of €173,000  
(Provisional Tax payment less than 75% of the amount due)    17,300     
     190,300
Self-assessment tax paid on 31/7/2017    (5,000)     
Tax payable after the payment of self assessment    185,300
Additional tax of 5% of €190,300 (tax unpaid 1/5/2018)    9,515         
Tax payable before interest    194,815
Interest at 3,5% p.a. on €185,300 for 9 months (completed months)    4,864
Interest at 3,5% p.a. on €9,515 from 1/5 to 28/5 (no completed months)   0                 
Total amount due as at 28/5/2018   199,679
Penalty for late submission of tax return   100
Surcharge of 5% of late payment (5% * 185,300 – tax unpaid at 1/9/2017)    9,265          
Total tax payable including all penalties and interest    € 209,044