According to article 24 of the Assessment and Collection of Taxes Law No. 4 of 1978 as amended, every company and every individual (self-employed, with chargeable income other than salaries, pensions, dividends and interest) registered with the local Tax Authorities should consider whether a provisional tax payment would arise based on their expected annual taxable income for the year 2019 by the 31st July 2019 and pay their tax liability in advance in two equal installments.
The temporary tax on the company’s and individual’s chargeable income is payable in the following dates:
➢ 31st July 2019 – 1st Installment;
➢ 31st December 2019 – 2nd Installment.
However, the authorities can accept the payment of the first instalment until 31st of August 2019 without charging the monetary charge or any interest for late payment of tax. The same thing applies for the second instalment if paid until 31st of January 2020.
If any instalment is not paid within the prescribed dates, interest is charged at the rate of 2% per annum from the original due date (imposed on a complete month basis) plus a monetary charge of 5%, starting from the end of following month of the due date, i.e. 31st of August 2019 and 31st January 2020. In case, where the tax due remains unpaid 2 months after the above-predetermined dates, an additional penalty of 5% is charged on the tax due.
Where the provisional income declared is less than 75% of the final taxable income, an additional amount of 10% penalty is levied on the difference between the final tax due and the provisional tax declared.
Jccsmart.com is a card payment processing system that facilitates a way to settle taxes payments, without having to wait in long queues. A valid credit or debit card is required to be able to use the JCC facilities. However, overdue payments can only be settled at the District offices of the Tax Department.
REVISION OF THE ESTIMATED CHARGEABLE INCOME
The revision can be made until 31st December 2019 at any time.
(i) If the estimate is revised upwards:
• Interest is applied to the difference between the revised amount for every instalment that is due, and the amount declared
(ii) If the estimate is revised downwards:
• The amount that can be revised must be equal and not lower than the amounts that have already been paid
o In the event of overpayment, there will be a refund equal to the overpayment of temporary tax together with interest (the public interest rates that apply at that time, currently 2%) on the completed months from the 1st of January of the year following the assessment year for which the provisional tax is concerned, i.e. 1st of January 2020.
o In case of late submission of the tax return that has refundable amount, the interest will be given after three months from the date the tax return was submitted.
COMPANIES WITH NO TAXABLE INCOME
o The tax authorities have advised that provisional income tax declarations do not need to be filed and they will not be accepted in cases where companies have neither taxable income nor any tax payable. This includes the situation whereby a company has income subject to tax but no resulting tax liability due to the availability of losses brought forward
o However, temporary tax returns must be filed in the case where companies do not have chargeable income due to a claim of a foreign tax credit. Such returns must show the chargeable income and the foreign tax credit claimed.
TAX PAYMENT OF TAX DUE FOR 2018
Any difference between the actual tax due and the temporary tax paid for the year 2018, must be settled until 1st of August 2019
In case of non-compliance with the above deadline and the failure of payment of the outstanding balance by 31st of August 2019, the following interest and penalties are applicable.
Failure of the settlement of tax due by 31st August 2019 will result in interest on overdue tax at the applicable rate in force (currently of 2% per annum) from 1st of August 2019 on the basis of completed months. Furthermore, failure to pay the outstanding balance in respect of the 2018 income tax by 31st August 2019 will result in a fixed monetary charge of 5% on the tax due. In addition, any outstanding tax (from the one declared on the income tax return) is subject to an additional tax of 5%, in a case such overdue tax is not paid within 30 days after the filing deadline. For the year 2018, such interest will apply if the tax is not paid by 30 April 2020 – the penalty will be imposed on 1 May 2020.
It is highlighted that such an additional tax is subject to the interest based on the rate of force (2% p.a. currently) for each complete month the 5% additional tax remains due.
As noted in the above paragraphs, a 10% penalty is imposed on the net tax payable if the provisional tax declared is less than 75% of the actual tax payable.
Disclaimer:
The information in this memorandum is only intended to provide general guidelines and is not intended to be complete or exhaustive. This memorandum is distributed with the understanding that P.D. Audit Limited is not responsible for the result of any actions taken on the basis of information included therein. P.D. Audit Limited is not attempting through this memorandum to render any tax or legal advice. It is recommended to consult with professional advisors for advice concerning specific matters before making any decision. This memorandum reflects current information as of 30 June 2018 based on tax laws currently in force and tax circulars issued by the Cypriot tax authorities.
