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Payment of temporary tax for 2022
According to the Assessment and Collection of Taxes Law, every legal or physical person (who receives income other than emoluments) is required to pay by July 31, 2022, an estimate of the taxable profit for (corporate) income tax purposes and the resulting tax liability for the following year.
According to the Assessment and Collection of Taxes Law, every legal or physical person (who receives income other than emoluments) is required to pay by July 31, 2022, an estimate of the taxable profit for (corporate) income tax purposes and the resulting tax liability for the following year.
Although the law specifies that the first instalment is due on July 31, 2022, there should not be any penalties or interest for paying the tax after that date as long as it is paid before August 31, 2022.
1. Such income is subject to a temporary tax payable in two equal installments on July 31, 2022 and December 31, 2022.
If the tax is not paid by the end of month following the month the instalment is due (i.e. August 31, 2022 and January 31, 2023), an interest at the current rate of 1.75% per annum will be applied. The interest is calculated based on the completed months.
2. In addition to the aforementioned, there will be a 5% penalty for failing to pay the required tax by the deadlines of July 31 and December 31. However, in reality, the tax will only be subject to the 5% penalty, if it is not paid by the end of the month following the month to which it applies (i.e. August 31, 2022 and January 31, 2023 respectively for each instalment).
3. Before December 31, 2022, the estimate of chargeable income may be updated (upwards or downwards). If the estimate is revised upward, interest is due on the difference between the amount initially declared and paid and the revised amount payable for each installment due. For the duration that the installment was due, the interest is calculated for each completed month (e.g. if a revised estimation is prepared in September, the interest will be imposed only for the 1st instalment for one complete month). On the condition that the incremental tax liability is paid on the day the temporary tax is revised, no fee is applied to the revised estimates.
The lowest amount that can be declared as temporary tax should match the amount of the previous payment made, even if the estimate is revised lower.
4. There will be an additional tax of 10% on the difference between the actual tax due and the temporary tax paid if the estimated chargeable income (as finally revised) is less than 75% of the actual chargeable income as this will be reported on the filed income tax return for the year.
5. By August 1, 2023, you must pay any difference between the actual tax owed and the temporary tax that was already paid for the year 2022.
JCC Smart or the Tax Portal can be used to pay the 2021 final tax and the 2022 provisional tax.
The Tax Department announced that, provided a self-assessment form has been entered into the system for the appropriate tax payment, Provisional tax payments (Code 200) and Final Income tax payments (Code 300) may be made either through JCCsmart (https://www.jccsmart.com/) or the new Tax Portal (https://taxportal.mof.gov.cy/).
However, it should be noted that any payments related to revised provisional tax or those subject to interest and penalties can now be made either at any District Income Tax Office or through the Tax Portal, provided that, once again, a self-assessment form has been entered into the system for the relevant tax payment.
Repercussions of late tax payments for Companies and self-employed individuals who prepare audited financial statements
1. By August 1, 2022, any difference between the actual income tax due for the year 2021 and the temporary tax paid during that year must be paid. As previously stated, a 10% additional tax is levied on the unpaid balance when the temporary tax paid was less than 75% of the actual tax liability. If payment is not made by August 31, 2022, interest will start to accrue on the basis of completed months on August 1, 2022 at the applicable rate in effect (currently 1.75% per annum).
2. In addition, a fixed monetary penalty of 5% of the tax due will be applied if the unpaid balance in respect of the 2021 income tax is not paid by the deadline of August 31, 2022. Furthermore , any unpaid tax (as stated on the income tax return) is subject to an additional penalty of 5% if it is not paid within 60 days of the deadline for paying the applicable tax liability for that particular tax year (i.e. failure to pay for tax year 2021 by October 1, 2022 will result in a 5% penalty).
*DISCLAIMER: This article and its publication are intended to provide a brief introduction and act as a general guide. This is provided for information purposes only and cannot be utilized as a substitute for professional advice. This document does not represent a legal opinion and one must not rely on it without receiving independent advice based on the particular facts of its own case. No responsibility is accepted by the author or the publishers for any loss suffered from acting or refraining from acting based on the contents of this publication.
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