Tax Alert – 2023 Provisional Tax Return

The deadline for submitting the 2023 Provisional tax return for the year ending 31 December is 31 July 2023.

A provisional tax calculation which is a rough estimate of taxable profit, should be filed to calculate the provisional tax liability for the current year. The payment of the respective liability must be paid in two equal instalments, e.g., by 31 July 2023 and 31 December 2023.

Regardless of his domicile status, Cyprus tax resident individuals may also need to file a provisional tax return, should they have any income other than their employment income, to settle the General Health System contribution deriving from such income. It is reminded that the corresponding income should have been declared to the employer and the respective income tax is paid monthly under PAYE by the employer. Alternatively, the income tax deriving from the other income can also be paid in two equal instalments, e.g., by 31 July 2023 and 31 December 2023.

The provisional tax return is subject to revision by 31 December of the year of assessment to which it relates, should the estimated taxable profit materially vary from the initial calculation. In such case, the Commissioner of Taxation should be notified in writing by submitting the revised provisional tax return.

A downward revision should not create refundable tax. An upward revision will create an additional provisional tax liability for both the 1st and 2nd installment. The difference between the amount paid for the 1st installment and the amount that should have been paid for the 1st installment carries interest at the rate of 2,2% p.a. and a fixed penalty of 5%.

If the provisional taxable profit for the year is less than 75% of the audited taxable profit, then a 10% additional tax is added to the liability due. If the provisional tax paid is higher than the audited tax liability, this is subject to refund provided that the relevant tax year has been assessed by the Commissioner of Taxation and found in agreement.

Please contact our Tax Planning and Advanced Business Structuring department who can assist you with any queries arising from this announcement.