M. Target Group kindly reminds that submission of 2023 provisional tax return and payment of the second installment of Provisional Tax by both individuals and companies is due 31st December 2023.

Provisional Tax – 2nd Installment

The provisional tax return requires the estimation of the provisional taxable profit for the current year and the payment of the respective provisional tax liability in two equal installments:

• First installment: on or before 31 July 2023. Tax can be paid within one month from the payment deadline (i.e. until 31 August 2023) without interest or penalties.
• Second installment: on or before 31 December 2023. Tax can be paid within one month from the payment deadline (i.e. until 31 January 2024) without interest or penalties.

It is noted that the final tax liability for the tax year 2023 should be settled by 1 August 2024.

Whom does it concern?

The following persons should consider whether a provisional tax payment would arise based on their expected annual taxable income:

• Individuals with taxable income other than salaries, pensions, dividends, and interest.
• Companies with taxable income.

A provisional tax return does not need to be submitted where there is no taxable profit.

Revision Timelines

A provisional tax return may be revised by a taxpayer at any time before 31 December of the year of assessment to which it relates. In case of revision, the Commissioner of Taxation will need to be notified in writing by completing and submitting a revised provisional tax declaration.

Interests and Penalties

Late payment or underpayment of the provisional tax needs to be settled by the following due date and it will carry interest at 1.75% p.a. and an additional penalty of 5% is imposed if the tax remains unpaid 2 months after the payment deadline.

If the provisional taxable profit for 2023 is less than 75% of the final taxable profit computed based on the audited financial statements, then a 10% additional tax is added to the tax liability payable. For this reason, it may be more tax effective to execute payments through the provisional tax assessment system rather than submitting a nil return and pay the final tax together with a 10% additional tax in 2024.

Cyprus tax resident individuals who have income other than from employment may also need to file a provisional tax declaration in order to settle the National Health Contributions relating to such income.

As always, M. Target Group specialists remain at your disposal should you require any further information, clarification or professional assistance with any tax matter.