In accordance with the Income Tax legislation, all taxable persons deriving income from business (self employed and Companies) are required to estimate their taxable profits for the fiscal year 2012 and pay temporary tax on three equal installments. The three equal
installments are paid on 1st of August, 30th of September and 31st of December. If the taxpayer expects tax loss for the year then the temporary tax declaration should be nil. In this case, the temporary tax declaration is not submitted to the authorities.
If the temporary tax is lower than 75% of the actual tax then 10% penalty is imposed on the difference. In the case the temporary tax installments are not paid on time then 5% penalty is imposed plus 5% interest on late payment (imposed on complete months).
In the case of incorrect estimation, then the taxpayer has the ability to submit revised Temporary Tax declaration during December 2012 in order to adjust for the difference between the estimated declared taxable profits and the actual taxable profits. The installments will be adjusted in accordance with the revised Temporary Tax declaration. Any under provision will be subject to interest at the rate of 5% on the difference with the previously declared installments. Any overprovision will be adjusted in the last installment.
It should be noted that any tax withheld overseas on the income generated by the Cyprus Company should be taken into account in the calculation of the estimated taxable profits.
The Temporary Tax declaration should be submitted to the Inland Revenue department of Cyprus until 1st of August 2012 and should be accompanied with the first payment.