Assessment and Collection of Taxes Law, every company or individual (who derives income other than from emoluments) must pay by 31 July 2021 an estimate of the taxable profit for (corporate) income tax purposes and the resulting tax liability for the year 2021.
Even though according to the law, the due date for both the submission of the return and payment of the 1st instalment is 31 July 2021, as long as the 1st instalment is paid before 31 August 2021, there should neither be a monetary charge nor any interest for late payment of tax.
- The temporary tax on such income is payable in two equal
instalments as follows:
- 31 July 2021;
- 31 December 2021.
- Furthermore, failure to pay the due tax by 31 July and31 December will result to a monetary charge of5% on the tax due for each instalment (in addition to the 1,75% per annum interest). However, in practice the imposition of the 5% monetary charge will be made only if the tax is not paid by the end of the following month to which it relates (i.e. 31 August 2021 and 31 January 2022 respectively for each instalment).
- The estimate of chargeable income may be revised (upwards or downwards) at any time before 31 December 2021. If the estimate is revised upwards, interest is payable on the difference between the revised amount payable for each instalment due and the amount initially declared and paid. The interest is calculated for each completed month for the period the instalment was due (e.g. if a revised estimation is prepared in September, the interest will be imposed only for the 1st instalment for one complete month). No monetary charge is imposed on the revised estimates on the proviso that the incremental tax liability is paid on the date the temporary tax is revised. If the estimate is revised downwards, the lowest amount that can be declared as temporary tax should equal the amount of the previous payment made.
- If the estimated chargeable income (as finally revised) is less than 75% of the actual chargeable income as this will be declared on the submitted income tax return for the year, then there will be an additional tax of 10% on the difference between actual tax payable and the temporary tax paid.
- Any difference between the actual tax payable and the temporary tax paid for year 2021 is payable by 1August 2022.
Payment of 2020 final tax and 2021 Provisional tax payments can be made either via JCC smart or through the Tax Portal
The Tax Department announced that the payment of Provisional tax (Code 200) and Final Income tax (Code 300) can be made either via JCC smart (https://www.jccsmart.com/) or through the new Tax Portal (https://taxportal.mof.gov.cy/), provided that a self-assessment form for the respective tax payment has been entered into the system.
However, it should be noted that any payments that are subject to interest and penalties or relating to revised provisional tax, can now be made either at any District Income Tax Office or through the Tax Portal, provided again that a self-assessment form for the respective tax payment has been entered into the system.
Repercussions of late payment of tax for Companies and Self-Employed individuals preparing audited financial statements.
- Any difference between the actual income tax payable for the year 2020and the temporary tax paid during that year is payable by 1 August 2021. As explained above, in cases where the temporary tax paid was less than 75% of the actual tax liability, a 10% additional tax is imposed on the outstanding balance. If payment is not made by 31 August 2021, interest will accrue at the applicable rate in force (currently 1,75% per annum) as from 1 August 2021 on the basis of completed months.
- Furthermore, failure to pay the outstanding balance in respect of the 2020 income tax by 31 August 2021 will result to a fixed monetary charge of 5% on the tax due. In addition, any outstanding tax (as this is declared on the income tax return) is subject to an additional monetary charge of 5% in case it is not paid within 60 days after the last day of the deadline for the payment of the relevant tax liability for that specific tax year (i.e. failure to pay for tax year 2020 by 1 October 2021 will result in a 5% monetary charge).
Payment of 2020 final tax and repercussions of late payment of tax for Self Employed individuals not preparing Audited accounts.
Self Employed Individuals who file an electronic tax return:
- Self Employed individuals not preparing audited financial statements who file an electronic tax return (filing deadline is the 30th of September 2021), must pay their 2020 final tax by 30th of September 2021.
- If the payment is not made by 31st of October 2021, a monetary charge at the rate of 5% is imposed. 3. Also an additional tax is imposed at the rate of 5%, 60 days after the last day of the deadline for the payment of the relevant tax liability for that specific tax year (i.e. failure to pay the tax year for 2020 by the deadline will result in a 5% monetary charge).
Payment of the 2nd instalment of the 2020 Provisional tax
We note that the deadline for the payment of the 2nd instalment of provisional tax for the tax year 2020 has been extended to 30 September 2021, without the imposition of penalties/ interest.
Special tax on the bank deposits applicable only for financial institutions:
The bank levy which is applicable only for financial institutions will be imposed on deposits as at the end of the previous calendar quarter at the rate of 0.0375%. Thus the levy which will be paid on 31 March 2021 will be based on the deposits as at 31 December 2020, the levy which will be paid on 30 June 2021 will be based on deposits as at 31 March 2021, the levy payable on 30 September 2021 will be based on deposits as at 30 June 2021 and the levy payable on 31 December 2021 will be based on deposits as at 30 September 2021.
By way of example, if the September payment is not made by 31 October 2021, a monetary charge at the rate of 5% is imposed. If payment is not made by the end of the next month from the date is due (i.e. 31 October 2021), interest will accrue at the applicable rate in force (currently 1,75% per annum) on the basis of completed months.
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 Ernst & Young Cyprus Ltd is not responsible for the result of any actions taken on the basis of information included therein. Ernst & Young Cyprus Ltd 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 8 July2021 based on tax laws currently in force and tax circulars issued by the Cypriot tax authorities.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.