Temporary Taxation

Based on the Inland Revenue law, every company is required to calculate its taxable income for this year by the end of June. Furthermore, companies are called to make two equal payments on the projected amount of tax on 31 July and 31 December.

In cases where the company submits the IR6 declarations and does not meet the aforementioned requirements and deadlines but business activities do generate taxable revenue, the company is subject to a 10% penalty, which will be imposed on the estimated tax plus interest. Therefore, instead of being subject to 12.5% tax the company will be required to pay 13.5%.

Furthermore, if the projected tax turns out to be 75% or lower than the actual tax, the difference between the estimated and actual tax is subject to the 10% penalty. For instance, when the estimated tax is calculated at 100 Euros, the company is called to make two payments of 50 Euros. However if the actual tax turns out to be 150 Euros, then the calculations are made as follows: (150 Euros * 75%) – 100 Euros) * 10% = 1.25 Euros. Companies are allowed to revise their estimated tax by 31 December of 2015.

According to the latest amendments made on the Income Tax law, if a company does not deliver the Provisional Tax returns by the aforementioned dates, it will be subject to a 4.75% interest rate on a monthly basis. Companies who fail to submit the Provisional Tax are also subject to a 5% penalty. Therefore, it is significant that the tax forms need to be submitted to the Income Tax Office by the due dates. It is worthy to note that the Income Tax Office does not allow submissions be made by individuals, but only legal entities.