Skip to main content

Understanding the Provisional Tax System in Cyprus and What You Need to Know Before the July Deadline

For companies operating in Cyprus, 31st July is not just another date. It marks the first deadline for paying provisional tax for the current tax year.

If you are unsure how the system works, what is required of you or what happens if you get it wrong, this post will explain everything.

What Is Provisional Tax in Cyprus?

Provisional tax is an advance payment towards your company’s corporate income tax for the year. It is based on an annual estimated profit you expect to make for the year ending 2025. It is not optional and all Cyprus tax resident companies with taxable income must assess and pay provisional tax.

Key Deadlines to Remember

The provisional tax is paid in two equal installments:

  • 1st Installment: By 31 July of the current year
  • 2nd Installment: By 31 December of the current year

A company can revise its provisional tax estimate any time before 31 December, and the amount due will be adjusted accordingly.

A final payment or refund will be made when submitting the Income Tax Return (TD4) the following year.

What Happens If You Don’t Estimate Accurately or Miss the Deadline?

Provisional tax comes with some important compliance rules:

Late Payment Penalties

  • 5% penalty for each late installment
  • 5.50% annual interest (calculated on completed months) on overdue amounts

Underestimation Penalty

  • If your annual estimated taxable profit is less than 75% of the actual taxable profit, you will be charged an additional 10% penalty on the difference of the actual and estimated tax.

Example:

  • Actual taxable profit of €80.000 resulting to actual tax of €10.000
  • Estimated taxable profit €56.000 resulting to estimated tax and provisional payments of €7.000
  • Estimated taxable profit is less than 75% of actual (70%). Tax underestimation difference €3.000
  • Penalty: €300 (10% of the shortfall)

No Submission?

  • Failure to submit and pay a provisional tax when required can lead to interest, penalties, and audit flags with the Tax Department.

How a Good Accountant Can Help

The provisional tax system may seem complicated at first, which could result to mistakes and additional costs. These can be easily avoided with the right support.

A good accountant will help you:

  • Accurately project your profits based on up-to-date accounting records and trends
  • Ensure timely submission and payment of both installments
  • Advise on mid-year adjustments if your financial position changes
  • Avoid unnecessary penalties and underestimation charges
  • Handle all communication with the Tax Department on your behalf

Provisional tax is part of a responsible tax planning. With expert support, you can align your payments to your cash flow and avoid last-minute surprises.

Conclussion

With the 31st July deadline approaching, now is the time to act. Whether you are unsure about your company’s estimated profits or simply haven’t prepared the paperwork yet, it’s not too late.

Need help estimating and submitting your provisional tax on time?
Contact us today and let us take care of it, so you can focus on running your business.