
Every company and Self-employed (who has taxable profit) can estimate and pay the tax of the current financial year in two equal installments.
The due dates for temporary tax payment are as follows:
- for the first payment is on the 31 of July
- for the second payment is on the 31 of December
The estimated chargeable income can be revised at any time before 31 December (upwards or downwards). If the estimation is 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 complete month as from 1st September.
If the estimated chargeable income under temporary self-assessment is less than 75% of the actual income, there is 10% additional tax on the outstanding balance.
The difference between the final tax computation and the temporary tax paid is payable by 1 August of the following year.
Example 1:
In July ABC Ltd has submitted its temporary tax return estimating a temporary income of €200.000 for the financial year and paid a temporary tax at 12,5%.
The final chargeable income based on audited financial statements is €250.000.
Solution:
31/12 | ||
€ | ||
Final Tax (€250.000*12,5%) | 31.250 | |
Less: Temporary tax paid (€200.000*12.5%) | (25.000) | |
6.250 | ||
10% Additional tax (€200k/€250k=80%) | – | No additional tax is paid since the estimated income declared is not less than 75% of the final tax |
Tax Payable | 6.250 | The tax is due on 1/8 of the following year |
Example 2:
In July ABC Ltd has submitted its temporary tax return estimating a temporary income of €200.000 for the financial year and paid a temporary tax at 12,5%.
The final chargeable income based on audited financial statements is €300.000.
Solution:
31/12 | ||
€ | ||
Final Tax (€300.000*12.5%) | 37.500 | |
Less: Temporary tax paid (€200.000*12.5%) | (25.000) | |
12.500 | ||
10% Additional tax (€200k/€300k=67%) | 1.250 | Additional tax is paid since the estimated income declared is less than 75% of the final tax |
Tax Payable | 13.750 | The tax is due on 1/8 of the following year |