Provisional tax in Cyprus: the two installments, explained

Cyprus collects corporate tax while the profit is still being earned. That's provisional tax. Your company estimates its taxable profit for the current year, declares the tax on that estimate and pays it in two equal instalments, the first by 31 July and the second by 31 December. You set the estimate, and you can change it until the year closes. Set it too low and you pay a surcharge.

What is provisional tax in Cyprus?

Provisional tax, also called temporary tax, is corporate income tax you pay during the year itself, before the accounts close. The company estimates its taxable profit for the current tax year, declares the tax on that estimate and pays it in two instalments.

The estimate is your own declaration. Nobody at the Tax Department tells you what your profit will be. You work it out, you file it, and you carry the consequences if it turns out far too low. The final reckoning comes later, in the corporate income tax return. From tax year 2026 that return is due by 31 January of the second following year, so the 2026 return is due on 31 January 2028. The 2025 return keeps its 31 March 2027 deadline. The provisional tax you've already paid counts against the real liability, and you then pay the balance or get the difference back. Our guide to Cyprus corporate tax explains how that final liability is worked out.

Who has to pay provisional tax?

Every Cyprus tax-resident company that expects a taxable profit in the current tax year. There's no size threshold, no first-year exemption and no exception for owner-managed businesses. Self-employed people with income outside employment are in the same system.

It works the other way too. A company that genuinely expects no taxable profit declares nothing and pays nothing. A loss-making or dormant year creates no provisional tax. It doesn't mean you can stop checking, though. If trading recovers during the year, the obligation arrives with it, and the revision window is how you catch up.

From tax year 2026 there's also a sensible rule for late starters. A company incorporated after 30 June, or a person whose non-employment income starts after that date, files the estimate by 31 December and pays the whole amount in a single instalment on 31 December. A company formed in September no longer has to meet a deadline that passed before it existed.

When are the installments due?

On 31 July and 31 December, both inside the tax year itself. By 31 July you file the estimate and make the first payment. By 31 December you make the second.

Each instalment is half the tax on the profit you declared. The December date does two jobs. It's the deadline for the second payment and the last day you can change the estimate. After that, the year's declaration is fixed, and the only open question is what the final accounts will say. Our Cyprus tax deadlines guide puts both dates alongside the rest of the calendar.

How do you estimate the year's profit?

Start from this year's books. Last year's return tells you what happened then. The months already closed tell you about now. You're estimating taxable profit, which is accounting profit adjusted for the usual Cyprus differences. Those are disallowed expenses, exempt income such as dividends, capital allowances instead of book depreciation, and losses brought forward from earlier years.

For an owner-managed company, a plain method works. Take the profit actually earned in the months already closed. Project the rest of the year from work that's contracted or in sight. Apply the tax adjustments, then the rate. Say the six months to June show €60,000 of profit and the second half looks similar. Estimate €120,000, apply 15%, and you get €18,000 of tax for the year, paid as €9,000 in July and €9,000 in December.

If your revenue is lumpy, with a few large invoices or seasonal trade, build the estimate on contracted work, not an average month. Your bookkeeping decides how hard this is. With books that are current to last month, the July estimate is mostly arithmetic. With books last reconciled in March, it's a reconstruction, and reconstructions miss things.

Can you revise the provisional tax estimate?

Yes, up or down, any time until 31 December of the tax year. The revised figure replaces the original, and the December instalment changes so the year's total matches it. Companies use this part of the system least, and it's the cheapest protection there is.

Put one check in the calendar for the autumn. Compare the profit you've actually earned so far with the figure you declared in July. If you're ahead, revise upwards and pay the difference with the second instalment. After 31 December you can't correct anything, and the 75% test runs against whatever you declared.

Revising down is fine when trading genuinely fell short. Cutting the estimate just to ease cash flow is a different thing. The threshold is measured against the profit finally assessed, so a payment you put off this way usually comes back next year with 10% added.

What happens if you underestimate provisional tax?

You pay an extra 10% if the profit you declared comes in below 75% of the taxable profit finally assessed. Most people get the base wrong. The surcharge is a percentage of tax, not of the profit shortfall.

The test is all or nothing. Land at or above the threshold and you pay no surcharge, however rough the estimate. Land below it and the 10% applies to the whole tax difference, from the first euro. Filing nothing at all is the worst place to be. With no estimate, your provisional income counts as nil, so the surcharge applies to the full final tax.

Why the 2026 reform changes your estimate

The rate moved. Corporate income tax is 15% from tax year 2026, up from 12.5%. A company that forecasts its 2026 profit perfectly but multiplies by last year's rate declares 16.7% too little tax. The forecast is right and the spreadsheet is out of date. If you're reusing last year's working paper, fix the rate before you touch anything else.

The payment calendar moved too. Up to tax year 2025, the balance you self-assess after provisional tax is due by 1 August of the following year. From tax year 2026, companies pay the balance by 31 January of the second following year, the same day the return is due. Our 2026 tax reform guide walks through the rest of the changes.

How do you declare and pay?

You self-assess provisional tax and pay it online through the Tax Department's systems. So the company needs its tax identification number and portal access set up well before 31 July. Sorting out access on deadline day is how a correct estimate becomes a late payment.

Before each instalment, make sure your books are current enough to support the estimate. Make real tax adjustments rather than glancing at the bank balance. And schedule the payment with time to spare for bank cut-offs.

This is the part Sumly takes off your plate. The AI books your documents and matches bank transactions as they happen, so your books are already current when July comes, and the estimate comes from live figures instead of a catch-up job. Sumly prepares the provisional tax work from those books, and a person reviews it and submits it through Tax For All, the Tax Department's online portal. On Base, that's you. On Plus, it's Sumly. On Premium, it's your Sumly certified bookkeeper, who also handles the corporate return, VAT and VIES from the same books. If you're deciding whether to run this yourself at all, do I need an accountant in Cyprus? sets out the trade-offs.

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