Provisional tax in Cyprus: the two installments, explained

Cyprus collects corporate tax while the profit is still being earned. Your company estimates its taxable profit for the current year, declares the tax on that estimate, and pays it in two equal installments, the first by 31 July and the second by 31 December. The estimate is yours to set and yours to change until the year closes. Set it too low and a surcharge follows.

What is provisional tax in Cyprus?

Provisional tax, also called temporary tax, is how Cyprus collects corporate income tax during the year itself instead of waiting for the accounts to close. The company estimates its taxable profit for the current tax year, declares the tax on that estimate, and pays it across the two installments.

The estimate is your own declaration. Nobody at the Tax Department tells you what your profit will be. You calculate it, you file it, and you carry the consequences if it proves far too low. The final reckoning comes later through the corporate income tax return, which for tax year 2026 onwards is due by 31 January of the second following year, so the 2026 return is due 31 January 2028, while the 2025 return keeps its 31 March 2027 deadline. The provisional tax already paid is credited against the real liability and the balance is settled or refunded. Our guide to Cyprus corporate tax covers how that final liability is built.

Who has to pay provisional tax?

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

The reverse is just as simple. A company that genuinely expects no taxable profit declares nothing and pays nothing. A loss-making or dormant year creates no provisional obligation. What it does not create is permission to stop checking: if trading recovers during the year, the obligation appears with it, and the revision window is how you catch up.

From tax year 2026 there is 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 installment on 31 December. A company formed in September no longer squeezes into a deadline that passed before it existed.

When are the installments due?

Both dates fall inside the tax year itself: 31 July for the estimate and the first payment, 31 December for the second.

Each installment is half of the tax on the profit you declared. The second date does double duty: it is the deadline for the second payment and the last day the estimate itself can change. Once it passes, the year's declaration is fixed, and the only open question is what the final accounts will say. The two dates sit alongside everything else in the calendar, and our Cyprus tax deadlines guide puts them in context.

How do you estimate the year's profit?

Start from the current year's books. Last year's return tells you what happened then. The months already closed tell you about now. The estimate is of taxable profit, which means accounting profit adjusted for the usual Cyprus differences: disallowed expenses, exempt income such as dividends, capital allowances in place of book depreciation, and losses brought forward from earlier years.

The method that works for an owner-managed company is plain. Take the profit actually earned in the months already closed, project the rest of the year from contracted and visible work, apply the tax adjustments, then apply 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.

Companies with lumpy revenue, a few large invoices or seasonal trade, should build the estimate on contracted work rather than an average month. The quality of the bookkeeping decides how hard this is. With books that are current through last month, the July estimate is mostly arithmetic. With books that were last reconciled in March, it is a reconstruction, and reconstructions miss things.

Can you revise the provisional tax estimate?

Yes, up or down, at any point until 31 December of the tax year. The revised figure replaces the original, and the December installment adjusts so the year's total matches it. This is the part of the system companies use least, and it is the cheapest protection available.

Put one check in the calendar for the autumn: compare the profit actually earned so far against the figure declared in July. If reality has run ahead, revise upwards and pay the difference with the second installment. After 31 December nothing can be corrected, and the 75% test runs against whatever you declared.

Downward revisions are legitimate when trading genuinely disappointed. A cut made only to ease cash flow is a different thing. The threshold is measured against the profit finally assessed, so a payment postponed this way usually comes back next year with 10% added.

What happens if you underestimate provisional tax?

If the profit you declared comes in below 75% of the taxable profit finally assessed, an additional 10% is charged. The detail most people get wrong is the base: the surcharge is calculated on tax, not on the profit shortfall.

1. 01

   Work out the final tax

   Apply the corporate rate to the taxable profit finally assessed. Say the assessment lands at €120,000: at 15% the real liability is €18,000.

2. 02

   Subtract what you already paid

   Add up the provisional tax paid across both installments and deduct it. If you declared €80,000 and paid €12,000, the difference is €6,000.

3. 03

   Apply the threshold test

   75% of the €120,000 final result is €90,000. The declared €80,000 sits below that, so 10% of the €6,000 difference is due: a €600 surcharge. Had the declaration been €90,000 or more, the surcharge would be zero.

The test is all or nothing. Land at or above the threshold and no surcharge is due, however imperfect the estimate. Land below it and the 10% applies to the whole tax difference, from the first euro. And filing nothing at all is the worst position available: with no estimate, provisional income is deemed nil, so the surcharge attaches to the full final tax.

Why the 2026 reform changes your estimate

The rate under the estimate moved. Corporate income tax is 15% from tax year 2026, up from 12.5%, so a company that forecasts its 2026 profit perfectly but multiplies by last year's rate declares 16.7% too little tax. The forecast is fine and the spreadsheet is stale. Anyone reusing last year's working paper should fix the rate cell before touching anything else.

The settlement calendar moved too. Through tax year 2025, the self-assessed balance left 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 package.

How do you declare and pay?

Provisional tax is self-assessed and paid electronically through the Tax Department's online systems, so the company needs its tax identification number and portal access in place well before 31 July. Sorting out access on the deadline day is how correct estimates become late payments.

Before each installment you want books current enough to support the estimate, real tax adjustments rather than a glance at the bank balance, and a payment scheduled with margin 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 the books are already current when July arrives and the estimate comes from live figures instead of a catch-up exercise. Sumly prepares the provisional tax work from those books, and a person reviews and submits it through Tax For All: you on Base, or your Sumly certified bookkeeper on Premium, who handles the corporate return, VAT and VIES from the same books. If you are weighing up whether to run this yourself at all, do I need an accountant in Cyprus? lays out the trade-offs.

Questions founders ask us

Frequently asked

Does a company in its first year have to pay provisional tax?

Yes, if it expects taxable profit in that year. The obligation follows the expected profit, whatever the company's age. From tax year 2026 there is a helpful concession: a company incorporated after 30 June files its estimate by 31 December and pays the whole amount in a single installment on that date, instead of splitting it across two.

What if my company makes a loss?

Nothing to pre-pay. Provisional tax is charged on estimated taxable profit, so a company expecting a loss declares no estimate and pays no installments. Keep watching the numbers, though. A company that expected a loss in March and is profitable by November now has an obligation, and it can still meet it by filing an estimate before 31 December.

What happens if I file no estimate at all?

The law treats your provisional income as nil. If the company then shows a taxable profit in its return, nil is below 75% of any positive result, so the 10% surcharge applies to the entire final tax. A company that ends 2026 with €18,000 of corporate tax and no estimate filed owes €1,800 on top. Filing a reasonable estimate is the whole defence.

Can I revise the estimate downwards as well as upwards?

Yes, in either direction, any time until 31 December of the tax year. Revise down when trading genuinely fell short of the summer forecast. A cut made only to free up cash is risky, because the 75% test is measured against the profit finally assessed, and a downward revision that proves wrong brings the 10% surcharge with it.

How is the 10% surcharge calculated?

On the tax difference. Take the final tax due on the assessed profit, subtract the provisional tax you actually paid, and apply 10% to what is left. It is only charged if your declared estimate came in below 75% of the final assessed result. At or above 75%, there is no surcharge, however rough the estimate was.

When is the final balance of corporate tax due?

For tax years up to 2025, the self-assessed balance is due by 1 August of the following year, so the 2025 balance is due 1 August 2026. From tax year 2026 the date moves to 31 January of the second following year, the same day the return is due, so 2026 tax is settled by 31 January 2028. Provisional tax already paid is credited first.

What happens if I pay an installment late?

Interest runs from the due date at the official rate, 3.5% for 2026, and late-paid tax also picks up a 5% monetary charge, with a further 5% if it stays unpaid two months on. Late payment and underestimation are separate exposures. Paying the right amount late does not protect you from the surcharge, and paying too little on time does not avoid interest on the eventual balance.