Late this winter, the Ministry of Finance proclaimed the Interpretive Circular no. 57 (“Circular”), concerning the tax treatment for those firms and companies whose financial reporting years end on any date except the 31st of December. Particularly, the provisions of article 7 of the Income Tax Law have been mentioned in the Circular and it makes it clear that in those events where the financial year is not ending on 31st December, the allocation of the taxable profit will be done on a monthly pro-rata basis to the respective tax years.

For instance:

If 31st of March is the date when the financial year is ending, in that case, 3/12 of the taxable profits which have been derived from the financial year that ends on 31/3/2021 and 9/12 of the taxable profits which then derive from the financial year that ends on 31/3/2022, will be included in the taxable profits for the tax year 2021. 

If 30th of September is the date when the financial year is ending, in that case, 9/12 of the taxable profits which have been derived from the financial year that ends on 30/9/2021 and 3/12 of the taxable profits which then derive from the financial year that ends on 30/9/2022, will be included in the taxable profits for the tax year 2021. Moreover, it has also been highlighted in the Circular that no matter when the financial year of a company ends, from 1st of January to 31st of December will be the tax year. In addition to this, the 1st of August of the next year is the deadline for the purpose of payment through self-assessment of the final income tax liability, and 31st of July and 31st of December of each respective year is the deadline for the purpose of payment of the provisional tax instalments. In order to make the payment for the final income tax liability by means of self-assessment or make the payment for the provisional tax instalments, through a monthly pro-rata basis the determination of the taxable profit will take place as is explained above. In contrast to the tax circular 1989/19 that has been revoked, no extension is provided by the Interpretive Circular no. 57 to the filing deadline of the annual Income Tax Return in a situation where there is no correspondence between the financial reporting year and the tax year.

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