Cyprus provisional tax is a two-instalment prepayment of corporation tax (IS) due 31 July and 31 December of the current tax year. Since 1 January 2026, the corporation tax rate increased to 15% (from 12.5%). If you budgeted using the old rate, recalculate now. The key risk is underestimating: if your estimate is more than 25% below the actual profit, a 10% penalty plus 1.75% annual interest applies automaticall
Cyprus provisional tax is paid in two equal instalments — 31 July and 31 December — and is calculated at 100% of the prior year's tax liability. Underpaying by more than 75% triggers a 10% penalty on the difference. y.
What Is Provisional Tax?
Provisional tax is Cyprus's mechanism for collecting corporation tax in advance. Instead of paying all your company's tax at the end of the year when the final accounts are prepared, you pay two instalments during the year based on an estimate of your expected profit.
The system is self-assessed: you decide what you expect to earn, calculate 15% of that, and split it into two equal payments. The Tax Department does not tell you how much to pay — you estimate it yourself.
Key facts:
- Rate since 1 January 2026: 15%
- Previous rate (pre-2026): 12.5%
- Two equal instalments: 50% + 50%
- Instalment 1 deadline: 31 July
- Instalment 2 deadline: 31 December
- Form: TD5 on TAXISnet (migration to TFA ongoing)
How to Calculate Provisional Tax: Step by Step
Step 1 — Estimate Your Annual Revenue
Based on contracts in hand, recurring clients, and expected new business, estimate your company's total revenue for the full calendar year.
Step 2 — Estimate Your Deductible Expenses
Subtract your expected allowable business expenses: accountant fees, software subscriptions, office costs, travel, marketing, salaries, and any other deductible costs. See our deductible expenses guide for the full list.
Step 3 — Calculate Estimated Taxable Profit
Revenue estimate minus expenses estimate = estimated taxable profit.
Step 4 — Apply the 15% Rate
Estimated taxable profit × 15% = estimated corporation tax for the year.
Step 5 — Split Into Two Instalments
Estimated annual tax ÷ 2 = each instalment.
Worked Example: FY2026 Provisional Tax
Scenario: A consulting company expects €60,000 revenue and €15,000 expenses in 2026.
| Calculation | Amount |
|---|---|
| Estimated revenue | €60,000 |
| Estimated deductible expenses | €15,000 |
| Estimated taxable profit | €45,000 |
| Corporation tax at 15% | €6,750 |
| First instalment (31 July 2026) | €3,375 |
| Second instalment (31 December 2026) | €3,375 |
If the actual profit for FY2026 turns out to be €50,000:
- Actual tax = €50,000 × 15% = €7,500
- Already paid = €6,750
- Balance due at final assessment = €750
No penalty applies because the estimate of €45,000 is within 25% of the actual €50,000 (shortfall is only €5,000 / €50,000 = 10%).
The 25% Rule: When Penalties Apply
The penalty threshold: If your provisional tax estimate results in tax paid that is more than 25% below the actual tax liability, you face an automatic penalty.
Penalty: 10% of the total actual tax due, plus interest at 1.75% per year on the unpaid amount.
Example of penalty scenario:
- Actual profit: €100,000 → actual tax = €15,000
- Your estimate was: €60,000 profit → tax paid = €9,000
- Shortfall: €6,000 (40% of actual tax — exceeds the 25% threshold)
- Penalty: 10% × €15,000 = €1,500 + interest
How to stay within the 25% threshold: Your paid provisional tax must be at least 75% of the actual tax due. If you estimate €15,000 profit and pay €2,250, but actual profit is €40,000 (actual tax €6,000), you fall into penalty territory.
Revising Your Estimate Before 31 December
You can revise your provisional tax estimate at any point before 31 December. This is the safety valve: if your company performs better than expected, increase the estimate and top up the payment before the second instalment deadline.
To revise:
- Go to TAXISnet and find your TD5 submission
- Submit a revised TD5 with the updated estimate
- Pay any additional amount before 31 December
There is no penalty for revising upward. The revision replaces your original estimate. If you realise in November that your profits will be significantly higher than estimated, revising before 31 December prevents the 25% penalty.
What If I Expect a Loss or Zero Profit?
If you genuinely expect no profit for the year, submit a TD5 with a €0 estimate. You still must submit the declaration — not submitting at all triggers a separate penalty.
If you are uncertain whether you will be profitable, err slightly on the side of a higher estimate. The cost of overpaying (you get a credit against future tax or a refund after the final assessment) is far smaller than the 10% penalty for underestimating.
How to File and Pay Provisional Tax
Filing the TD5
Current portal: TAXISnet at taxisnet.mof.gov.cy (migration to TFA in progress — verify with your accountant)
- Log in to TAXISnet with company credentials
- Navigate to "Declarations" → "TD5 Provisional Tax"
- Enter the financial year and estimated taxable income
- Submit the declaration
- Note the PRN (Payment Reference Number) generated
Making the Payment
With the PRN, pay via:
- JCCSmart at jccsmart.com → "Tax Payments" → enter PRN
- Tax Portal at taxportal.mof.gov.cy → "Direct Tax Payment"
- Bank transfer using the PRN as the payment reference
Provisional Tax vs. Final Tax: The Timeline
| Event | When |
|---|---|
| First provisional tax instalment | 31 July (current year) |
| Second provisional tax instalment | 31 December (current year) |
| Year-end; prepare documents for auditor | January (following year) |
| Auditor completes accounts | February–March (following year) |
| Company tax return TD4 filed | 31 March (second following year) |
| Any balance of tax paid | With TD4 filing |
The provisional tax payments made in July and December are credited against the final tax liability calculated in the TD4. If you overpaid provisionally, the excess becomes a credit or refund.
Key Provisional Tax Dates for 2026
- 31 July 2026 — First instalment for FY2026 (50% of estimated 2026 tax)
- 31 December 2026 — Second instalment for FY2026 (50% of estimated 2026 tax)
- 31 March 2027 — Final tax return TD4 for FY2025; any balance of FY2025 tax due
- 31 March 2028 — Final tax return TD4 for FY2026
For all Cyprus compliance deadlines in one place, see our 2026 compliance calendar.
Provisional tax calculations benefit from accurate bookkeeping throughout the year. A Cyprus accountant who monitors your profitability quarterly can help you set the right estimate and avoid penalties. Find one in our directory of tax advisors.