In addition to the annual tax payment, companies subject to corporate income tax (CIT) on net profits (including those generating no profit at all) need to produce half-year report (form PND 51). A company is duty-bound to estimate its annual profit earnings including its tax liability and pay half of the estimated tax amount within two months after the end of the first six months of its accounting period. The prepaid tax is estimable against its annual tax liability.
Example: If a company’s accounting period ends at the end of the calendar year – December 31 – the primary six months constitute months of January – June. The company’s half-year report will then be due within two months after June, that is to say by the end of August.
If your company attempt to pay less half-year tax by forecasting lower annual profit or simply underestimating its earnings lower than annual profit, then when the actual year-end profitability will come out to be 25% higher than your forecast, you will have to pay an extra 20% tax on the difference amount between the forecast and the actual tax.
An exception to this rule can occur when the company files a half-year report on an estimated amount of net profit earnings that is greater than or equal to half of its actual net profit from the previous accounting year (as per the corporate income tax return statement). Therefore, when this condition holds true and the company happens to underestimate its earnings beyond the acceptable threshold, this shall still be treated as a sensible approach.
Cloud7 Legal Services can take the whole responsibility for drafting and submitting your company’s half-yearly reports along with your tax payments.