In a significant move, the Tax Authority has abolished the longstanding practice requiring taxpayers to file a provisional return of income within three months and an annual return of income within six months from the end of the accounting year.
Instead, taxpayers are now mandated to file only one tax return within four months from the end of the tax year.
It follows the promulgation of Royal Decree 118/2020 amending the Income Tax Law, which was published earlier this week in the Official Gazette.
“The amended tax law has, with effect from tax years beginning on or after January 1, 2020, removed the requirement to file a provisional return of income and settle taxes on the estimated income within three months from the end of the relevant tax year or accounting period,” said leading audit, tax and advisory services firm KPMG.
“Taxpayers are required to file only one tax return within a period of four months from the end of the relevant tax year or accounting period. Tax is also now required to be paid within this period of four months. Previously, the time period for filing the final return and paying the balance tax was six months,” the firm stated in an advisory circulated to clients and the general public.
KPMG, while greeting the change, urged taxpayers to keep in mind that audits of financial statements would need to be undertaken well in time. It said: “While the requirement to do away with the filing of dual returns is welcome, this would imply that audits of financial statements would need to be completed before the expiry of four months from the end of the relevant tax year or accounting period to allow enough time to prepare the tax return and meet the deadline.”
The scrapping of the dual tax returns system is one of several amendments to the Income Tax Law vide Royal Decree 118/2020. It also includes, among other things, enabling provisions to facilitate the Automatic Exchange of Information (AEOI) between tax jurisdictions, the introduction of tax residency provisions, and changes in the proceedings for appeals.
CONRAD PRABHU
@conradprabhu
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