If your company’s reporting period ends at the end of the calendar year — December 31 — it is time to consider filing the mid-year financial report.
If this is the first time you hear about it, most likely your auditor has been submitting zero reports in previous years without emphasizing it. However, there are important nuances to be aware of.
What tax is paid: Corporate Income Tax
Form: PND51
Reporting period: January 1 – June 30 (or months 1–6 of the fiscal year if it differs from the calendar year)
Deadline: by the end of August (2 months after the reporting period ends)
How is the tax calculated?
Based on income for the first 6 months, it is necessary to:
- estimate the full-year profit with a margin of error not exceeding 25%
- calculate the projected annual corporate income tax
- divide it by 2 and pay that amount
It is possible to underestimate the projected profit by more than 25% if this amount is equal to or exceeds half of the profit from the previous reporting year.
Penalties
If the profit is underestimated by more than 25% without justification, a penalty of 20% may apply to:
- the mid-year tax payable, or
- half of the actual annual tax based on year-end results
At present, such penalties are rarely enforced — which explains why many auditors submit zero reports. However, this trend may change.
Therefore, if your calculations show that the company generated profit in the first half of the year, it is advisable to confirm the amount with your auditor and pay half of the projected corporate income tax.
Recommendations
We recommend starting each reporting period with a clear tax plan so that the figures in your financial statements do not come as a surprise.
Author: Alexandra Agapitova.
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