Tax advance
Tax advance payment is an obligation arising in relation to several types of tax. Its purpose is to ensure continuous revenue for the central or local government budget before the final tax liability is determined.
Taxpayers generally fulfill their tax advance payment obligations through self-assessment. Where a tax advance is deducted from a payment, the employer, payer or other withholding agent is responsible for deducting and paying it to the tax authority.
Types of tax advance
The main types of tax advance include:
- personal income tax advance deducted by the employer or payer;
- personal income tax advance payable by a private individual in respect of income not received from a payer;
- corporate income tax advance;
- local business tax advance;
- small business tax advance; and
- innovation contribution advance.
Tax advance and tax payment obligation
The payment of a tax advance forms part of the taxpayer’s general tax payment obligation. A private individual or business required to pay tax must do so by the due date specified in the Act on the Rules of Taxation or in the legislation governing the relevant tax.
Tax deducted from a payment must be paid to the tax authority by the person or entity responsible for the deduction.
Tax advances paid during the tax period are taken into account when determining the final tax liability. Depending on the final calculation, the taxpayer may be required to pay an additional amount or may be entitled to a refund or to carry forward the overpayment.
Modification of a tax advance
A taxpayer may request a reduction of the tax advance if the advance is calculated based on data from a previous year, quarter or half-year and, according to the taxpayer’s calculations, the expected tax liability will not reach the amount of the advance payable based on the previous period.
If the tax authority has prescribed the payment of the tax advance in equal installments, the taxpayer may, in justified circumstances, request permission to pay the installments in different amounts.
