During the year, companies pay provisional tax in quarterly periods, and tax is withheld at source from some of their income. At year end these amounts are deducted from the annual corporate tax. If the year's profit turns out lower than expected or the company makes a loss, the amount paid exceeds the annual tax. This difference does not come back automatically; it must be claimed on time and with the right documents.
Which amounts are offset and refunded?
| Amount | Example | Result |
|---|---|---|
| Provisional tax | Amounts actually paid for the four periods of the year | Offset against annual tax; remainder refunded |
| Taxes withheld at source | Deposit interest, repo, participation account income; progress payments on multi-year construction | Offset against annual tax; remainder refunded |
| Taxes paid abroad | Tax paid on foreign income | Offset within the statutory limit; not refunded |
Provisional tax that was assessed but not paid is not offset against the annual tax; it is cancelled, and late payment interest is calculated separately from its due date.
Related calculators: Provisional tax · Corporate tax
How does the offset work?
- The tax calculated on the annual corporate tax return is determined.
- Provisional tax and withholding paid during the year are shown on the return and offset.
- Any amount left after the offset may be applied to the company's other tax debts.
- Whatever remains after that may be refunded in cash.
For companies subject to the domestic minimum corporate tax, the calculated tax is determined by this minimum amount, and the offset and refund are calculated on that basis. Details: Domestic minimum corporate tax.
Deadlines
| Claim | Deadline |
|---|---|
| Refund of provisional tax not offset | By the end of the calendar year in which the annual return is filed; showing the refund request in the relevant table of the return counts as a written request |
| Refund of taxes withheld at source | Within the period and with the documents set by the Communiqué; missing the deadline may cost the right to a refund |
When preparing the return, we check separately whether the refund request has been entered on it; skipping this step is the most common cause of loss.
Documents and checks
- Records showing that provisional tax was actually paid; whether there is a gap between assessment and payment.
- Checking that the withholding was declared by the withholding party on its withholding tax return; bank and brokerage letters.
- For cash refunds, the documents required by the Communiqué according to refund type and amount; if required, a YMM certification report or a tax inspection report.
- The status of overdue tax and social security debts; the refund is first offset against these debts.
If a YMM report is required, it is issued by an independent sworn financial advisor (YMM); we make the accounts and documents ready for the report.
Common problems
- Not claiming the provisional tax refund on the return in a loss year.
- Never offsetting the tax withheld on bank interest.
- Offsetting unpaid provisional tax as if it had been paid, followed by an assessment.
- Not tracking the remaining claim in the accounts after the offset.
- Assuming that tax paid abroad can be refunded.
If the refund claim is rejected or the refund is incomplete: Tax disputes and litigation. Filing calendar: Tax returns.
Sources
Corporate Tax Law No. 5520 (Art. 32 provisional tax, Art. 33 taxes paid abroad, Art. 34 offset and refund); Income Tax Law No. 193 (repeated Art. 120, Art. 121); Corporate Tax General Communiqué Serial No. 1; Income Tax General Communiqué Serial No. 252.