ECONOMY

Tax deposit cut to be extended

tax-deposit-cut-to-be-extended

One of the main instruments for bolstering enterprises in 2020 was the reduction or waiver of the corporate tax deposit, which provided the market with extra liquidity of 1.5 billion euros. The measure is expected to be extended this year as well, especially if the market remains under pressure as a result of the health crisis persisting into the first quarter of the year and corporate financial figures confirming the collapse of revenues in 2020.

The Finance Ministry has already started updating its figures on the impact of the pandemic on business, while drafting its strategy for the new year. Just like in 2020, interventions will be of a temporary nature.

Ministry officials say that due to the dramatic state of businesses, the cost of the deposit’s reduction would be small for the budget, as takings projected from taxing corporations are low anyway.

The drop in corporate turnover will mathematically lead to minimal income tax in most cases, which will be covered by the reduced deposit paid last year. The new corporate tax deposit for 2022 will be based on the tax that will be calculated. Due to the very low earnings, this will lead to a particularly low deposit. For other enterprises – those that register losses – there is little if any chance of forcing them to pay any tax deposit ahead of 2022.

According to ministry officials, company earnings to be declared for 2020 and taxed in 2021 are expected to slump by more than 50% overall, which will entail reduced corporate tax and an almost zero tax deposit for the majority of enterprises.

In this adverse environment, the government is planning to apply the same calculation method for the corporate tax deposit as last year. This means a 30% cut for turnover losses of 5%-15%, the halving of the deposit for turnover drop of 15%-25%, a 70% cut for a turnover decline of between 25% and 35%, and a complete waiver of the deposit for a drop in turnover of more than 35%.

In 2020 the tax deposit paid for 2021 added up to €1.8 billion euros.