A normal period of 12 months is known as a year of income. This spans from 1 July to 30 June. On application, a taxpayer may be allowed to use a substituted year of income, which is a 12-month period other than the normal year of income.
The ITA provides for two provisional returns within a 12-month period (financial year). The first provisional return is due within the first six months of the accounting year while the second is due by the end of the 12th month of the accounting year.
The due date for filing of provisional returns is the date of payment of tax.
The self-assessment return is due by the end of the sixth month after the end of the accounting year.
Electronic filing has been introduced for all tax returns.
Payment of tax
For all companies, a system of provisional payments on account, based on estimated profits, is in place. The first payment of 50% is due by the end of the sixth month of the accounting period, and the second payment is due by the end of the 12th month. The balance is expected to be paid together with the final self-assessment return by the end of the sixth month after the accounting period.
A person who fails to pay tax due by the due date is subject to interest on late payment of tax at a rate of 2%. Interest is capped to the aggregate of the principal tax and penal tax.
Tax audit process
In most cases, audits are initiated by the URA, which notifies the taxpayer of the records they need to prepare before commencement of the audit. The URA then reviews the records. This is normally done at the premises of the taxpayer, where the URA can obtain the necessary clarifications from the bookkeepers.
The audit findings are then communicated to the taxpayer subsequent to whom an assessment is raised. If the taxpayer does not agree with the objection decision, they may appeal to the Tax Appeals Tribunal or to the high court.
Statute of limitations
The Tax Procedures Code Act provides for a five year check of records.
Topics of focus for tax authorities
The focus of the URA keeps shifting but is generally based on the risk analysis of the information availed to them. There is continued focus on transfer pricing and the application of reduced tax rates in respect to DTAs.