What are prepayments?
Companies and corporations must usually make tax prepayments on their profit. The company’s profit is the difference between its income and expenses. For instance, a limited liability company can make tax deductions for the wages paid to its employees. Expenses like this decrease the amount of income that is subject to prepayments.
What kind of income is taxed by way of prepayments?
For corporate entities, profits are subject to prepayments. Profits come from the activities pursued. These include:
- Business operations
- Other activities for the production of income: typically, renting out assets/property, or selling assets/property (which results in capital gains)
How does the prepayment register affect prepayments?
If a company is registered in the prepayment register, it takes care of its own prepayments. This means that parties making payments to the company do not need to withhold taxes from those payments.
Note: A new company must request prepayments separately even if it is in the prepayment register.