Advance Income Tax Payment for Businesses: How It Is Calculated and When It Is Offset

What Is the Advance Income Tax Payment?

The advance income tax payment is an amount assessed and paid alongside the main income tax, as a prepayment of the following year’s tax. It is calculated as a percentage of the tax arising from business activity, based on the previous year’s profits. Its key feature is that it is not lost: the following year it is offset against the tax arising from the new return.

Which Rates Apply Today?

The advance payment rate depends on the business’s legal form:

• Individuals with business activity (self-employed professionals and sole traders): 55% of the tax arising from business activity
• Legal persons and legal entities (IKE, EPE, AE, OE and EE): 80% of the income tax arising from profits in the previous tax year

The advance payment is calculated on the tax after deducting any tax withheld or paid.

How the Offset Works

The advance payment made this year is not a final cost. The following year, when the new return is filed and the tax for that period is determined, the advance payment previously made is deducted from the amount owed. If the new year’s tax is lower than the advance payment, the excess is offset or refunded. At the same time, a new advance payment is assessed for the year after that. This means that the greatest cash-flow shock occurs in the first year, while in subsequent years, if profits remain stable, the burden is not noticeable.

Special Treatment for Newly Established Businesses

For individuals receiving income from business activity for the first time, the advance payment is reduced by 50%, bringing the rate to 27.5% instead of 55%. A special reduced advance payment regime also applies to newly established companies, with different conditions and duration, so the exact calculation must be checked case by case.

A Complete Calculation Example

Let us assume an IKE whose 2025 return results in income tax of €10,000.

For a self-employed professional with tax of €5,000, the 55% advance payment is €2,750 and the total amount is €7,750. If this is the first year of business income, the advance payment is reduced to 27.5%, or €1,375, and the total amount becomes €6,375. These amounts are illustrative, but show how the advance payment affects a business’s cash flow.

What Changes After the 2026 Thessaloniki International Fair?

At the 2026 Thessaloniki International Fair, a reduction in the advance tax payment was announced:

• For sole traders, the rate falls from 55% to 50% from tax year 2027
• For companies and legal persons, the 80% rate is reduced gradually (75%, 70%, 65%, 60%, 55%, 50%), ultimately aligning it with the rate for sole traders

These measures are being legislated, so the final conditions and timing may change. For the current year, the rates of 55% and 80% continue to apply.

How the Advance Payment Affects Business Cash Flow

The biggest practical problem with the advance payment is not the tax itself, but timing: a substantial amount is paid before the business earns the following year’s profits. For seasonal businesses or those with declining revenue, the advance payment may exceed the tax eventually owed, meaning the business effectively finances the State until the offset. This is why estimating the advance payment before filing the return is good practice.

5 Practical Preparation Tips

1. Calculate the advance payment before filing the return and plan cash flow for the total amount, not just the main tax.
2. If you expect a significant fall in profits next year, bear in mind that the advance payment will be higher than the final tax and will be offset or refunded later.
3. If you are starting a business, check the reduced advance payment regime for newly established businesses.
4. Lawfully claim all deductible expenses, because lower tax also reduces the advance payment.
5. Follow legislative developments after the 2026 Thessaloniki International Fair so that you can plan cash flow using the new rates.