Paying taxes requires having sufficient cash on hand by key deadlines; otherwise, you could run into serious trouble with the tax authorities.
This situation cannot be improvised, so you must plan ahead.
To do this, it’s best to establish a plan for managing collections and payments in your company, taking into account the tax calendar for the current fiscal year.
This way, you can manage your cash flow and ensure your liquidity.
Summer is over, and it’s time for “"back-to-school season" and with it, the payment of taxes for the third quarter of the year.
Below are the key dates you need to know. They are:
Thursday, October 20. Deadline for filing Forms 111, 115, 117, 130, 131, 202, 303, 309, and 349. In addition, you must file Form 202 (related to corporate income tax)
Monday, November 7. Form 102 (for the second installment of income tax if payment has been split).
Monday, November 21. Form 349 for intra-Community transactions.
Wednesday, November 23. Form 303 for self-assessment of VAT for October 2022.
Friday, December 20. Deadline for filing Form 202 (for corporate income tax).
There are many options for securing liquidity to cover tax payments, but not all are equally advantageous, so it’s best to carefully and thoughtfully consider which one to use.
In any case, remember that the urgency to obtain liquidity is never a good guide.
Among the most commonly used options, we highlight:
The Tax Agency grants payment deferrals and installment plans.
However, it charges high interest rates that often exceed the costs of other options.
This involves collecting the entire invoice or a significant percentage of it in advance, something you must negotiate with your customer since you’ll usually need to offer discounts for early payment.
If you can use this strategy, it is highly recommended as long as the early payment discounts you apply do not negatively impact your operating margin.
This method involves setting aside a portion of the company’s revenue to cover these payments.
These internal set-asides become funds that cannot be touched, no matter what happens.
Obviously, this can cause you to miss out on attractive investment opportunities or business expansion opportunities because you have fewer resources available when they are tied up.
A financial institution (not necessarily a bank) discounts the promissory notes before they mature.
Although small discount fees apply, you get the immediate liquidity you need.
This is similar to discounting promissory notes.
It involves handing over an invoice and the rights to collect payment to a financial institution.
A handling fee and some interest are deducted, but you receive the funds you need.
Securing external financing is also a viable alternative.
Obviously, the ability to secure it on the best terms depends on each entity’s financial standing.
It comes with a cost, but it provides the peace of mind and flexibility needed to ensure you have the necessary liquidity at all times.
If you choose this option, don’t assume that only banks can help you.
There are other financing companies that are more attractive and cost-effective.
There are many ways to secure the liquidity needed to pay taxes.
Having a payment and collection plan will allow you to stay ahead of the curve and secure better terms.
At WorkCapital, we offer financing tailored to your needs at the best terms.
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