IRD Issues New Circular on Quarterly Income Tax Instalment Calculations for the Year of Assessment 2026/2027

The Inland Revenue Department (IRD) has issued Circular No. SEC/2026/E/06, dated 03 August 2026, providing guidance on how taxpayers should calculate their quarterly income tax instalments for the Year of Assessment (Y/A) 2026/2027. The circular is issued under Section 90 of the Inland Revenue Act, No. 24 of 2017, as amended by the Inland Revenue (Amendment) Act, No. 11 of 2026.

Quarterly Instalment Due Dates

The circular reminds taxpayers that instalment payments must be made on the following dates:

• 1st Instalment – On or before 15 August
• 2nd Instalment – On or before 15 November
• 3rd Instalment – On or before 15 February
• 4th Instalment – On or before 15 May

How Should Instalments Be Calculated?

The circular introduces a straightforward formula for calculating quarterly instalments:

Quarterly Instalment = (A − C) ÷ B

Where:

• A = Income tax payable for the immediately preceding Year of Assessment (before deducting tax credits).
• B = Number of instalments remaining, including the current instalment.
• C = Tax already paid through previous instalments, Withholding Tax (WHT), Advance Income Tax (AIT), and eligible foreign tax credits before the due date of the instalment.

Standard Method – Previous Year's Tax Liability

For most taxpayers, the calculation is based on the income tax payable for the immediately preceding Year of Assessment. The circular includes practical examples for both individuals and companies to demonstrate how the formula should be applied.

Alternative Methods Available

The IRD recognises that the previous year's tax liability may not always reflect the current year's circumstances. Therefore, the circular allows alternative methods in certain situations.

1. No Taxable Income in the Previous Year

If a taxpayer had no taxable income in the previous year and also expects no taxable income in the current year, the quarterly instalment may be nil. However, the taxpayer must submit the prescribed declaration provided in Attachment 1.

2. Previous Year's Taxable Income Was Nil Due to Losses or Exemptions

Some taxpayers may have reported no taxable income because of:

• Carried forward business losses,
• Investment losses, or
• Tax exemptions (such as BOI exemptions).

If taxable income is expected during the current year, instalments should be calculated based on the estimated taxable income for the current Year of Assessment rather than the previous year's tax liability. The circular provides examples illustrating these situations.

3. Significant Reduction in Current-Year Income

Where a taxpayer reasonably expects a substantial reduction in income during the current year, instalments may be calculated using the estimated current year's income instead of the previous year's figures. Supporting evidence together with the prescribed declaration in Attachment 2 must be submitted.

4. Newly Registered Taxpayers

Since newly registered taxpayers do not have a previous Year of Assessment for comparison, they are required to estimate their current year's taxable income and calculate instalments accordingly. The declaration in Attachment 2 should also be submitted.

Other Important Clarifications

The circular also provides guidance on several practical matters, including:

• Preparation of the credit schedule.
• Treatment of employment income subject to APIT/AIT.
• Recognition of foreign tax credits.
• Alternative accounting periods.
• Submission deadlines for declarations.
• Mid-year revisions where business circumstances change significantly.

Two Declaration Forms Included

The circular contains two prescribed forms:

• Attachment 1 – For taxpayers with no taxable income or those using the alternative method due to losses or exemptions.
• Attachment 2 – For taxpayers estimating reduced income or newly registered taxpayers.

Final Thoughts

This circular provides a clearer and more structured approach to calculating quarterly income tax instalments following the amendments to Section 90 of the Inland Revenue Act. While the standard rule continues to rely on the previous year's tax liability, the IRD has also introduced practical alternatives for taxpayers whose current financial position differs significantly from the previous year.

Taxpayers should carefully assess which method is applicable to their circumstances and ensure that any required declarations and supporting documents are submitted on time when using an alternative calculation method.