Special levy on regulated industries

What it means

The special levy on business in regulated industries is paid alongside corporate income tax by companies operating under a licence in a regulated sector, such as energy, electronic communications, insurance or health insurance. It applies only to profit above a statutory threshold.

The base is the profit attributable to the regulated activity, calculated pro rata to that activity's share of total revenue. The rate is set per month and the legislature has changed it several times, so the calculation must always follow the law as currently in force.

It is a separate levy, not a tax, and differs from the bank levy paid by banks and branches of foreign banks. What matters for the business is that the levy paid is a tax-deductible expense and therefore reduces the income tax base.

How it works in practice

The levy is paid monthly, much like tax advances, and after the period ends a return is filed that settles the advances against the actual liability. The deadlines are usually tied to the deadline for the corporate income tax return.

A company that runs other activities alongside the regulated one must be able to show which revenue belongs to the regulated part. It pays to set up the books so that revenue by activity can be separated directly from analytical accounts rather than estimated by hand at year end.

In the profit and loss statement the levy is shown according to the accounting policy, usually among taxes and fees. Budgets, dividend plans and valuations of companies in regulated sectors must treat it as an additional charge on profit above the threshold.

What to watch out for

The obligation arises when the licence for the regulated activity is obtained, not when profit crosses the threshold. A new licensed company should check whether registration and notification duties apply to it even while the levy itself is still zero.

The law changes fairly often, whether the rate, the list of regulated sectors or the profit threshold. Multi-year plans are best built on scenarios, and the current wording should be checked before every return, otherwise a top-up payment with late-payment interest may follow.