🔎 What Should You Do When You Have Taxes to Pay but Not Enough Cash?

salome468
Oct 17
2 min read

Updated: 4 days ago

Sounds familiar, doesn’t it?

You’ve paid your employees’ salaries, but now there’s no money left for taxes.

Or maybe you earned income during the year, but by next April 1st, the funds to pay those taxes have vanished (spent somewhere along the way ☺️).

So, what can you do, knowing that “nothing is certain except death and taxes”?

Let’s look at your options.

🧾 Option 1 - Declare and Recognize the Tax Liability

This is the most legally correct approach.

You submit your tax declaration on time and recognize the liability - even though you don’t have the funds to pay it.

What happens then?

The Revenue Service (under the Ministry of Finance) initiates enforcement measures to collect the debt.

This may include placing liens or mortgages on your property, or sending a garnishment order to your bank accounts to seize any funds available there (if any 🙂).

Additionally, your debt will start to grow a late payment penalty of 0.05% per day will accrue.

What can you do?

You can negotiate with the tax authorities for a tax deferral or payment plan.

Such negotiations often have a good chance of success if they are conducted honestly and in good faith - and if the state budget isn’t under too much stress at the moment.

📄 Option 2 - Recognize and Pay the Tax Only When You Have the Money

This option is riskier.

If you delay submitting the declaration and the tax authorities audit you before you declare the liability, they will treat it as a hidden (undeclared) tax.

In that case, you’ll face a 50% penalty on the unpaid amount, plus interest and enforcement measures (liens, garnishments, etc.).

Negotiating a tax deferral afterward also becomes much harder.

Shocked yet?

You might be thinking: “That’s not much of an option!”

Well, it’s not that bad - keep reading.

If the tax authorities don’t audit you before you submit the declaration and pay, then formally everything looks fine.

The declaration is filed, the tax is paid, and there’s no automatic penalty or interest.

Sounds perfect, right? Not quite…

The violation remains “alive” for three years (the statute of limitations).

During that time, if the authorities discover that the declaration was filed late, they can still impose penalties but only 10% instead of 50% (since it’s a late filing, not concealment).

🧾 Option 3 – Recognize the Tax in the Correct Period, but Pay It Late

To make this clearer, let’s look at an example.

Suppose you paid salaries at the end of October but didn’t declare the related tax obligation in the October return.

At the end of November, you corrected (amended) the October return and included the missing liability.

You also paid the tax in late November.

The outcome is similar to the previous case, with one key difference:

You recognized the tax in the correct period, but paid it late.

As a result, the system will automatically charge interest (for the delayed payment), but you avoid the 10% penalty, since the declaration period was correct.