Corporation tax

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The corporation is

Tax rates are very different around the world.

National corporate taxes

The fact of double taxation

Taxing the profits of a corporation with corporation tax and the additional taxation of the profit distribution for the shareholder can lead to double taxation or double taxation . A double tax burden arises, for example, in domestic tax matters if both corporation and shareholders are taxable in Germany. In the case of cross-border issues (corporation e.g. with its registered office in France, shareholders with residence in Germany), the term double taxation comes into play.

  • The classic system deliberately leads to repeated taxation of the same tax situation. The profits of the corporation are fully subject to corporation tax and then the profit distribution is fully subject to income tax . These systems are rare worldwide (see below: systems without tariff reduction ) and mostly combined with very low corporate tax rates.
  • On the other hand, systems that are customary internationally are those that reduce or generally avoid the pre-taxation of profit distributions at the corporate level by means of a tariff reduction for taxation at the shareholder level.
  • Another way of avoiding the double taxation is to offset the corporation tax paid by the corporation in whole or in part against the income tax (see below: Credit systems ; also in Germany between 1977 and 2000: see also crediting procedure ). This system has no future within Europe because, in order to be compatible with European law , it must be interpreted across borders (foreign corporation tax must also be allowed to be offset). Among the countries that still use crediting procedures, France , for example, also wants to change the system in the next few years.

While the aforementioned cases result in an economic double burden when the corporation and its company are included, in cross-border situations double taxation can occur with the same legal entity in that two countries want to tax the same income (e.g. corporations with branches in other countries are economically active or generate interest or license income abroad).

In order to avoid double taxation in the area of ​​income taxes for corporations operating across borders, double taxation agreements applicable to both natural persons and legal entities are concluded between the nation states. The method of relief from double taxation depends on the type of income and can be done by exempting the profits already taxed abroad, but also by limiting the tax deduction, offsetting the foreign tax or by a complete waiver of taxation by the other country.

Corporation tax worldwide

If the tax burden from corporations to be compared with each other, it should be noted that additional corporate taxes such as in Germany and in individual countries Liechtenstein the business tax levied and countries with low tax rates to broader tax base tend.

Source: BMF: The most important taxes in an international comparison 2015, overview 3

Discounted tariff systems

In these systems there is a general relief, either through a partial tax exemption of the distribution or through a lower tax rate. Within the corporation level (subsidiary pays out to parent company), these systems usually have a full tax exemption.

  • In Belgium the corporation tax rate is 31–34.5%, the distribution is either taxed at 25% for the shareholder or it can be invested.
  • In Bulgaria the corporation tax rate is 10% (“flat tax”). The distribution of profits is 5%.
  • In Denmark , the corporate tax rate is 22% (2015: 23.5%). Dividends are charged with a capital gains tax of 27%, which has a withholding effect of up to DKK 49,900.
  • In Germany , the corporate tax rate is 15%. In addition, a 5.5% solidarity surcharge is levied on the tax amount , as well as trade tax, the rate of which varies from municipality to municipality. In total, the tax component amounts to approx. 30% of the taxable income.
  • In Spain the corporate tax rate is 30%. For companies with an annual turnover of up to € 10 million, a reduced tax rate of 25% applies to the first € 300,000 of profit.
  • In Finland the corporate tax rate is 20%.
  • In France the corporate tax rate is 33.3%.
  • In Italy the corporate tax rate is 24% (plus local tax).
  • In Lithuania the corporation tax rate is 15% (small businesses 5%), the distribution is taxed at 15% final.
  • In Luxembourg the corporation tax rate is 21% (for incomes up to 15,000 euros 20%), half of the distribution is tax-free.
  • In the Netherlands , the corporation tax rate is 25% (reduced tax rate of 20% for the first 200,000 euros of profit), the distribution of significant investments (from 5%) is taxed at 25%.
  • In Norway the corporation tax rate is 27%.
  • In Austria , the corporate tax rate has been 25% since 2005; the distribution is taxed with a final capital gains tax of 27.5%.
  • In Poland , the corporation tax rate is 19% (reduced tax rate of 9% since January 1, 2019 [15% until December 31, 2018] if the previous year's profit did not exceed € 1.2 million) % taxed final.
  • In Portugal , the corporation tax rate is graduated according to profit from 21% to 30% plus a municipal surcharge of up to 1.5%; the distribution is taxed at a final rate of 28% or half of it is tax-exempt as part of the tax assessment.
  • In Sweden , the corporate tax rate is 22%, the distribution is taxed at a flat rate of 30%.
  • In Slovenia the corporation tax rate is 17%, withholding tax of 25% for the dividend.
  • In the Czech Republic , the corporate tax rate is 19%, dividends and distributions are taxed at 15%.
  • In Turkey the corporation tax rate is 20% and the distribution is taxed at 10%.
  • In Hungary , the corporate tax rate has been 9% since January 1, 2017.
  • In the United States , the federal tax rate is 21% and the distribution is taxed at 0, 15, or 20%.

Systems without a tariff discount

The distribution is fully taxed by the shareholder. Distributions to other corporations are generally exempt from corporation tax.

  • In Ireland the corporate income tax rate is 12.5% ​​for business and 25% for non-business income.
  • In Switzerland there is a federal corporation tax at a rate of 8.5%. There are also cantonal and communal corporate taxes with very different tax rates. The total exposure ranges from 16.4% to 29.2%, with an average of around 20%. The tax burden represents deductible expenses and thus reduces the taxable profit.

Full credit systems

A double burden (domestic) or a double taxation (cross-border) is avoided. The shareholder can offset the corporation tax paid by the corporation against his income tax.
Germany had such a system for a long time with the imputation procedure in force from 1977 to 2000 . The tax credit is i. d. Usually also to be regarded as taxable income.

Partial credit systems

Only part of the corporation tax paid by the corporation is offset against the shareholder's income tax.

Tax exemption systems / dividend exemption procedures

There is no taxation for the shareholder , so that there is no risk of double taxation (domestic).

Estonia does not levy any tax (rate: 0%) on retained profits ( accumulation ); the corporation only has to pay 20% tax on distribution.

The Slovakia levies a corporate tax of 22% and represents the dividend the shareholder free.

Individual evidence

  1. The most important taxes in an international comparison 2015 . BMF. Archived from the original on July 15, 2016. Retrieved July 8, 2019.