Federal/State Corporate Tax Rates Around The World

Most countries around the world charge a corporate income tax much that is similar to our federal tax. Corporate income taxes are charged by various government entities and jurisdictions in almost all countries of the world. Generally speaking, income taxes are a portion of a corporation’s profit that is collected to help the citizens in a particular jurisdiction or country. Therefore, this article will try to do address how corporate income taxes differ or are the same around the world.

Corporate Income Tax Bases

While the rates of income tax of taxable profits vary from country to country, so do the way taxable profits are calculated by each jurisdiction or each country. For example, taxable profits as they calculated in the United States follow a quite different set of rules from those used to calculate profits in other countries. Also, rules regarding how capital expenditures and depreciation are handled by a corporate income tax vary widely from country to country.

Company Shareholder Taxation

Company shareholder taxation is the taxation of shareholders who receive dividends or distributions from a corporation from the profits of the corporation which may have already been taxed. Often this is very different than a limited partnership or sole proprietorship where the owner of the businesses is taxed directly on the profits of a business and not on the distribution of profits.

Therefore, different countries offer different types of solutions for this problem. In the United States, many small businesses elect to do business as an S Corporation and thus avoid income tax liability for the corporation itself. Under this type of pass-through taxation, corporate shareholders are passed through the liability, credits and deductions of the corporation.

Other countries use an Imputation Tax System which allows some or all of the tax paid by corporations to be attributed pro-rata to shareholders by way of a tax credit to reduce the amount of income taxes payable on dividends or distributions. Countries like Australia and New Zealand both used Imputation Tax System. Other countries like the United Kingdom have used Imputation Tax System in the past; however, have changed the way shareholders are taxed by adopting a system similar to that of the United States.

Differences in Corporate Income Tax Rates

As well as the many ways that corporate income taxes are calculated in various countries, the actual rate of income tax varies considerably as well. There are some countries that charge corporations very little in the way of a corporate income tax in order to stimulate corporate business growth in their countries. Likewise, there are countries that significantly tax corporate income to help pay for infrastructure and services for citizens.

Among the industrialized nations, the United States has one of the highest corporate income tax rates. The United States, along with Japan and Germany have corporate income tax rates upwards of 35 to 38% depending on the type and amount of corporate income and any allowable credits or deductions. Other countries that significantly tax corporate income and profits are the United Kingdom, Spain, France and Belgium - all of these Countries typically charge corporations and income tax rate of between 30 and 35%.

On the other hand, countries like Ireland, Iceland, Hungary and Poland offer some of the lowest corporate income tax rates in the world. In fact, Ireland typically only charges corporations an income tax rate of about 12 to 15%.


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