There are many things to consider, when you are expanding your business. One of the most important decisions to make is where to start your new company. Many turn away the idea of going to Europe, thinking it is very expensive. Instead, they prefer to search for zero-tax countries in the Caribbean, Middle East and the Pacific. However, this is a common misconception. There are many low tax destinations within the EU. Not mentioning other advantages of operating your business there.
Let us see European countries with the lowest corporate tax rate:
Switzerland tops our list with company profits being taxed at 8.5% only. Although this is not the full story. Further taxes are imposed at regional level, which can come up to 23% or more, depending on an enterprise’s turnover.
Hungary has the second lowest corporate tax rate in Europe. Their government decided to cut the tax by 10% in order to attract foreign investors into the country. As well as give an extra boost to local businesses. And, unlike in Switzerland, there are no additional ‘hidden’ charges.
12.5% corporate tax revived Ireland’s economy after the near collapse in 2008. The country’s model has attracted the investment of the biggest names in the business world. Likewise, giving the opportunity to local business to thrive.
This former Soviet country has emerged as a true business hub. Firms of all sizes are drawn by the strategic location, open-minded society and low corporate tax rates. For example, large high-revenue corporations are taxed at 15%. Meanwhile small low-income businesses get to enjoy even lower 9% corporate tax rate.
Companies pay corporate tax of 15.9% in Germany. However, there is a ‘but’. Firms are also liable for solidarity surcharge of 5.5% and trade tax of up to 14%.
As the rule of thumb, developing countries have the best taxation policies. And Poland is not an exception. This is an intentional approach taken to stimulate internal economic grown through foreign investment. With only 19% corporate tax you can build a business, invest and work remotely. On the other hand, Polish government is tightening the regulations for the companies registered in tax havens and transferring profits abroad.
Czech Republic 19%
Czech Republic also offers corporate tax of 19%; for both, foreign and local businesses. Making it a very attractive destination for international expansion. Moreover, foreign capital is taxed at lower rate of 15% and is eligible for exemptions under certain circumstances.
There are many reasons why doing business in the Netherlands is a smart choice. Innovation is rewarded by many tax benefits, credits and grants. In the meantime, the corporate tax is 20% on the first €200,000, and 25% on any excess. The good news is that the Dutch government is planning to lower these rates by 2021. According to the current plan the entry corporate tax will drop to 16%, while the business income after €200,000 will be charged at 21%.
Finland is notorious for high taxes. However, corporate tax comes up to 20% only. The Finnish government favours entrepreneurship. Does it surprise you? Remember, Finland is home to some pretty large tech and IT companies. Furthermore, it is recognised to have extremely favourable ecosystem for start-ups.
Luxembourg taxes regular companies at 20.3%. Nonetheless, a different rate applies to IP companies registered in Luxembourg. They are liable to the corporate tax of 6%.
This is just a little insight into European tax system. In reality it is much more complicated than that. There are a lot of nuances and loopholes to discover.
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