According to a recent research conducted by the Dutch financial newspaper “Het Financiële Dagblad”, large European enterprises pay an average corporate tax rate of 23,3% on their profits. The research analyzed the taxation of the 25 biggest firms trading on the Amsterdam Stock Exchange, including Philips, Unilever, ING Group, and Heineken, and assessed their corporate tax burden in different EU countries.
The research revealed that the corporate tax rates in the EU differ significantly. For example, Belgian, French, and Maltese companies are subject to corporate tax of 33% – 35% on their profits, whereas Bulgarian, Irish, Lithuanian, and Latvian companies are subject to corporate tax of 10% – 15%. Outside the EU, some countries, such as Cayman Islands, UAE and Guernsey, do not levy tax on corporate profits at all. The highest corporate tax rate, according to “Het Financiële Dagblad”, is in force in the UAE (55%) on companies operating in oil and gas sectors.
Most tax-friendly EU countries
The findings of the research indicate that, in the EU, the 5 most tax-friendly countries for large businesses are:
Bulgaria has been known for its attractive fiscal environment for a long time. The country levies the lowest flat corporate tax rate (10%) in the EU. The rate of the personal income tax is also 10%. Moreover, Bulgaria is an attractive destination for businesses due to its strategic geographic location, low labor costs, and good business infrastructure.
The standard corporate tax rate in Ireland is 12,5% on company’s trading income and 25% on company’s non-trading income. The Irish tax system is often represented as an exemplary for tax competition and investment boosting purposes. The progressive personal income tax in Ireland varies between 20% and 40%.
Latvia levies a flat corporate tax rate of 15% on enterprise’s profits. Moreover, from January 2017, Latvia applies a reduced micro enterprise tax that is applicable to low-turnover firms meeting certain requirements. The rate of the micro enterprise tax is 12%. In addition to low tax rates, the country attracts investors by offering advanced transport infrastructure and skilled workforce. Investors are interested in the fields of information technology, transport, logistics, life sciences, woodworking, and renewable energy. In Latvia, the rate of the personal income tax is 23%.
In Lithuania, the rate of the personal and corporate income tax is 15%. The country is ranked as the 2nd most favorable country for investment in Europe. Also, Lithuania is among the top 5 fastest growing economies in the EU. The Baltic state is known for its research and development sectors, excellent digital infrastructure, qualified talent pool, and attractive labor costs.
The standard corporate tax rate in Slovenia is 19%. However, the country offers extensive tax reliefs on the amounts invested in research and development sectors as well as equipment and intangible long-term assets. In Slovenia, personal income is taxed at rates varying between 16-50%.