The Dutch newspaper “Het Financiële Dagblad” (The Financial Daily) has recently conducted research showing that the average amount large EU enterprises spend on corporate tax equals 23.3 percent of their profit. The authors analyzed the tax liabilities of 25 companies – the biggest on the Stock Exchange in Amsterdam – including Unilever, Heineken, ING Group and Philips, and reviewed the corporate taxes they pay in various European countries.
The analysis showed that the rates of corporate tax differ significantly among the EU countries. While Maltese, French and Belgian companies pay between 33 and 35 percent tax on their corporate income, the liabilities of Bulgarian, Lithuanian, Latvian and Irish businesses amount to 10 to 15 percent. Some countries outside the European Union, e.g. the United Aram Emirates, Guernsey and the Cayman Islands do not collect taxes on corporate income. According to the newspaper the highest rate of corporate tax (55 percent) applies to companies involved in the gas and oil industry in the United Arab Emirates.
Top 5 of the tax-friendly countries in the EU
The research results show that the top five low-tax destinations for large companies in the European Union are as follows:
For quite some time the country has been popular with its convenient fiscal policies. The corporate income tax flat rate is the lowest in the European Union and is fixed at 10 percent. Personal income is taxed at the same rate. Furthermore, Bulgaria attracts entrepreneurs with its strategic location, developed business infrastructure and low costs for labour. Read here on Bulgarian company types.
The normal rate of the corporate tax in the country is 12.5 percent on income from trade and 25 percent on income from other sources. The local taxation system is a good example of encouraging competition and boosting of investments. The tax on personal income is progressive in the margins of 20 to 40 percent.
The country collects corporate income tax at 15 percent flat rate. In January, 2017 it introduced a lower rate of 12 percent for micro enterprises to support companies with low turnover that meet particular requirements. Latvia also attracts investors with its skilled workforce and developed transport infrastructure. The most popular fields for investment are logistics, transport, IT, life sciences, renewable energy and woodworking. The tax on personal income is 23 percent.
A flat tax rate of 15 percent applies for both corporate and personal income generated in the country. Lithuania is considered the second most favourable European state for investors. Also, its economy is rated in the European top 5 for fast growth. Lithuania is popular with its R&D sector, outstanding digital infrastructure, low labour costs and qualified specialists.
The normal rate of corporate income tax in the country is 19 percent. Nevertheless, the country provides significant tax reliefs for investments in the R&D sector, intangible fixed assets and equipment. The rate of the tax on personal income varies in the margins of 16 to 50 percent.
The Netherlands – The Western European alternative with a solid reputation
The Netherlands comes in on a respectable 6th place with a corporate tax of 20 percent. The Netherlands is known as a global trading hub with an international workforce that is 93% fluent in English. The reputation of the country, combined with its tax treaties, have lead to the biggest firms in the world to establish their headquarters in the Netherlands. Amongst such companies are Apple, Starbucks, Google and many other fortune 500 companies.
Read more on corporate income tax in the Netherlands.