As global expansion and virtual workforces become more common, businesses want
to know the top countries with the highest corporate tax rates. Especially
with virtual teams, it’s important to note that many countries require
businesses to pay taxes if they have a workforce presence in their country.
With this in mind, it’s critical for companies to ensure accurate legal
compliance to avoid hefty fines and penalties, in addition to taxes owed. If
your business is looking to avoid expensive costs at the end of the fiscal
year, here is a list of the top 6 countries with the highest corporate tax
rates.
1. The United Arab Emirates: Up to 55%
Although this may seem high at first, there are several conditions for
companies before they have to pay 55% in corporate taxes. These taxes are
established on a territorial basis, instead of federally,
under the respective Tax Decrees issued by each of the seven individual
Emirates.
Typically, the corporate income tax is only enforced with foreign oil
companies engaged in petroleum activities or branches of foreign banks. There
are also free zones within the Emirates that have their own rules and
regulations. In some cases, they offer tax exemptions to businesses set up in
these free zones for a period from 15-50 years.
With that being said, many legal entities registered in the United Arab
Emirates are currently not required to file corporate tax returns
.
The United Arab Emirates derives its riches generally from its natural
resources — oil. The UAE controls almost 6% of the world’s demonstrated oil
reserves, and crude and refined petroleum trades developed approximately 40%
of the country’s $242 billion in exports in the year 2018. The nation is
currently broadening its economy by supporting its trade and travel industry,
and aiming to improve education rates.
- United Arab Emirates ranks as the 31st largest economy in the world in terms of nominal GDP.
- United Arab Emirates ranks as one of the top 10 richest countries in the world.
- United Arab Emirates is one of the best countries in the world for business.
So, although this does make the list for countries with the highest corporate
tax rates, it is more business friendly than the corporate tax rate might lead
on.
2. Brazil: 34%
There are two methods of corporate taxation in Brazil
.
If the company is a Brazilian resident, they are taxed based on their
worldwide income. If they are a non-resident company, they are usually taxed
through the registered subsidiary, branch or permanent establishment, based on
income generated locally. Businesses can also be subject to a withholding tax
(IRRF) on any income derived from a Brazilian source.
Companies can be taxed based on the ‘actual profits’ method (APM) or the
‘presumed profits’ method (PPM). Regardless of which method is chosen, the
corporate income tax (IRPJ) is assessed at the fixed rate of 15% on annual
taxable income.
But how do you go from a 15% corporate tax rate to 34%? Why is this on the
list of countries with the highest corporate tax rates? Because in addition to
these taxes, businesses are subject to surcharges, social contribution of net
income (CSLL), and local income taxes. The surcharge alone adds another 10% on
the annual taxable income for anything above 240,000 Brazilian reais (BRL),
which is equal to about $45,000 USD.
When it comes to the social contributions, all legal entities
are generally required to pay
an additional 9%. This is taxed at a much higher rate of 20% for financial
institutions and private insurance.
The largest country in South America, Brazil is a multi-cultural and
culturally diverse nation with a population of 211 million. The World Bank has
identified Brazil as an upper-middle-income economy. Of late, Brazil has
emerged as an industrialized country and has accrued the largest share of
international wealth in Latin America.
- Brazil is the world’s largest producer of soybeans.
- Brazil’s top export commodities consist of oilseeds, ores, slag, ash, and mineral fuels including oil.
- Brazil mainly imports manufactured products like machinery, lubricants, fuels, pharmaceutical and chemical goods, and accessories for motor vehicles. Additionally, the nation also imports raw materials like crude oil, natural gas, coal, and wheat grain.
3. Venezuela: 34%
Like Brazil, businesses in Venezuela have different corporate tax rates
depending on how the legal entity was established. For resident corporations,
they are required to pay corporate income tax on any Venezuelan and foreign-
source income. For corporations with a permanent establishment, they only have
to pay a corporate income tax on their Venezuelan income and foreign-source
income that can be attributed to the permanent establishment.
It is important to note that some industries can be taxed as high as 50%, such
as income for oil exploitation. Other income activities include refineries,
transportation, and exports of hydrocarbons and by-products for exploitation.
Venezuela is a South American country with an economy that is predominantly
dependent on the oil and manufacturing sectors. Petroleum products account for
98% of the country’s exports and the combined value of exports and imports
equal 54% of its GDP. Non-oil export-based industries include aluminum, steel,
apparel, beverages, transport equipment, foodstuffs, paper, cement, tires,
fertilizer, and car assembling. Despite political differences with the Western
Bloc, Venezuela is still a significant trading partner of the US.
4. Germany: 30%
Companies are taxed based on their worldwide income in Germany. However, any
income that can be attributed to foreign permanent establishments are exempt
because of most double tax treaties. For non-resident corporations with
permanent establishment, they are taxed based on their German-source income.
The corporate tax rate is split into two categories for Germany: Corporation Tax and Trade Tax. The total flat rate for corporate
taxes is 15%, with some additional surcharges. The trade tax combines a
uniform tax rate of 3.5% with the municipal tax rate, which varies depending
on the location of the permanent establishment. These municipalities can range
from 12.6% to 20.3%.
Taking all of this into consideration, corporate profits earned in Munich
would be about 33%, Frankfurt would be about 32%, and Berlin would be about
30%. These are simply estimates and can vary depending on the circumstances of
each corporation.
Germany is a nation situated in central-western Europe with a population of
around 83 million. Frankfurt is the financial capital of Germany along with
having the nation’s busiest airport. Germany has emerged as one of the leading
nations for importers and exporters.
The German economy is mixed. The country permits a free market economy in
business and the consumer goods sectors. The government provides healthcare
education and insurance, for which the residents pay the system (depending on
their income) to receive benefits.
- Germany is the largest economy in Europe.
- Germany is one of the world’s largest exporter of automobiles.
- Germany also exports parts of motor vehicles, planes, and machinery.
- One of the major imports are cars followed by petroleum oils and gases, and pharmaceuticals.
These are just a few reasons Germany is one of the countries with the highest
corporate tax rates.
5. France: 28%
Resident companies located in France only have to pay corporate taxes on any
French-source income. This means that any income from foreign business
activity or attributed to a foreign permanent establishment is excluded from
the French tax basis.
Non-resident companies must pay corporate taxes on any income attributed to
French business activity or to a French permanent establishment. They are also
required to pay taxes on any income from real estate located in France.
For companies that make less than 250 million Euros, they are subject to a 28%
corporate tax. Any profits above 251 million Euros are taxed at 31%.
France is located in western Europe and has a population of over 67 million
people. The country is the most important agricultural producer in Europe and
a global forerunner in the industrial power sector. Tourism is also a vital
component of the French economy.
The French federal government guarantees its citizens free basic amenities
such as education, healthcare, and pension plans. France has been classified
as a high-income and wealthy nation by the World Bank.
- At present, services are the chief contributor to the nation’s economy, with over 70% of GDP generated from this sector. France is one of the global leaders in manufacturing – aerospace, automotive, and railway sectors, luxury goods, and cosmetics.
- France primarily exports vehicles, aircraft, food products (wine), pharmaceutical products, and electronic and hydrocarbon components.
- France mostly imports crude petroleum, refined petroleum, and vehicle parts.
6. China: 25%
Tax resident enterprises (TRE) must pay corporate income taxes based on their
worldwide income. Non-TREs are only taxed based on their China-source income.
Currently for China, the standard corporate tax rate is set at 25%, but lower
rates are available for qualifying sectors and industries.
Navigating Chinese corporate tax rates can be complicated, as their rates
change depending on multiple business indicators. Here is a list of some tax
rates that may be lower for qualifying businesses:
- High Tech Enterprises: 15%
- Software Companies: 10%
- Pollution Prevention Companies: 15%
Some corporate taxes are also lower depending on the Chinese region, in
addition to the industry or sector.
Situated in East Asia, China is one of the world’s oldest civilizations. It is
the world’s most populous country with around 1.4 billion inhabitants. China
has an entrepreneurial economy and, despite having one of the highest
corporate tax rates, it is one of the best places to do business due to its
low costs.
- The economic development of China has benefited largely from its export-led growth strategy.
- China’s top export items are automatic data processing machines, mobile phones, and textiles.
- The primary imported goods are machinery and transport equipment.
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