Countries With the Highest and Lowest Corporate Tax Rates

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Countries With the Highest and Lowest Corporate Tax Rates

The United Arab Emirates (UAE) has the highest corporation tax rate in the world, with a tax rate of up to 55% in 2021. Suriname (36%), Iraq (35%), Malta, Sint Maarten (Dutch), St Maarten, Sudan, and Zambia are also at the top of the list. Corporations are taxed at 34% in both Brazil and Venezuela.

There are 10 nations that do not levy any corporate taxes. These are some examples:

  • Anguilla
  • Bahamas
  • Bahrain
  • Bermuda
  • Cayman Islands
  • Guernsey
  • Isle of Man
  • Jersey
  • Turks and Caicos Islands
  • Vanuatu

The global average corporate tax rate is23.64%.

Key Takeaways

  • The United Arab Emirates, Iraq, Malta, Brazil, and Venezuela have some of the highest corporation tax rates in the world.
  • Anguilla, Bahamas, Bahrain, Bermuda, Cayman Islands, Guernsey, Isle of Man, Jersey, Turks and Caicos Islands, and Vanuatu are among the 10 nations with the lowest corporation tax rates, all of which are 0%.
  • The average tax rate in Europe is the lowest.
  • Bermuda, the Bahamas, and the Cayman Islands are tempting to many entrepreneurs and U.S. enterprises due to their 0% tax rate paired with a straightforward structure for establishing off-shore businesses.
  • The UAE’s economy is thriving, while other nations, such as Suriname, are floundering despite high corporate tax rates.

Low Corporate Tax Rates

Aside from the Caribbean nations with no business taxes, numerous Eastern European countries have lower than average corporation tax rates, including:

  • Hungary 9%
  • Montenegro 9%
  • Andorra 10%
  • Bosnia and Herzegovina 10%
  • Bulgaria 10%
  • Gibraltar 10%
  • Macedonia 10%
  • Moldova 12%
  • Cyprus 12.5%
  • Ireland 12.5%
  • Liechtenstein 12.5%

Europe has the lowest corporation tax rate in the world, at 18.98%, lower than the average tax rate in Asia (21.43%), the Americas (27.16%), and Africa (27.46%).

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Bahamas, Bermuda, and the Cayman Islands

These three Caribbean areas are three of the most popular nations for offshore investment, making them highly enticing to company owners, especially those in the United States.

Because its government does not tax earnings, dividends, or personal income, the Bahamas provides a greater tax benefit. It also lacks a number of additional taxes, such as capital gains, inheritance, gift, and unemployment. There are certain tax obligations that do exist, such as company license fees, some property taxes, and a value-added tax (VAT).

There are also several advantages for international and foreign investors to invest in the Bahamas. Foreign investments are protected by the law. The government also provides an easily adaptable framework for establishing company formations that may benefit from the 0% corporation tax rate.

With their 0% company tax rate, Bermuda and the Cayman Islands provide comparable international and foreign investment benefits. Bermuda does not levy taxes on income, dividends, or capital gains. The same is true for the Cayman Islands. Instead of corporation taxes, firms in this country pay a license fee to the government.

Because of their low- to no-tax settings, several Caribbean nations are considered tax havens. Companies often utilize legal techniques to hide money and avoid paying higher taxes in their native nations.

High Corporate Tax Rates

Although the UAE has a corporation tax rate of up to 55%, its tax structure is fairly unusual. The high tax rate is mostly paid by oil and gas firms and international bank subsidiaries. This is due to the fact that the government splits tax brackets based on income for both people and enterprises. As a result, the following tax structures emerge:

  Tax Roll Definition

Image by Sabrina Jiang © Investopedia2020

The UAE’s economy is healthy, with a comparatively high per capita income of $66,771. Once heavily reliant on oil, the government has gradually expanded its economy to include tourism, banking, industry, and air transport.

Other nations with high corporation tax rates have weaker economies. Suriname, for example, levies a 36% corporate tax. In 2020, the country’s GDP per capita was $4,916. As a result of its reliance on the mining sector, the nation is very vulnerable to fluctuations in mineral prices. The country’s economy is under strain from increased unemployment, decreased investment, and 59.1% inflation in 2021.

How the U.S. Compares

Following the passage of the Tax Cuts and Jobs Act, the corporation tax rate in the United States was reduced from 40% in 2017 (the second highest in the world) to 21% in 2018. (TCJA).This is lower than the worldwide average corporation tax rate of 23.79%.

The drop in the corporation tax rate in the United States is one of the most significant declines in any nation since the turn of the century. Only Kuwait saw a greater percentage drop, lowering its business tax rate from 55% to 15% in 2009.

In comparison, it took Canada nine years to gradually reduce its corporation tax rate from 36.6% in 2003 to 26.5% now. Japan’s corporation tax rate has likewise gradually lowered from 42% in 2003 to 30.62% in 2019.

What Is a Corporate Tax?

A corporation tax is a total tax levied on a company’s earnings. Companies are required to pay taxes on their taxable income. Total revenue minus expenditures, depreciation, operating costs, and other costs is included in this number. These taxes differ by nation, with some countries taxing firms more heavily than others. Some states do not tax corporations at all.

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Which Country Has the Highest Corporate Tax Rate?

The United Arab Emirates has the highest tax rate in the world. Companies in the Middle Eastern nation face a 55% tax rate.

What Is Corporate Tax Avoidance?

Corporate tax avoidance is a tactic used by businesses to reduce their tax burden. This may be accomplished by relocating funds and company units to offshore countries with lower tax rates. Although it seems to be prohibited, it is not always so. Many businesses engage in legal maneuvering to reduce their tax obligation.

The Bottom Line

There has been substantial disagreement over whether or whether a lower corporation tax rate stimulates economic development, notably in the United States, where a traditionally corporate tax-friendly Republican party is in power. While the TCJA’s total effect on the US economy may not be known for some time, it is probable that US firms will continue to park money in tax-free jurisdictions such as Bermuda, the Bahamas, and the Cayman Islands while creating employment in the US.

Correction for November 22, 2021: North Macedonia was originally mistaken in this article.

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