25 Countries with the Lowest Corporate Tax Rates

Published on January 27, 2023 at 10:16 am by Ramish Cheema in Economy, News

In this piece, we will take a look at the 25 countries with the lowest corporate tax rates. For more countries, head on over to the 5 Countries with the Lowest Corporate Tax Rates.

Corporate tax is the amount of money that a company pays the government on its income. It is generally the last calculation on a firm’s income statement, computed when expenses such as direct material costs, labor costs, marketing expenses, administrative overhead, research and development, and interest payments are subtracted from the net sales.

Corporate tax rates are not the same around the world. In fact, there is a significant variance between the lowest and highest amounts. For instance, several countries and territories, as we will discuss below, have a corporate tax rate of 0%. In comparison, one of the highest corporate tax rates in the world is for public industrial and commercial enterprises that operate in the Union of the Comoros – a small African nation with a nominal per capita income of $1,349. These Comoran companies can end up paying as much as a staggering 50% of their incomes as tax – a fact that is likely to make many boardrooms shudder. On a side note, as if this weren’t enough, Comoros is also one of the few countries in the world that taxes marriage expenses.

These taxes (the corporate ones) are also one of the more controversial topics in finance, government, and public discourse, due to the thorny issue of tax avoidance. Tax avoidance is different from tax evasion, as it is not illegal and simply involves a firm structuring its operations in a way that lets it minimize the tax expense. Research conducted by the Danish think tank Kraka, the University of Berkeley, and the Danish Ministry of Finance suggests that if tax avoidance were eliminated, then the U.S. could see domestic profits exceed by up to 10%. The percentage is even higher for other countries; for instance, EU countries could see profits grow by 20%, and tax haven regions such as Bermuda, Bahamas, and the British Virgin Islands could see their profits drop by a staggering 55%.

The highly, should we say ‘profitable’ nature of tax avoidance also results in rather creative names for these schemes, such as the Double Irish, Single Malt, the Dutch Sandwich, and the Bermuda Black Hole. In fact, the Bermuda Black Hole saw nonfinancial U.S. firms amass a whopping $1 trillion in offshore operations by 2017 according to McKinsey. Most tech companies, such as Apple Inc. (NASDAQ:AAPL) and Alphabet Inc. (NASDAQ:GOOGL) have been accused of these schemes, and Apple was fined a whopping $13 billion in 2016 by the European Commission because of Black Hole operations.

Due to a lack of a unified global regime on corporate tax tracking, it is tedious to determine how much companies pay. However, for the U.S., corporate tax collection grew by 14% in the fiscal year 2022 to sit at $425 billion.

Photo by Vitaly Taranov on Unsplash

Our Methodology

We have used corporate tax rate data primarily from the Tax Foundation to compile our list. The data has been verified from other sources (such as the accounting firms PwC and KPMG) as well to ensure that it is up to date and accurate. For each country, the lowest tax rate is mentioned (except for new business exemptions), which is sometimes different from the figures in the aforementioned sources.

25 Countries with the Lowest Corporate Tax Rates

25. Republic of Cyprus

Latest & Lowest Corporate Tax Rate: 12.5%

The Republic of Cyprus is an island country in the Mediterranean Sea. It has a diverse economy fueled by oil exports, shipping companies, medicines, and agricultural products among others. Cyprus’ corporate tax rate is a flat 12.5%, and non resident firms are also taxed on profit from activities that result from its permanent establishment in the country. Cyprus also has higher taxes for special interest income and some kinds of dividends.

24. Republic of Ireland

Latest & Lowest Corporate Tax Rate: 12.5%

The Republic of Ireland is a European country with a special place in global corporate taxes, as it is often used as a hub for tax avoidance by large multinationals. In fact, at some points in time over the previous decade, up to 80% of Irish corporate taxes were paid by foreign multinational firms. Ireland’s laws have allowed companies like Apple to create virtual internal assets to reduce their tax base. Ireland’s standard tax rate is 12.5% but tools such as the Single Malt and Double Irish have often led to this being reduced to 0%.

23. Principality of Liechtenstein

Latest & Lowest Corporate Tax Rate: 12.5%

The Principality of Liechtenstein, or simply Liechtenstein, is a mountainous European country located in the Alps. Despite being one of the smallest countries in the world, it has a per capita income of $98,432 – the third highest nominally. Additionally, Liechtenstein does not have a tax treaty with the U.S. It has a flat tax rate of 12.5%, and has often been criticized for a lucrative and secretive financial industry claimed to have helped with tax evasion.

22. Republic of Moldova

Latest & Lowest Corporate Tax Rate: 12%

The Republic of Moldova, or simply Moldova, is a landlocked Eastern European country that gained independence from the Soviet Union in 1991. It relies on a mix of agricultural and industrial products for its exports. Moldova follows similar rules to other countries when it comes to calculating corporate tax for resident and non resident firms. Its base tax rate is 12% and can go up to 15% based on government calculations. Additionally, farmers are taxed at a lower 7%, and some small businesses at 4%.