Business tax, or corporation tax, is payable by any company that makes any profit from trading, investing or by selling assets. The main rate of tax set at 25% in the UK, while smaller businesses pay a reduced rate of 19%.
Business tax can create challenges for many companies, particularly start-ups and mid-sized companies. High levels of tax can slow down growth and, in certain weak economic environments, can even lead to redundancies.
Some companies choose to relocate to take advantage of lower corporate taxes, seeking advice from professional global tax experts. As well as benefitting businesses, lower tax rates can also help create a more positive economy via an increase in the supply and demand of products and services.
Although lowering taxes during times of sharp economic growth can result in high inflation, reducing business tax in a weak economy can lead to quicker recovery.
According to the most recent data from Statista, Portugal has the highest corporate combined income tax rate rate in Europe. However, there are some European countries that offer attractive rates for businesses, making them popular destinations for new companies and entrepreneurs.
With the continent’s lowest combined business tax rates, Hungary is an ideal location for start-up businesses. The country also enjoys low personal tax rates, regardless of income, making it an attractive place to work.
On the downside, most of the country’s industries are centralised to Budapest, often making it difficult to source talent from other regions. However, English is widely spoken and the infrastructure is robust, making it an option for those across a range of sectors.
Perhaps surprisingly, Ireland makes the list of those countries with the lowest tax rates. Although not as cheap as some other European countries, Ireland is a popular location for companies looking to relocate from the UK due to its close proximity, similar culture and language.
Dublin houses the majority of businesses and is the central hub of international trade within the country.
With low tax rates and access to a high standard of talent, Lithuania is also a big hit with businesses. The country is enjoying fast growth in the tech sector and its geographical location means it has easy access to a variety of other countries when it comes to trade.
The lower cost of living also makes it attractive to many workers looking for opportunities to progress in Europe.
Featuring very low taxes and low living costs, Bulgaria is a popular destination for start-ups. However, the main drawback is the paperwork required for companies to pay their taxes which can be time-consuming and complex.
The main attraction of this country is that businesses don’t need to pay any income tax on profits that are reinvested. However, personal social security taxes are fairly high which might deter potential talent from searching for opportunities within Estonia.
Finally, if you’re a business or start-up looking to relocate to a country to take advantage of lower corporate tax rates, it’s vital to make sure you thoroughly research the process and take care of all the legalities around setting up a company abroad.