Corporate tax is a tax applied to the profits of corporations. While tax rates vary from country to country, corporate taxes can be lowered through various deductions, subsidies, and loopholes. Implementing low corporate tax rates can offer benefits to businesses and governments alike.
For the former, low tax rates may enable increased investment and entrepreneurial activity by decreasing the barriers to entry in each market. As a knock-on effect for the latter, increased entrepreneurship can help drive domestic economic growth, employment, and technological advancement.
While reducing tax liability isn’t simple – often requiring in-depth consultation and strategising with legal experts – it’s helpful to know which countries offer lower corporate tax rates than others. Discover six so-called ‘tax havens’ around the world for international businesses below.
For reference, the worldwide average statutory corporate income tax rate is 23.54% measured across 180 jurisdictions.
Estonia
The small northern European country of Estonia offers an attractive – though not startlingly low – corporate tax rate of 20%. But this tax only applies to distributed income, while all profits made abroad are tax-free. Dividends meanwhile are subject to a reduced rate of 14%.
Thailand
The tropical Southeast Asian country of Thailand holds appeal for various reasons, including its 20% corporate tax rate for companies with tax resident status. Companies that can evidence their non-resident status avoid paying tax on global income.
Companies listed on the country’s stock exchange enjoy a 100% tax exemption on dividends, while non-listed companies still receive a 50% exemption.
Portugal
This small country on Spain’s border offers among the lowest corporate tax rates in Europe. Its tax system is complex, however, with different rates in different locations, ranging from 16.8% on the Portuguese island of Madeira to 21% on the mainland.
Portugal also operates ‘free zones’ where businesses pay only 5% in business taxes.
Hong Kong
Hong Kong is both a city and a special administrative region of China. It’s become famous for its efforts to attract foreign investors, operating a two-tier tax scale from 8.25% to 16.5% depending on turnover.
Local companies receive a discount on their first 2 million Hong Kong dollars in profits, paying the 16.5% thereafter.
Lithuania
Lithuania sits in the Baltic region of Europe with Latvia to the north, Belarus to the east and south, Poland to the south and Russia to the southwest. Its low corporate tax rate of 15% is designed to attract foreign investors as well as support domestic agricultural companies.
New companies enjoy a preferential tax rate of 0-5% for a beginning period.
The Cayman Islands
The Cayman Islands in the western Caribbean is one of several offshore tax havens, offering 0% corporate tax for companies performing activities abroad. This practice is viewed as controversial but continues, with international companies enjoying a standard grace period of 20 years.
Attractive tax environments require more than low corporate tax rates, but those offered by the companies above are still a promising start.
