When thinking about starting a business or establishing ourselves in another country, we must consider dealing with a series of expenses and taxes. These taxes that we must pay are not common in all the countries of the European Union, that is, in each country we have a different company tax.
For this reason, some companies want to open branches or offices in countries with lower corporate tax fees, or directly move to these countries directly. We can find the example of some companies in the United States are buying organizations in Ireland to locate there and pay less corporate tax.
But we can ask ourselves: Is Ireland the country that pays less corporate tax? What is currently being paid in Spain? What other taxes do we have to take into account when moving our company?
Ireland is not the country in Europe that pays less
We can continue with the example of the company in France that currently pays a corporate tax of 38 percent, while in Ireland it is 12.5 percent, registering one of the lowest quotas in Europe.
But Ireland is not the lowest since there are countries like Cyprus or Leichtenstein also that have a taxation beneficial to companies, since their corporate tax is also 12.5 percent.
The country in Europe that offers the lowest corporate tax is Bulgaria. This country has the lowest corporate tax with 10 percent, as can be seen in the “Corporate Tax of Europe” graph:
On the opposite side we find France Malta with higher charges with 38 percent and 35 percent, respectively. Belgium is also among the countries with a higher corporate tax for companies, and they must pay 34 percent.
Regarding Spain, 25 percent of the corporate tax must currently be paid. Being above the average of the 28 countries of the European Union that is currently around 22.9 percent.
With this analysis it can be seen that there is a big difference between the countries of Europe in terms of corporate tax.
What about the corporate tax in Spain?
As has been seen in Spain, it is in the upper middle of corporate taxes in Europe and above the average of the 28 countries of the European Union. We must also consider that corporate tax must be filed even if no activity has been carried out during the tax period or no income has been obtained.
The following entities are considered taxable persons, residing in Spain,: commercial companies, or legal entities, including civil societies, except those that do not have a commercial purpose.
Likewise, agricultural transformation companies, investment funds, temporary Unions of companies (UTE), venture capital funds, pension funds, mortgage market regulation funds, mortgage securitization funds, some asset securitization funds, funds of guarantee of investments, funds of bank assets and communities that own neighborhood forests in common hands.
The general tax is 25 percent, but there are some exceptions:
- Fiscally protected cooperatives that pay 20 percent.
- Newly created entities, except cooperatives, that carry out economic activities. During the first year or first tax period in which the tax base is positive, and in the next one, they will have to pay 15 percent. Those that are part of a set of companies, nor the heritage entities will not be considered newly created.
- On the contrary, they are exempt from paying corporate tax:
- Unions, federations and confederations of cooperatives.
- Professional associations, business associations, official chambers and labor unions.
- Employment promotion funds constituted on conversion and reindustrialization.
- The Mutual Partners of Social Security.
Other taxes that must be taken into account when establishing ourselves in a country
When implanting ourselves in one country, we must ask ourselves if the fiscal pressure is higher or lower in other European countries. The two big taxes, apart from the corporate tax, that must be paid is VAT and personal income tax.
In Europe the average VAT of the 28 countries of the European Union is 21.53 percent, so in Spain we are below the average with our general rate at 21 percent. We are in the lower part of the VAT tax burden among European countries although higher than 20 percent.
Spain has the same VAT pressure as Belgium, the Czech Republic, Latvia, Lithuania, the Netherlands, and it can be seen that the differences between the different countries are not very large, as can be seen in the “Nominal VAT Type of Europe” graph:
The countries with the lowest VAT are Luxembourg with 17 percent, Malta with 18 percent, Germany and Cyprus with 19 percent, which are the only countries in Europe that remain below 20 percent.
On the other hand, the countries in which more VAT is paid in Europe would be Hungary with 27 percent, Denmark, Croatia, Sweden and Norway with 25 percent, and Romania, Finland and Iceland with 24 percent.
In Europe, the average rate of personal income tax of the 28 countries of the European Union is 39.4 percent, so Spain is below average with an average rate of personal income tax of 21.5 percent. We are at the bottom of the fiscal pressure due to the average rate of personal income tax among European countries, although above 20 percent.
Spain is below the pressure of the average rate of personal income tax than the United Kingdom, Poland, Slovakia and the Czech Republic, and it can be seen that the differences between the different countries are not very large as can be seen in the graph “Average Type of Personal Income Tax of Europe”:
The countries that have a lower average rate of personal income tax is Estonia with 18.4 percent and Ireland with 19.4 percent, which are the only countries in Europe that remain below 20 percent.
On the other hand, the countries that pay less average rate of personal income tax in Europe would be Belgium with 42 percent, German with 39.7 percent and Denmark with 36.1 percent.
At the international level, corporate tax is also very different
According to the report by KPMG on taxation in the world, corporate tax is very different between countries.
So different is that in countries like the Bahamas, Cayman Islands or Bermuda, there is not even a corporate tax, that is, companies pay nothing to the state coffers.
But, among those who pay more, in addition to the United States with 40 percent, there are countries that stand out for having a very high corporate tax, such as the United Arab Emirates, whose companies must pay more than 55 percent, being the only collection tax in the country, since there is neither VAT nor personal income tax.