The United States and the European Union have been pushing for corporate tax reforms, but they are struggling to get any part of their economic program passed through the Europe. In the EU, any tax reform must be approved by the European Parliament and member states before it can take effect. Some member states of EU have reservations about the minimum corporate income tax. A recent study shows that the United States and the Netherlands are the only major nations that enact no corporate taxes in some cases for large corporations. In an attempt to address this problem, the EU is proposing to harmonize the tax rate and fiscal obligations across all EU member states. This would be a significant reform in each country.
Implementing minimum Corporate Tax in Europe
While there are no significant changes as for minimum taxation on corporations there are some reforms that are close to be introduced. For instance, the EU is introducing a new minimum corporate tax rule that will limit the depreciation allowances for long-life tangible assets other than buildings to 40 years. Another proposal would reduce the depreciation allowances for other fixed assets down to 25%. However, these proposals do not introduce any radical changes for tax havens in Europe in the context of corporate income tax for small and medium companies. All aforementioned proposal of tax changes would apply to both domestic and multinational businesses with combined revenues exceeding EUR750 million a year.
Minimum corporate tax rate of 15 percent in Europe
The EU parliaments states that the minimum corporate tax rate of 15 percent will protect the fundamental rights of businesses while avoiding discrimination between cross-border and domestic businesses. The EU’s proposed global minimum corporate tax rate will apply to all companies in the EU with combined revenues of EUR750 million a year. The minimum tax rate of 15% is intended to comply with the OECD model and do not violate the EU’s treaties. This is a fundamental change for multinationals, but the proposals are still in its infancy.
The lowest tax rates in Europe for Business
The UK and Luxembourg also have low corporate tax rates. Dividends are not subject to tax in Luxembourg, which is the lowest in the European Union. The tax rate is 12.5%, and it is the lowest in the European Union for businesses that have more than one shareholder. While the UK and the EU do have a higher standard of living, both countries offer low corporate tax rates. The EU and Luxembourg are both attractive places to do business. The European Union also offers low corporate taxes.
Romania in turn, according to Company in Romania offers the lowest fiscal burden for small and medium enterprises. Many small entrepreneurs from Europe including bloggers also migrate to Romania. For example, a Polish blogger Rekin Finansów shared his experience on business in Romania in the following article: Czy warto założyć firmę w Rumunii.
The best place in Europe for company incorporation
The average tax rate for individuals in the EU is 21 percent. This is slightly lower than the world’s average of 23 percent. The same is true for small business owners. Even self-employed individuals can benefit from the low corporate tax rates in the EU. Romania has the lowest corporate tax rate of 1% in the EU for companies up to 1 million yearly turnover. Both personal and corporate taxes in Bulgaria are at 10%. The country has no capital gains tax, and its citizens can enjoy lower tax rates in the EU. Similarly, the UK is the lowest in terms of income tax for businesses.
The personal and company taxes in the country are lower in some EU countries than most states in the US. Some countries offer more competitive taxes than others. In the case of the Netherlands, the country has a low corporate tax rates compared to other EU countries. The Dutch government does not charge tax on profits of companies in the country. The European Union offers favorable withholding tax rates to US companies. Its high tax rates also encourage foreign investment.