Corporate income tax is usually levied at a flat rate on corporate profits. However, some countries offer reduced corporate tax rates for small businesses. Of the 27 European OECD countries featured on today’s map, eight impose a reduced corporate tax rate on companies whose income or profits are below a certain threshold.
Belgium, France, Lithuania, Luxembourg, the Netherlands, Poland, Portugal and Slovakia have reduced corporate tax rates for companies under a certain size, ranging from 5 percent in Lithuania to 22.8 percent in Luxembourg in 2021.
Latvia gives owners of “micro-businesses” (companies with a turnover of less than € 25,000) the option of taxing 25 percent of income, of which 80 percent is the owner’s social security contribution and 20 percent is personal income tax.
The biggest difference between the reduced and the usual top rate for corporate taxes is in Portugal at 14.50 percentage points. Large companies pay a uniform top rate of 31.50 percent, while small companies pay a reduced rate of 17 percent on taxable income up to 25,000 euros.
France shows the second largest difference with 13.41 percentage points. A uniform top rate of 28.41 percent applies to companies with a turnover of more than 250 million euros and a taxable income of more than 763,000 euros, while small companies with a turnover of less than 10 million euros apply a reduced rate of 15 percent Pay a win of up to 38,120 euros.
The difference between the rates in Luxembourg is the smallest at 2.14 percentage points (normal rate 24.94 percent and reduced rate 22.8 percent).
|Reduced and combined standard corporate tax rates in European OECD countries, 2021|
|country||Reduced combined corporate tax||Standard top combined corporate tax rate|
|Reduced rate||Reduced rate threshold|
|Belgium (BE)||20.0%||Applicable to the first € 100,000 of taxable income of qualified companies.||25.0%|
|Czech Republic (CZ)||–||–||19.0%|
|France (FR)||15.0%||Applicable to sales of no more than € 10 million and for that part of the profit that does not exceed € 38,120.||28.4%|
|Latvia (LV)||–||The micro business owner can choose a 25% tax rate on income, 80% of which is the owner’s social security contributions and 20% is personal income tax. Applicable if the turnover does not exceed € 25,000. (Since it is a tax on revenue, not profits, the rate is not directly comparable to the reduced rates in other countries.)||20.0%|
|Lithuania (LT)||5.0%||Applies to companies whose average number of employees does not exceed 10 and whose income does not exceed € 300,000 during the tax period. A one-year corporate tax exemption (0% tax rate) is applied to small business start-ups (who meet the above criteria).||15.0%|
|Luxembourg (LU)||22.8%||Applicable if the taxable income does not exceed € 175,000.||24.9%|
|Netherlands (NL)||15.0%||Applies to taxable income up to € 245,000.||25.0%|
|Poland (PL)||9.0%||Applicable if the income does not exceed € 2 million.||19.0%|
|Portugal (PT)||17.0%||Applicable to the first € 25,000 of taxable income of qualified companies.||31.5%|
|Slovak Republic (SK)||15.0%||Applicable if the income does not exceed € 49,790.||21.0%|
|United Kingdom (GB)||–||–||19.0%|
Notes: The combined corporate tax rates show the combined central and sub-central statutory corporate tax rate, which is the result of the central government tax rate (minus the deductions for sub-national taxes) plus the sub-central tax rate.
Source: OECD, “Tax database: Table II.2. Targeted statutory corporate tax rate ”, last updated in April 2021, https://www.stats.oecd.org/Index.aspx?DataSetCode=TABLE_II2.
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