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Taxation

Corporation tax rates – is the UK still competitive in Europe?

Corporation tax rates – is the UK still competitive in Europe?
Jenna Buckle

By Jenna Buckle

16 Feb 2022

It has recently been announced that corporation tax rates in the United Kingdom are set to increase from 1 April 2023 to 25% for companies with a profit margin above £250,000.

Companies with a small profits rate of £50,000, however, will continue to pay corporation tax at 19%. These measures have been put in place in order to support the government’s objective to raise revenue, whilst also keeping the UK’s corporation tax rate competitive relative to other European countries.  Although tax rates in other European countries have been steadily increasing over the last few decades, with the average tax rate of all European OECD countries declining from 21.06 in 2018, to 20.4 in 2021, these rates are still comparable to those set to be imposed in future years in the UK.

Corporation tax rates in most European countries have remained relatively consistent over the years. However, between 2018 and 2022, several countries have announced changes in statutory corporate income taxes. These countries are as follows:

Belgium

In December of 2017, the Belgian parliament approved the Corporate Income Tax Reform Act, which outlined the reduction of corporation tax rates as a primary objective. In 2018, corporation tax rates were reduced from 33.9% to 29.58%. Under certain circumstances, SMEs can further benefit from a reduced CT rate of 20.4% on the first 100,000 of taxable income received. In 2020, nominal corporation tax rates were further reduced to a rate of 25%.

Norway

In 2018, the Norwegian corporation tax rates decreased from 24% to 23%. These rates were further reduced in 2019 to 22%, with a rate of 25% being maintained for the financial sector.

France

The French corporation tax rate was reduced from 33.33% in 2017, to 26.5% in in 2021, with a rate of 27.5% applying to all companies with a turnover above 250 million euros. From January 1 of 2022, corporate income tax rates were reduced even further to a rate of 25%.

Greece

Under proposals announced in September 2018, the corporation tax rate has been set to decrease from 29%, to 25% in 2022. However, the corporation tax rate remains at 29% for credit institutions and banks, providing that they fall within special provisions of deferred taxation for the year that such provisions apply.

Luxembourg

In Luxembourg, the corporation income tax rate has decreased from 19% in 2018, to 17% in 2021 for companies with a taxable income in excess of 200,001€. However, it is important to note that there is a 7% solidarity surtax charge in Luxembourg City, leading to an overall tax rate of 24.94%.

Sweden

Taxable income in Sweden has been subject to corporate tax at a flat rate of 20.6% since January 2021. Prior to this, the corporation tax rate was 22% until 2018, and 21.4% up until the 31 of December 2020.

Turkey

In April 2021, the Turkish Government announced that corporation tax rates would increase from 20% in 2020, to 25% and 23% for the 2021 tax year, and 2022 tax year respectively.

The statutory corporation tax rates for countries that have not experienced notable changes over the last couple of years are as follows:

Country 2022 Unit
Albania 15 %
Austria 25 %
Belarus 18 %
Bosnia and Herzegovina 10 %
Bulgaria 10 %
Croatia 18 %
Cryprus 12.5 %
Czech Republic 19 %
Denmark 22 %
Estonia 20 %
Finland 20 %
France 28 %
Germany 30 %
Hungary 9 %
Iceland 20 %
Ireland 12.5 %
Isle of Man 0 %
Italy 24 %
Kosovo 10 %
Latvia 20 %
Liechtenstein 12.5 %
Lithuania 15 %
Macedonia 10 %
Malta 35 %
Moldova 12 %
Montenegro 9 %
Netherlands 25 %
Poland 19 %
Portugal 21 %
Romania 16 %
Russia 20 %
Serbia 15 %
Slovakia 21 %
Slovenia 19 %
Spain 25 %
Switzerland 14.84 %
Ukraine 18 %
United Kingdom 19 %

If you are considering the UK as a location to incorporate your business, you will notice that the UK has historically been very competitive within Europe. Although corporation tax rates are due to increase to 25% in the coming year, this is still favourable when compared against the corporation tax rates of many European countries with large commercial centres. In addition to having a competitive tax regime, the UK offers a strong regulatory framework and aims to ensure that the UK is a competitive and straightforward jurisdiction for businesses to operate.

We would be happy to discuss your requirements and help with any queries you may have. Speak to our tax team today.

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