Behind the Numbers: A Deep Dive into Europe’s Corporate Tax Rates for 2023

Western businesses are increasingly outsourcing tasks to more competitive regions where they can find reputable suppliers. Especially since the epidemic and the ensuing economic crisis, global business conditions have been generally adverse, increasing this tendency. Several crucial aspects are dependent on each other for company growth, particularly when expanding internationally. The corporate tax rates are one such aspect of the local state’s business climate. 

Moreover. Organizations may profit from establishing business connections with reliable IT recruitment service partners that are specialists in their professional and geographical sectors to ensure steady performance at an overall cheaper cost compared to their home location (or in-house). So, consider Alcor BPO when planning your European (and beyond) outsourcing expansion. It’s a great team that can take care of expanding your business and setting up your operations in Europe, from hiring top developers to back-office support. In this article, we will talk about tax rates in the EU and specify the lowest tax countries in Europe.

Region’s Economic Growth, Prospects, and Taxes

Several important details should be remembered before digging into the rankings. First, the average corporate income tax rate across European countries is 21.5%, which is lower than the global average of 23.54%. Secondly, corporate income tax rates in the European Union have been falling for decades. From a high of 32.6% in 2000, the average corporation tax rate has steadily declined to its present level of 21.7%. Lastly, Bulgaria and Hungary have the lowest statutory business tax rates among EU member states. The tax rate in Bulgaria is 10%, while Hungary’s is just 9%.

Taxation of European Corporations

According to conventional wisdom, European countries rely heavily on revenue from corporate income taxes to fund their economies. The country’s government sets the corporate income tax rate in which the firm is headquartered (or from which it reports revenues).

Corporate income tax rates and economic policies are being standardized by the European Union and the Organization for Economic Co-operation and Development (OECD). Due to the vast differences in the corporate income taxes paid by member states, it is difficult to ensure that no state is granting preferential taxation advantages to any particular company. Many large multinational firms employ subsidiaries in tax haven governments like Ireland and Luxembourg. Companies like Apple and Google have benefited from Ireland’s low corporation tax rates since their companies have a presence there.

Europe’s Business Statutory Tax Rates

To begin, it’s vital to distinguish between statutory and effective taxation rates on corporate revenue in the EU and elsewhere. To sum up:

1) The statutory tax rate is the rate that is legally imposed on taxable income within a specific tax category.

2) After accounting for tax benefits (such as loopholes, deductions, exemptions, credits, preferential rates, etc.), the effective tax rate is the proportion of income paid by a person or business.

Corporate tax rates by EU states are listed below:

We have also included a brief synopsis of the individual income tax rates throughout the EU states. Having these in mind is helpful when planning for things like staff pay and the associated taxes.

Please note that the policies and extra taxes on top of earnings will vary from country to country. It might be the case with tenure, required insurance payments, pension accumulation, etc. The present comparison, however, is between the flat tax rates on individual income in each EU member.

Let’s now consider countries’ social security tax rates:

Alcor – Your Reliable IT Recruitment & Legal Partner in Eastern Europe

If you are looking for a reliable partner who will help you deal with taxes and other legal nuances of working in Eastern Europe and hiring developers, consider Alcor your trustworthy partner. After several successful hires, Alcor has mastered staffing an Eastern European development team. In approximately 3 to 6 weeks, our team of 40 recruiters can find you qualified software engineers in Poland, Bulgaria, or Romania. Alcor is ready to set up your Eastern European R&D division. We quickly form a team of recruiters dedicated to providing top IT staffing services. After helping establish your R&D department, we take charge of the offshore engineering team’s payroll and legal matters. 

Conclusion

Europe has a lower average corporation tax rate than the rest of the globe. It makes many European countries good places to set up a business. The rate varies considerably, though, even inside the European Union. Some countries have a disparity in values that is more than threefold. Compare the corporation tax rate of 35% in Malta with that of 10% in Bulgaria and 9% in Hungary. The corporation tax rates in Western European countries are much higher than in Eastern Europe.

New and established businesses are recommended to open shop in Eastern Europe. Countries like Bulgaria, Romania, and Poland have excellent growth opportunities. Considering the difficulties businesses have to deal with due to the epidemic and the economic crisis, this is of paramount importance since these obstacles have significant effects on the worldwide business climate. Suppose you do not want to handle the intricacies of the legislation of your chosen Eastern European country for doing business on your own. In that case, the best option is cooperation with an experienced partner.