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As global trade becomes more interdependent, countries have increasingly used corporate tax rates as a way to attract international business and support domestic economic activity.
However, given the numerous ways that different countries apply corporate tax, it can be challenging to compare nations at a glance.
To determine how small businesses are taxed worldwide, OnDeck reviewed corporate tax rates and special corporate tax requirements for small companies in 200 countries. The team then applied the rules for each country to the same example company (set revenue, size, profit, employer base, etc.) as a reference point. Data came from KPMG, the Tax Foundation, Trading Economics, PricewaterhouseCoopers, Deloitte, and various government websites.
To better understand the costs of doing business around the world, OnDeck applied each country’s tax laws to a model company with revenue of $1 million, profit of $100,000 a year, five to nine employees, is owned by a resident of the country in question, and earns a majority of its revenue from business operations within the country in question. The study doesn’t include oil, gas, and mining companies or publicly traded companies.
Here’s the world map showing the tax rates around the globe:
How Do Small Businesses Taxes Vary Worldwide?
While small business tax rates worldwide have fallen drastically in the last 40 years, they still vary widely from country to country. Tax rates are lowest in the Middle East and Europe and highest in Africa and South America.
Key findings
Tax rates are lowest in the Middle East and Europe – at 17.9% and 16.2%, respectively.
They are highest in Africa and South America – with average rates of 27.6% and 26.1%, respectively.
The highest effective tax rate is in Suriname (36.0%).
Many small nations have established themselves as tax havens with effectively zero corporate tax rates — Bahamas, Bahrain, Monaco, Nauru, United Arab Emirates, Vanuatu, and Vatican City.
North America
Corporate taxes vary in North America more than in nearly any other region. While the Bahamas is regarded as a tax haven, the neighboring islands of Saint Kitts and Nevis, Trinidad and Tobago, Saint Vincent and the Grenadines, and Saint Lucia are home to some of the highest corporate tax rates in the world.
While Belize was once considered a tax haven, recent changes to the tax regime have given the country corporate tax rates similar to the rest of the world. In the United States, companies are subject to a 21% federal corporate income tax rate and state corporate taxes – which range from 0% in Washington, Nevada, Wyoming, South Dakota, Texas, and Ohio to 11.5% in New Jersey.
Canada levies a net federal tax rate of 15% on corporations, in addition to the corporate taxes levied by the provinces and territories, which range from 8% in Alberta to 16% in Prince Edward Island.
While corporate taxes in Canada are close to the global average, it takes an average of just 1.5 days to start a new business in the country – the third shortest period of any nation.
South America
Small businesses in South America face an average corporate tax rate of 26.1%, the highest of any region other than Africa. The continent ranks low in other measures of business friendliness. It takes an average of 42.6 days to start a business, and start-up costs are equivalent to 41.4% of GNI per capita – each the highest such figures of any world region.
Brazil also levies a surtax of 10% on all annual taxable income over 240,000 Brazilian reais ($43,474 USD).
Guyana levies a general 25% corporate income tax rate, as well as a 40% tax rate on companies that get at least 75% of their gross income from goods they did not manufacture themselves.
Venezuela has an effective tax rate of 34%, among the highest in the world. Additionally, it takes an average of 230 days to start a business and costs more than twice the country’s GNI per capita — each the highest such figures of any nation.
Europe
On average, small businesses in Europe face a corporate tax rate of 17.9%, the lowest of any region other than the Middle East & Central Asia. Europe also excels in other measures of ease of doing business. It takes an average of 12.7 days to start a new business, and start-up costs are just 3.2% of GNI per capita – each the smallest such figures of any region.
Georgia’s 15% general corporate income tax rate is one of the lowest globally. It also takes an average of just one day to start a new business, the second shortest duration of any country.
Companies in Monaco that earn at least 75% of their revenue within the country are exempt from corporate tax.
The 12.5% corporate tax rate in Cyprus is among the lowest globally. The country also has the third most new business registrations per capita of any country.
Companies are subject to a flat corporate income tax rate of 21% in mainland Portugal. In comparison, companies in the archipelagos of Madeira or the Azores are subject to a corporate income tax rate of 14.7%.
While Spain levies a general corporate income tax rate of 25%, newly created companies are taxed at 15% for the first period in which they report a profit and the following tax period.
Africa
Corporate tax rates are generally higher in developing countries. In Africa, the average corporate tax rate is 27.5% – the highest of any region. Chad, Comoros, Equatorial Guinea, Guinea, Sudan, and Zambia all tie for the second-highest corporate tax rate in the world at 35%. Many countries in the region also rank as the worst for ease of doing business, with high start-up costs and multiple barriers to entry.
Mauritius has the second-lowest corporate tax rate in Africa (15%) and the newest business registrations per capita of any country on the continent.
Tunisia charges companies in the banking, debt collection, telecommunication, car dealing, and resource extraction sectors more than twice the general corporate tax rate.
Companies in Burundi either owe taxes equivalent to 1% of their revenue or 30% of their profits, whichever is the larger amount.
Equatorial Guinea’s 35% corporate tax rate is the second-highest globally. It also takes an estimated 16 procedures to start a new business there, the second most procedures of any country worldwide.
Middle East and Central Asia
In the Middle East & Central Asia, the average corporate tax rate is just 16.2% – the lowest of any world region. But while countries like Bahrain, UAE, Turkmenistan, and Qatar have effective tax rates ranging from 10% to 0%, they do levy higher taxes on oil and gas companies. Government revenues from oil and gas operations help keep corporate taxes low for other sectors in these oil-rich countries. While there are no taxes in Bahrain on income, sales, capital gains, or estates, a 46% tax rate may be levied on the net profits of oil and gas companies on limited occasions.
The UAE has designated “free zones” where companies are exempt from corporate taxes for a period of 15 to 50 years.
Qatar levies a 10% general corporate tax rate and a rate of at least 35% on oil companies.
Kuwait charges an additional 1% zakat on the net profits of all publicly traded companies.
Rest of Asia and Oceania
Corporate tax rates vary in the rest of Asia & Oceania more than in any other region. While the island nations of Nauru and Vanuatu are effective tax havens, countries like Japan, Bangladesh, and Kiribati have some of the highest corporate tax rates of any country. According to a World Bank report, Singapore, where the effective corporate tax rate is just 17%, ranks as the second most business-friendly country overall.
Laos offers companies using green technology a reduced corporate tax rate.
The Marshall Islands exempts all non-resident (offshore) companies from corporate income tax and levies a 3% tax rate on gross revenue for local resident companies.
Micronesia levies a 3% corporate income tax on small companies and a 30% corporate income tax on larger companies.
While New Zealand has an average corporate tax rate, it takes an average of just half a day to start a new business – the shortest time of any country in the world.
