While the concept of levying a tax on corporate entities' income is quite common in other countries, the percentage of tax and tax slabs vary.
With Finance Minister Arun Jaitley set to present the Union Budget 2018 on Thursday, talk about a new corporate tax setup has gained momentum.
Corporate tax refers to the income tax paid by both Indian companies and foreign companies operating in India on their taxable profit, based on the rate of tax applicable for that financial year.
Currently, a corporate income tax (CIT) of 30 percent is applicable to an Indian company with an income of less than Rs 1 crore, and 40 percent tax is levied on foreign companies.
While the concept of levying a tax on corporate entities' income is quite common in other countries, the rate of tax and tax slabs vary from country to country.
Here's a list of corporate tax rates in the top 10 countries by GDP:
In the United States, resident corporations are taxed based on worldwide income of USD 50,000 and above. The US government cut federal corporate tax rate to 21 percent from 35 percent, effective January 1 this year.
The US CIT rate is based on a progressive rate schedule. However, an alternative minimum tax (AMT) provides for a flat rate with fewer deductions.
The corporate tax rate in the United States averaged 32.68 percent between 1909 and 2018. It reached an all time high of 52.80 percent in 1968 and a record low of 1 percent in 1910.
Tax resident enterprises (TREs) are subject to CIT on their worldwide income. A non-TRE that has no establishment or place in China is taxed only on its China-sourced income.
Under the CIT law, the standard tax rate is 25 percent. However, a lower CIT rate is available for selected sectors/industries, including qualified new/high tech enterprises, key software production enterprises and so on.
According to Trading Economics, the corporate tax rate in China averaged 29 percent between 1997 and 2018. It reached an all time high of 33 percent in 1998 and a record low of 25 percent in 2008.
A domestic corporation in Japan is taxed on its worldwide income. As of April 1, 2017, corporate taxpayers are obligated to file and pay the national local corporate tax at a fixed rate of 10.3 percent of their corporate tax liabilities. Previously, the national local corporate tax rate was 4.4 percent.
The corporate tax rate in Japan stands at 30.86 percent. It averaged at 42.01 percent until 2018 from 1993, reaching an all time high of 52.40 percent in 1994 and a record low of 30.86 percent in 2016, according to Trading Economics.
In Germany, the corporate tax rate stands at 29.72 percent. A corporation tax is levied at a uniform rate of 15 percent and is then subject to a surcharge of 5.5 percent (solidarity surcharge). This results in a total tax rate of 15.825 percent. The corporates are also required to pay a trade tax rate, is a combination of a uniform tax rate of 3.5 percent (base rate) and a municipal tax rate depending on where the PEs of the business are located.
As per Trading Economics data, the corporate tax rate in Germany averaged at 39.32 percent until 2016 from 1995, reaching an all time high of 56.80 percent in 1995 and a record low of 29.40 percent in 2009.
France levies corporate income tax at a standard rate of 33.33 percent. The country will progressively reduce the CIT rate to 28 percent by 2020.
The corporate tax rate in France averaged at 38.39 percent until 2017 from 1981, reaching an all time high of 50 percent in 1982 and a record low of 33.30 percent in 1993, according to Trading Economics.
Resident companies are taxable in the United Kingdom on their worldwide profits (subject to an opt-out for non-UK permanent establishments), while non-resident companies are subject to UK corporate tax only on the trading profits attributable to a UK PE plus UK income tax.
The corporate tax rate in the United Kingdom stands at 19 percent. It averaged at 31.61 percent until 2018 from 1981, reaching an all time high of 52 percent in 1982 and a record low of 19 percent in 2017.
Brazilian resident companies are taxed on worldwide income. Non-resident companies are generally taxed in Brazil through a registered subsidiary, branch, or PE, based on income generated locally. Other than that, non-resident companies can be subject to withholding tax (IRRF) on income derived from a Brazilian source.
Corporate income tax is assessed at the fixed rate of 15 percent on annual taxable income. Corporate taxpayers are also subject to a surcharge of 10 percent on the annual taxable income in excess of 240,000 Brazilian reais.
According to Trading Economics, the corporate tax rate in Brazil averaged at 33.27 percent from 1997 until 2018, reaching an all time high of 37 percent in 2000 and a record low of 25 percent in 1998.
Italian corporate entities are subject to a corporate income tax or IRES and to a regional production tax or IRAP.
Italy's corporate tax rate was reduced to 27.9 percent on January 1, 2017, from 31.4 percent in 2016. According to Trading Economics, the corporate tax rate in Italy averaged at 40.95 percent until 2017 from 1981, reaching an all time high of 53.20 percent in 1994 and a record low of 27.90 percent in 2017.
Corporations resident in Canada are subject to Canadian corporate income tax (CIT) on worldwide income. Non-resident corporations are subject to CIT on income derived from carrying on a business in Canada and on capital gains arising upon the disposition of taxable Canadian property.
The corporate tax rate in Canada stands at 26.50 percent. It averaged at 38.79 percent until 2016 from 1981, reaching an all time high of 50.90 percent in 1981 and a record low of 26.10 percent in 2012, according to Trading Economies.
Resident corporations are taxed on their worldwide income, whereas non-resident corporations with a permanent establishment (PE) in Korea are taxed only to the extent of their Korean-source income.
The corporate tax rate on companies in South Korea whose taxable income exceeds 300 billion won increased to 25 percent in 2018 from 22 percent. According to Trading Economics, the Corporate Tax Rate in South Korea averaged at 29.36 percent until 2018 from 1974 . It reached an all time high of 40 percent in 1975 and a record low of 22 percent in 2009.India Union Budget 2018: What does Finance Minister Arun Jaitley have up his sleeve? Click here for top and latest Budget 2018 news, views and analyses.
India Union Budget 2018: What does Finance Minister Arun Jaitley have up his sleeve? Click here for live Budget 2018 news, views and analyses.