Singapore is often ranked highly as one of the easiest places in the world to do business. For corporates that are looking to start up in the city state, it’s good to know that Singapore is also one of the world’s most tax efficient countries.
That’s mainly down to the fact that Singapore’s corporate tax rate is extremely low and comes in at a flat rate of 17%. When businesses are looking at setting up a presence in a country, the tax rate is one crucial factor that they look at.
Why? Mainly it’s down to how profits are taxed. If corporate tax takes away less of a business’s profits, then there is more profit to be shared out by shareholders after the authorities have received corporate tax payments.
But what about the rest of the world? How does it stack up in terms of corporate tax when compared to Singapore? Here’s a comprehensive guide to corporate tax rates from around the world.
Read Also: Complete Guide To Singapore Corporate Taxes: Tax Rates, Tax Rebates And Tax Exemptions
US – 21% Corporate Tax Rate
While the tax system in the US is notoriously byzantine, recent tax cuts from the first Trump administration has taken the corporate tax rate down significantly to 21%.
Before President Trump’s Tax Cuts and Jobs Act (TCJA) was signed into law in 2017, US corporations in the top bracket were charged a corporate tax rate of 35%.
From the beginning of 2018, that fell to a flat 21% and Trump’s re-election as president of the US could see these tax rates falling even further – although with certain caveats. While on the campaign trail, president-elect Trump said that he intends to reduce the corporate tax rate to 15% for companies that make their products in America.
China – 25% Corporate Tax Rate
The world’s second-largest economy is a burgeoning hotbed of innovation and entrepreneurial endeavour. Setting up a presence in China for many companies has also become a necessity. So, if they do, how much will they be charged in corporate tax?
Well, China charges a corporate income tax (CIT) rate that is a flat 25%. However, there is a lower available corporate tax bracket of 15% but this only applies to qualified high-tech enterprises that meet specific criteria for the reduced CIT rate.
These companies usually operate in sectors or industries that are encouraged by the Chinese government, such as certain integrated circuit (IC) production companies and software enterprises. For example, key software and IC design companies are eligible for a CIT rate of just 10% after being exempted from CIT for the first five years.
Specific regions within China also have preferential CIT rates to help stimulate and encourage growth, with businesses operating in Western Regions being able to claim the reduced CIT rate of 15%.
Japan – 23.2% Corporate Tax Rate
Japan is another large Asian economy that is seeing strong growth in recent years. Asia’s second-largest economy has been looking to encourage more innovation and enact more business-friendly reforms to its corporate environment.
Before 2017, Japan’s corporate income tax rate was in excess of 30%. However, currently, Japan’s corporate tax rate stands at 23.2%. This rate is applied across the board for companies that have paid-in capital of JPY 100 million (US$640,000) or more.
There are preferential rates for companies with paid-in capital of less than JPY 100 million but these are incremental and only go as low as 15%.
India – 35% Corporate Tax Rate
India, like the US, is well known for having an extremely onerous tax system. And when it comes to corporate income tax, it’s no exception. That’s mainly because there are various rates being charged dependent on size and whether the company is domestic or foreign-owned.
On the whole, domestic companies that earn more than INR 100 million (US$1.2 million) in income within a tax year can expect to pay an effective tax rate of around 35%. This is because companies have to pay extra surcharges based on health and education and at various rates, too.
Meanwhile, foreign-owned companies have to bear a higher tax burden in India, with their effective corporate tax rate reaching close to 40%.
Corporate Income Tax (CIT) Rate For Indian + Foreign Companies
Source: PwC
Australia – 30% Corporate Tax Rate
In Australia, companies are subject to a federal corporate tax rate of 30% on their taxable profits. Like many other countries, though, Australia also carves out tax exceptions for small and medium-sized businesses (SMBs).
Indeed, for SMBs in Australia – specifically those that have annual turnover of below AUD 50 million (US$31 million) – the corporate tax rate falls to 25%.
Read Also: How Companies Can (Legally) Reduce Their Corporate Income Tax In Singapore
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