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5 Countries in Europe with the Lowest Corporate Tax Rates

Doing business in Europe is practical for many reasons. For one, price comparisons, exchange rates, and other financial transactions are easier, considering that 19 EU countries use the Euro currency.

If you’re thinking about joining the Eurozone business scene, be sure to look into the corporate tax rates along with other business start-up considerations. Yes, tax remittance comes along with huge earnings when it comes to incorporating a company. But other countries offer more favourable tax rates than others.

Corporate Income Tax Rates and the Laffer Curve

Corporate tax is one of a country’s income streams. And studies show that nations with lower or more favourable tax rate are likely to attract more investors and entrepreneurs. Ultimately, this creates more jobs and other income opportunities for the nation

Statutory tax rate and calculation vary from country to country. But in most nations around the world, the rate ranges from 15% to 30%.

European Countries with the Most Favourable Corporate Tax Rate

The Eurozone countries attained economic success for good reasons, one of which is its favourable tax rate. Specifically, the following are your best options if you’re planning to start a company in the EU region:

1. Bulgaria

Aside from the country’s strategic location and low labour cost, Bulgaria also attracts entrepreneurs and investors with its 10% flat rate for corporate tax. The nation offers one of the lowest rates in the EU.

However, it’s not always that way. Back in 1997, Bulgaria’s rate was 40%. And it took years of planning and implementing the Laffer Curve principle to get the rate to where it is now.

The Laffer Curve principle states that “you get more of what you tax less.” This is also a way of encouraging people to make more taxable behaviours (e.g., entrepreneurship, employment, shopping, investing).

2. Hungary

Hungary is home to some of the world’s excellent infrastructures, science parks, and industrial sites. The country also offers a great balance between labour quality and cost. It’s also in the centre of Europe, giving entrepreneurs excellent logistics and transportation advantages.

The country’s average corporate tax rate from 1989 to 2020 is 21.45%. Its highest rate was in 1989, which is 50%. And it reached a record low in 2017 at 9%.

In 2019, the European Parliament named Hungary as one of the seven tax havens in Europe, along with Malta, Cyprus, and Ireland.

3. Malta

Indeed, Malta is worth visiting and living in many ways and assistance online is available to register a company in Malta. The country’s economy is as magnetic as its picturesque landscape. Not only is it a tourist’s Mediterranean paradise, but it is also an entrepreneurs’ tax haven.

Malta might have a complex taxation system. But it also offers a wide range of tax cuts and programs, including refunds and international corporation tax rate. Local business owners pay 35% for income tax. And foreign entrepreneurs pay as little as 5% for company tax in Malta.

Malta might be the EU’s smallest state. But its favourable tax rate ensures that the country’s economy remains one of the most competitive and progressive.

4. Lithuania

Lithuania became a member of the Eurozone in 2015 and joined the OECD in 2018. The country is known for its strong trading relations with the US, Germany, Russia, and China, as well as its Eastern and Central European neighbours.

Incorporating a company in the country is a great way to tap into the nation’s highly qualified workforce, digital infrastructure, and attractive labour cost. Lithuania is one of the top 5 fastest growing EU economies and is the 2nd top-rated country for investment.

Lithuania offers one of the lowest personal and corporate income tax rates, which is 15%. Small businesses and those in the agricultural sector can even apply for a reduced rate, which can range from 0% to 5%.

5. Montenegro

Montenegro is known for its efficiency and ease of the company incorporation process, making it a favourable country to start a business. The country also offers different supportive laws, strategies, and programs for foreign business ownership. And it boasts of a record low 9% corporate tax.

Steelmaking, consumer goods, agricultural processing, and aluminium are the country’s top industries. And its tourism sector is the 2nd fastest growing market in the world. As of 2018, Montenegro is the 3rd top exporter of ores, mineral fuels, aluminium, and oil. And it is one of the top 3 trade partners of China, Serbia, and Germany.

Let’s face it. Incorporating a company in the EU region might be a long and daunting process, considering the strict statutory guidelines and standards. However, it is worth enduring, knowing that it can give you access to top talent, multinational partnerships, infrastructure, and other opportunities. Taking advantage of the low company tax in Malta, Montenegro, Bulgaria, Lithuania, and Hungary is the best way for you to stretch your capital. Financial and legal consultancy services might also help you plan your business creation strategically.


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