Corporate tax rates around the world averaged 40.11% in 1980, and 46.52% when GDP was factored in. Since then, countries have acknowledged the influence that high corporation tax rates have on company investment decisions, and the average corporate tax rate for 177 different tax jurisdictions is currently 23.85% according to recent statistics, and 25.85% when weighted by GDP.
Every major region in the world has experienced declines, including the world’s largest economies. The United States’ 2017 tax overhaul reduced the statutory corporate income tax rate closer to the middle of the distribution, from among the highest in the world. Whereas the US had the fourth-highest corporate income tax rate in the world in 2017, it currently ranks in the middle of the countries and tax jurisdictions studied.
Corporate income tax rates in Europe are generally lower than in other areas, whereas corporate income tax rates in many developing countries are higher than the global average. The majority of countries now have corporation tax rates below 30%.
Notable Corporate Tax Rate Changes
In 2020, ten countries have changed their statutory corporate income tax rates. Micronesia was the only country to raise its top business tax rate, implementing a progressive corporate income tax system with a top rate of 30%, up from the previous flat corporate tax rate of 21%.
In 2020, nine countries across five continents cut their corporate tax rates: Armenia, Belgium, Colombia, France, French Polynesia, Greenland, Monaco, Togo, and Zimbabwe. Colombia, French Polynesia, and Togo each received a one-percentage-point drop, while Greenland received a 5.3-percentage-point reduction.
Below is an overview of how tax rate changes have affected the top 7 countries:
- Comoros (Africa): 50%
- Puerto Rico (North America): 37.5%
- Suriname (South America): 36%
- Chad (Africa): 35%
- The Democratic Republic of the Congo (Africa): 35%
- Equatorial Guinea (Africa): 35%
- Guinea (Africa ): 35%
How do tax rate changes affect LLC in Texas? The owners of an LLC may be liable for a variety of company taxes. The most significant financial burden for most business owners is federal, state, and local income taxes. Whether your LLC has one owner (a single-member LLC) or numerous owners affect how you file and pay income taxes (a multi-member LLC).
LLC Corporate Tax Requirements
For federal income tax purposes, a single-member LLC is treated as a disregarded entity by default. “A disregarded entity” indicates that the LLC is not required to file a separate income tax return to disclose income and expenses, according to Vincent Porter, a certified public accountant (CPA) at MyTexasCPA. The member’s income and spending will be reported on his or her tax return.”
In other words, much like a sole proprietor, you’ll record company income and costs on Form 1040, Schedule C as the sole owner of an LLC. If the LLC makes a profit for the year after deducting company expenses, the owner will owe taxes to the IRS at their personal income tax rate. The LLC’s losses can be deducted from the owner’s personal income if the LLC makes a loss for the year.
At the state and local levels, the process is largely the same. A single owner of a New York City LLC, for example, will declare company revenue on both their federal and state tax returns. The income will be taxed at the owner’s personal income tax rate (federal, state, and local). The idea is that you’ll only be taxed on revenue that can be traced back to a state or municipality.
“States will tax an LLC based on the number of sales, payroll, or assets owned in that state,” according to Porter. To put it another way, if a company’s federal income is $100 and it has $50 of payroll in New York and $200 of payroll elsewhere, New York will tax $25 of that income ($50/$200 x $100).” A separate LLC tax or fee is levied in several states. California, for example, has an annual LLC tax of $800, as well as an annual fee that varies depending on your LLC’s California income. When deciding on a business form and making budgeting decisions, keep these LLC taxes in mind.
Final Thought
Corporate tax rates vary a lot depending on where you live. With a statutory corporate tax rate of 28.50%, Africa has the highest rate of any region. At 19.99%, Europe has the lowest average statutory corporate tax rate of all regions.
Corporate tax rates in the United States vary by state. Before opting to start a business, do a thorough study on your state’s tax regulations.
