The highest corporate tax rate in the world belongs to the United Arab Emirates (UAE), with a 2019 tax rate of up to 55%, according to KPMG. Other countries at the top of the list include Brazil (34%), Venezuela (34%), France (31%), and Japan (30.62%).
Ten countries charge a 0% corporate tax:
- Cayman Islands
- Isle of Man
- Turks and Caicos Islands
The global average corporate tax rate is 23.79%.
- The United Arab Emirates, Brazil, Venezuela, France, and Japan report some of the world's highest corporate tax rates.
- The ten countries with the lowest corporate tax rates include Anguilla, Bahamas, Bahrain, Bermuda, Cayman Islands, Guernsey, Isle of Man, Jersey, Turks and Caicos Islands, and Vanuatu.
- Bermuda, the Bahamas, and the Cayman Islands are appealing to many entrepreneurs and U.S. businesses because of their 0% tax rate combined with a simple structuring for setting up off-shore business.
Low Corporate Tax Rates
In addition to the mostly Caribbean countries with no corporate taxes, many countries in Eastern Europe have lower than average corporate tax rates, including:
- Hungary 9%
- Montenegro 9%
- Andorra 10%
- Bosnia and Herzegovina 10%
- Bulgaria 10%
- Gibraltar 10%
- Macedonia 10%
- Moldova 12%
- Cyprus 12.5%
- Ireland 12.5%
- Liechtenstein 12.5%
- Albania 15%
By region, Europe has the lowest corporate tax rate at 19.35%, lower than the average tax rate in Asia (21.09%), the Americas (27.21%), and Africa (28.24%).
Some tax requirements that do exist include business licensing fees and some property taxes, as well as a value-added tax (VAT). In the Bahamas there are also many incentives for international investors and foreign investors. Foreign investors enjoy a shield of privacy.
The country also offers an easily accommodating framework for setting up business structures that can take advantage of the 0% corporate tax rate.
Bermuda and the Cayman Islands also offer similar international and foreign investing advantages with their 0% corporate tax rate. Together, the Bahamas, Bermuda, and the Cayman Islands are three of the most popular countries for offshore investing, which makes them very appealing to business entrepreneurs and particularly U.S. businesses.
High Corporate Tax Rates
The United Arab Emirates has a corporate tax rate of up to 55%; however, its tax framework is somewhat unique. The high tax rate is primarily only paid by oil and gas companies and subsidiaries of foreign banks. This is because federally the country divides tax brackets by income for both individuals and businesses. This leads to a tax structure that includes the following:
The UAE has a strong economy with a relatively high per capita income of approximately $74,035. Once highly dependent on oil, the government has diversified the economy over time to include tourism, finance, manufacturing, and air transport.
Other countries with a high corporate tax rate are less economically sound. Venezuela has a high corporate tax rate at 34% in 2019, and the country is in an economic crisis, with predictions for the inflation rate of ten million percent. Preventing an economic collapse requires significant reforms.
Brazil also has a high corporate tax rate at 34%, with an economy that is fragile. The Brazilian real is volatile, with weakness against the U.S. dollar. Gross domestic product (GDP) growth fell to -3.3% in 2016 and was reported at around 1% for 2017 and 2018.
How the U.S. Compares
With the Tax Cuts and Jobs Act (TCJA) of 2017, the U.S. corporate tax has been slashed from 40%—the second highest in the world as of 2017—to 21% in 2018, below the global corporate tax rate average of 23.79%. The decrease in the U.S. corporate tax rate is one of the most dramatic decreases in any country since the beginning of the 21st century. Only Kuwait, which decreased its corporate tax rate from 55% to 15% in 2009, had a bigger percentage change.
In contrast, it took Canada nine years to slowly decrease its corporate tax rate from 36.6% in 2003 to 26.5%. Japan also slowly decreased its corporate tax rate from 42% in 2003 to 30.62% in 2019.
The Bottom Line
There's been much debate—particularly in the U.S. with a historically corporate tax-friendly Republican party in power—over whether or not a lower corporate tax rate spurs economic growth. While the impact of the TCJA on the overall U.S. economy won't be known for some time, it is likely that U.S. corporations will continue to park money in tax-free countries such as Bermuda, the Bahamas, and the Cayman Islands even as they create jobs in the U.S.