Corporation taxes in the European Union: Slowly moving toward comprehensive business income taxation?

Ta
b
le
2
European
Union:
corporation
tax
es
(CTs)
and
personal
income
tax
es
(PTs)
o
n
corporate
source
income
in
2017
Member
State
Equity
income
(profits,
di
vidends,
capital
gains)
Debt
income
(interest)
CT
rate
a
PT
on
di
vidends
CT
+
PT
c
(T
op)
PT
on
capital
gains
d
PT
on
interest
D
ebt/equity
ratio
Included
in
g
lobal
income
[(top)
PT
rates]
(T
op)
PT
rate
or
WHT
b
Included
in
global
income
(T
op)
PT
rate
or
WHT
b
T
a
xing
p
rofits
(1)
C
lassical
system
Denmark
2
2
Y
es
(27/42)
27
43.1/44.8
27/42
Y
es
2
2
4
:1
France
e
34.4
Y
es
(50.23;
ex
40)
21
54.2
1
6
Y
es
24
–
Ireland
12.5
Y
es
(51)
20
57.1
3
3
Y
es
20
–
UK
20
Y
es
(7.5,32.5,38.1;
ex
£5000)
–
26–50.5
2
0
Y
es
–
W
orld
cap
(2)
Imputation
system
Malta
35
Y
es
b
ut
full
tc
35
35
–
N
o
15*
–
T
a
xing
capital
income
(1)
D
ual
income
tax
(DIT)
Finland
2
0
N
o
(30/34;
ex
15)
25.5
44/47.2
30/34
No
30*
25%
EBITD
A
Spain
25
No
(19–23)
19–23
39.2–42.2
19–23
No
19–23
30%
EBITD
A
Sweden
2
2
N
o
(30)
–
45.4
3
0
N
o
–
—
123

---

818
S. Cnossen
Ta
b
le
2
continued
Member
State
Equity
income
(profits,
di
vidends,
capital
gains)
Debt
income
(interest)
CT
rate
a
PT
on
di
vidends
CT
+
PT
c
(T
op)
PT
on
capital
gains
d
PT
on
interest
D
ebt/equity
ratio
Included
in
g
lobal
income
[(top)
PT
rates]
(T
op)
PT
rate
or
WHT
b
Included
in
global
income
(T
op)
PT
rate
or
WHT
b
(2)
C
omprehensi
v
e
b
u
siness
income
tax
(CBIT)
Austria
2
5
N
o
27.5*
45.6
27.5*
No
27.5*
–
Bulgaria
10
No
5*
14.5
–
No
–
3
:1
Croatia
20
No
14.2
31.4
14.2
N
o
–
4:1
Czech
Republic
19
No
15*
31.1
–
No
15*
4:1
German
y
30.18
No
26.4*
48.6
47.5
N
o
26.4*
30%
EBITD
A
Greece
29
No
10*
36.1
1
5
N
o
15*
30%
EBITD
A
Hungary
20.6
N
o
15*
31.5
1
5
N
o
15*
3:1
Latvia
15
No
10*
23.5
1
5
N
o
10*
4:1
Lithuania
1
5
N
o
15*
27.7
1
5
N
o
15*
4:1
Lux
embour
g
29.22
No
(e
x
50)
15*
36.7
–
No
10*
85:15
Poland
1
9
N
o
19*
34.4
1
9
N
o
19*
1:1
Portugal
29.5
N
o
28*
49.2
2
8
N
o
28*
40%
EBIT
Romania
1
6
N
o
5
*
20.2
16*
No
16*
3:1
Slo
v
akia
22
No
–
2
2
19/25
No
19*
25%
EBITD
A
Slo
v
enia
1
7
N
o
25*
37.7
2
5
N
o
25*
4:1
T
a
xing
economic
re
nts
Allo
w
ance
for
corporate
equity
(A
CE)
f
Belgium
33.99
No
27
51.8
0
.4
No
27
5:1
123

---

Corporation taxes in the European Union: Slowly moving…
819
Ta
b
le
2
continued
Member
State
Equity
income
(profits,
di
vidends,
capital
gains)
Debt
income
(interest)
CT
rate
a
PT
on
di
vidends
CT
+
PT
c
(T
op)
PT
on
capital
gains
d
PT
on
interest
D
ebt/equity
ratio
Included
in
g
lobal
income
[(top)
PT
rates]
(T
op)
PT
rate
or
WHT
b
Included
in
global
income
(T
op)
PT
rate
or
WHT
b
Cyprus
g
12.5
N
o
17*
27.4
–
No
30*
–
Italy
31.4
N
o
26*
49.2
26*
No
26*
30%
EBITD
A
No
CT
or
PT
Estonia
–
Y
es
(20)
20
20
20
No
20*
–
Netherlands
25
No
15
25
–
N
o
–
–
Sour
ce
:
A
uthor’
s
compilation
from
European
Commission
(
2016b
)a
n
d
Ernst
&
Y
oung
(
2017a
,
b
).
Data
are
from
secondary
sources
and
m
ay
not
al
w
ays
be
accurate
or
complete.
All
rates
are
in
%
;
W
HT
=
withholding
tax;
an
asterisk
(*)
means
that
the
tax
is
final;
“e
x”
means
ex
empt;
EBITD
A
stands
for
earnings
before
interest,
tax,
depreciation
and
amortization;
tc
=
tax
credit
a
CT
rates
include
(1)
surtax
es
in
Greece
(6%)
and
P
ortugal
(1.5%;
7
%);
(2)
surchar
g
es
in
Belgium
(3%),
France
(3.3%
for
lar
ge
companies),
German
y
(0.82
5%)
and
Lux
embour
g
(7%);
(3)
local
tax
es
in
Croatia
(18%
city
surchar
g
e
for
Zagreb),
Finland
(19.8
+
1.43%),
(German
y
;
ef
fecti
v
ely
14.35%
for
B
erlin),
Hungary
(2%),
Lux
embour
g
(6.75%
for
L
ux
embour
g
C
ity)
and
Italy
(3.9%
IRAP).
L
o
w
er
or
graduated
CT
rates
apply
to
lo
w
er
amounts
o
f
p
rofits
o
r
to
small
b
u
sinesses
in
B
elgium,
Franc
e,
Hungary
,
Latvia,
Lithuania,
the
N
etherlands,
P
ortugal,
Romania,
Slo
v
enia
and
Spain.
M
inimum
tax
es
are
le
v
ied
in
Austria
(creditable
against
the
fi
nal
C
T),
H
u
ngary
and
Lux
embour
g
b
The
fi
nal
P
T
w
ithholding
tax
is
optional
in
A
ustria,
German
y
and
Portugal
c
Calculated
as
CT
+
PT(1
−
CT),
in
which
PT
is
the
fi
nal
w
ithholding
tax
or
the
top
PT
rate.
Further
,
the
assumption
is
that
p
rofits
are
distrib
u
ted
in
the
y
ear
in
which
the
y
are
m
ade
d
PT
rates
sho
w
n
are
for
long-term
capital
gains
o
n
shares
sold
o
n
n
ational
stock
ex
changes.
In
the
C
zech
Republic
and
S
lo
v
enia,
a
(v
anishing)
capital
ga
ins
tax
applies
to
shares
held
more
than
5
y
ears.
Se
v
eral
M
ember
S
tates
tax
short-term
(speculati
v
e)
g
ains
o
n
shares
h
eld
less
than
1
year
as
b
u
siness
income
or
at
higher
(ef
fecti
v
e)
P
T
rates.
V
arious
Member
States
ex
empt
small
amounts
o
f
capital
gains
o
r
tax
them
at
a
lo
w
er
rate.
Generally
,
capital
gains
are
not
adjusted
for
inflation.
In
addi
tion,
indi
vidual
net
wealth
tax
es
are
le
v
ied
in
France
(0.5–1.5%)
and
the
N
etherlands
(1.2%;
called
presumpti
v
e
income
tax).
In
Lux
embour
g,
corporations
are
subject
to
a
0.5%
net
w
ealth
tax
e
In
France,
rates
ha
v
e
to
be
increased
by
15.5%
social
contrib
u
tions
f
In
Belgium
and
Italy
,
taxable
profits
are
reduced
by
an
allo
w
ance
for
corporate
equity
(A
CE)
o
f
1
.131%
(1.631%
for
S
MEs)
and
5
.4%
(ne
w
equity
only),
resp
ecti
v
ely
.
In
Cyprus,
the
A
C
E
equals
the
y
ield
on
10-year
go
v
ernment
bonds
plus
3%.
P
ortugal
h
as
a
5
%
A
CE
for
m
icroenterprises
and
S
MEs
g
In
Cyprus,
the
di
vidend
tax
of
17%
is
called
defense
contrib
u
tion,
which
is
also
le
v
ied
at
the
rate
of
30%
on
interest
and
ro
yalties
123

---

820
S. Cnossen
effective rates on interest (final withholding tax). Also, the withholding taxes may not
apply to returns paid on shares and bonds held abroad, which are usually the subject
of double tax treaties and EU directives.
Clearly, most Member States appear to have a preference for source taxation of
capital income. Exceptionally, Slovakia, Sweden and the UK do not impose a with-
holding tax on dividends, while Bulgaria, the Czech Republic, Cyprus, Malta and the
Netherlands do not tax capital gains. Interest is not subject to withholding in Bul-
garia, the Netherlands, Sweden and the UK. Seven Member States do not restrict the
deductibility of interest through a debt/equity ratio or EBITDA percentage (but may
apply other restrictions on interest deductibility). In sum, not all Member States tax
corporate source income comprehensively at the level of the corporation.