Compare corporate tax rates in Italy, Spain, France, and Portugal with our simple and creative guide, and discover your company’s ideal tax destination.
Corporate income taxes play a crucial role in shaping a business’s financial strategy, and understanding the variations among different nations is vital for international companies and entrepreneurs. Our article will shed light on the statutory corporate income tax rates, highlighting potential implications for businesses operating or considering expansion in these countries.
By analyzing these figures, entrepreneurs, investors, and executives can gain invaluable insights into the taxation frameworks and make well-informed choices about their business operations. Gain a better understanding of the tax structures in Italy, Spain, France, and Portugal and how they may impact your bottom line.
Quick Facts
| Country | Corporate Tax Rate |
| Italy | 24% |
| Spain | 25% |
| France | 25% |
| Portugal | 21% |
Corporate Tax Rates in Italy
National Corporate Tax (IRES)
The corporate income tax in Italy is known as Imposta sul Reddito delle Società (IRES). It is imposed on the profits of companies operating within the country. Both resident and non-resident companies with a permanent establishment in Italy are liable to pay this tax. The IRES rate is applied to the taxable income, calculated as the difference between total revenues and deductible expenses.
Italy’s standard corporate tax rate is 24% for the year 2023. However, tax rates are subject to change, so it is essential to refer to the most recent tax regulations to confirm the current rate.
Notably, small and medium-sized enterprises (SMEs) often benefit from reduced tax rates, which can be as low as 15% on qualifying income. This provision encourages the growth of smaller businesses and fosters a vibrant entrepreneurial ecosystem.
Additionally, Italy offers incentives for companies engaging in research and development activities. These entities may be eligible for a reduced tax rate of 15% on income generated from intellectual property, motivating innovation and technological advancements.
Regional Tax On Production Activities (IRAP)
In addition to IRES, Italian companies are also subject to the regional tax on production activities called Imposta Regionale sulle Attività Produttive (IRAP). IRAP is a regional tax, and its rates may vary depending on the region where the company is located. The tax is imposed on the value-added generated by a business’s productive activities, excluding some specifically identified costs.
Corporate Tax Rate Exemptions
Certain types of income may be exempt from IRES, and the regulations can vary. For example, dividends received by resident companies from qualifying subsidiaries might be eligible for a participation exemption, meaning they are not subject to IRES. Additionally, income derived from certain qualifying intellectual property assets may be eligible for an IP box regime with reduced tax rates.
Similarly, exemptions and deductions are available for the regional tax on production activities (IRAP). Companies engaged in certain industries or activities may benefit from specific IRAP deductions or reduced rates to encourage economic development in those sectors.
What Companies Are Liable To Pay The Corporate Tax Rate In Italy?
- Resident Companies: Italian companies that have their legal and administrative headquarters, as well as their effective management, located in Italy are considered resident companies. They are subject to IRES on their worldwide income.
- Non-resident Companies: Non-resident companies that conduct business in Italy through a permanent establishment are liable to pay IRES. A permanent establishment can be a branch, office, factory, workshop, or other fixed place of business.
- Limited Liability Companies: Limited liability companies, known as S.r.l. (Società a responsabilità limitata), And Joint-Stock Companies, known as S.p.A. (Società per Azioni), are among the common types of entities that fall under the scope of IRES.
Corporate Tax Rates in Spain
Spain’s Corporate Income tax rate is a vital component of the country’s taxation framework, contributing significantly to the government’s revenue. This tax is levied on companies and is determined based on their net income generated during a business year.
The Standard Corporate Income Tax Rate
The standard Corporate Income Tax (CIT) rate stands at 25%, the prevailing rate for most companies operating in Spain. Companies with a turnover of less than EUR 10 million enjoy a slightly reduced rate of 23%, applicable as of 2023. This lower rate aims to support smaller businesses and encourage entrepreneurship.
Special Rates for Specific Activities
Specific industries and sectors are subject to special tax rates under the Spanish Corporate Tax system. For instance, banking, mining, and oil and gas companies are taxed at a higher rate of 30%. On the other hand, non-profit entities benefit from a favorable tax rate of 10%, acknowledging their social contributions.
Unique Taxation for Investment Funds and UCITS
Investment funds and undertakings for collective investment in transferable securities (UCITS) fall under a distinct tax category. These entities are subject to a significantly reduced tax rate of just 1%. This lower taxation encourages investments and supports the growth of the financial sector.
Minimum Tax for Large Entities
The Spanish tax system implements a minimum tax rule to ensure a fair contribution from larger companies. As of 2023, companies with a turnover exceeding EUR 15 million cannot avail of tax credits to reduce their current year’s tax below 15% of the tax base. This measure ensures that even the most profitable companies pay a reasonable tax.
Special Rate for Newly Created Companies
To foster the creation of new businesses and support their initial years of operation, Spain has introduced a special 15% tax rate. This reduced rate applies to newly established companies and is valid for their first tax period in which they generate profits and the following period.
Corporate Tax Rates in France
The corporate tax system in France plays a pivotal role in shaping the country’s economic landscape. Companies operating in the nation are subject to various tax rates based on their size and turnover.
Statutory Tax Rate
The statutory tax rate is at the heart of the French corporate tax system. As of the current regulations, the standard corporate tax rate is 25%. This rate applies to a broad spectrum of companies, providing the government with a steady stream of revenue.
Reduced Rate for SMEs
Recognizing the importance of small and medium-sized enterprises (SMEs) in the economy, France has implemented a reduced corporate tax rate of 15% for these entities. Companies must have a turnover below EUR 10 million to qualify for this beneficial rate.
Additionally, they should meet specific conditions outlined by the authorities. SMEs can enjoy a reduced rate on profits up to EUR 42,500. This threshold was increased from EUR 38,120, effective from 1 January 2023. Profits exceeding this limit are subject to the standard rate of 25%.
Unified Standard Rate for Large Enterprises
On the other end of the spectrum, large enterprises with an annual turnover of EUR 250 million or more face a unified standard corporate tax rate of 25%. This provision ensures that even sizable companies contribute their fair share to the country’s fiscal endeavors.
Social Contribution to Corporate Tax
Companies with a turnover exceeding EUR 10 million are liable to an additional social contribution on their corporate tax. This contribution is set at a rate of 3.3%. However, it is essential to note that this 3.3% is levied only on the portion of the aggregate corporate tax liability that surpasses EUR 763,000. By implementing this mechanism, France strives to balance business growth and social welfare.
Surtax Based on Statutory Tax
To promote responsible taxation practices among larger companies, France has put a surtax based on the statutory tax. Companies with turnovers exceeding EUR 10 million face an additional social contribution of 3.3% on the part of their corporate tax liability that exceeds EUR 763,000. This provision encourages businesses to manage their tax obligations responsibly and contribute positively to society.
Corporate Tax Rates in Portugal
Corporate Tax Rates In 2023
Portugal maintains its corporate tax rate at 21%, applicable to resident and non-resident companies. However, there are opportunities for certain entities to enjoy reduced rates, making it a tax system worth exploring for businesses of all sizes.
Supporting Growth with Reduced Rates for SMEs
For small and medium-sized enterprises (SMEs) with an annual turnover of up to €50 thousand, there is an attractive incentive in the form of a reduced corporate tax rate of 17%. This strategic move aims to foster the growth and development of SMEs, recognizing their pivotal role as drivers of the Portuguese economy. This reduced rate gives SMEs more financial breathing space to expand and innovate.
Madeira Island’s Attractive Corporate Tax Rate
Madeira Island, as a Portuguese Autonomous Region, has a distinct corporate tax rate of 14.7%. For SMEs with a turnover of up to €50 thousand, there is an even lower rate of 11.9%, further enhancing the island’s appeal as a business destination.
Companies incorporated in Madeira can also explore the Madeira International Business Center (MIBC) regime, which grants a desirable % corporate tax rate of just 5% under specific conditions. This enticing offer makes Madeira Island an alluring location for businesses seeking a competitive tax environment.
Which Country Corporate Tax System Is Best?
Understanding the taxation system can help businesses thrive. Italy boasts a competitive rate of 24%, encouraging investments. Spain follows closely at 25%, attracting foreign companies. France levies 28% yet provides substantial infrastructure benefits. Lastly, Portugal offers an inviting 21%, fostering business growth. So, which country is best? It depends on your business needs. If you seek affordability, Portugal may be your winner. For a mix of taxation and infrastructure, France might suit you.
In conclusion, while each country has perks, Portugal’s balanced taxation system and business-friendly environment make it an attractive destination for companies looking to thrive and grow. Remember, always consult with a tax expert to make an informed choice for your specific business needs.
