Corporate Income Tax

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Corporate Income Tax

Most countries in the world have some form of Corporate Income Tax (“CIT”). CIT systems differ per country, even within the EU. A CIT is a tax levied on the net profits (gross income minus allowable tax reliefs) of enterprises. It usually also covers taxes levied on the capital gains of companies. The profits made by businesses which are run by natural persons and “transparent” entities (for example in many countries: partnerships) are normally not taxed with CIT. Instead, the natural person himself or the partners to such transparent entity are taxed: either with income tax (if they are private individuals) or – in case of a transparent entity - with CIT (if the partners are corporate bodies).

What companies are subject to CIT depends on the national law of the country in question. Usually, companies subject to CIT are entities which have a legal personality and which are incorporated and/or organized under the corporate or company laws of the country in question. Often, and usually subject to conditions, also companies originating from other jurisdictions are subject to CIT. However, this depends very much on the CIT system which is operated. For instance, countries apply different approaches to taxing the income of corporate bodies: they may tax all income originating from their country of (all national and foreign) companies or they may tax all (worldwide) income of (only the) companies located, resident or native in their country. Some countries apply a mixture of these methods. Sometimes this causes double or non-taxation.

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Page contributors

Bertjan Janzen
Tax Partner
Tim Kok
Senior Manager Indirect Taxes
Ad van Doesum
VAT Adviser / Professor
PwC / Universiteit Maastricht

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