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In , the unweighted average worldwide statutory tax rate was Today, the average statutory rate stands at The weighted average statutory rate has remained higher than the simple average over this period. Prior to U. Figure 3 shows the significant impact the change in the U. The weighted average statutory corporate income tax rate has declined from Over time, more countries have shifted to taxing corporations at rates of or lower than 30 percent, with the United States following this trend with its tax changes at the end of The largest shift occurred between and , with 78 percent of countries imposing a statutory rate at or below 30 percent in and only 42 percent of countries imposing a statutory rate at or below 30 percent in All regions saw a net decline in average statutory rates between and The average declined the most in Europe, with the average of South America has seen the smallest decline, with the average only decreasing by 25 percent, from South America saw a period where the average statutory rate increased slightly at less than one percentage point, although the average rate decreased over the full year period.
Worldwide and regional average top statutory corporate tax rates have declined over recent decades, with most countries following the trend. Of jurisdictions around the world, only one has increased its top corporate income tax rate in , while nine countries have decreased their corporate tax rate.
The trend seems to be continuing, as several countries are planning to reduce their corporate tax rates in the coming years. The dataset compiled for this publication includes the statutory corporate income tax rates of sovereign states and dependent territories around the world. Tax rates were researched only for jurisdictions that are among the around sovereign states and dependent territories that have been assigned a country code by the International Organization for Standardization ISO.
In addition, the dataset includes historic statutory corporate income tax rates for the time period to However, these years cover tax rates of fewer than jurisdictions due to missing data points. Please let Tax Foundation know if you are aware of any sources for historic corporate tax rates that are not mentioned in this report, as we constantly strive to improve our datasets. To be able to calculate average statutory corporate income tax rates weighted by GDP, the dataset includes GDP data for jurisdictions.
When used to calculate average statutory corporate income tax rates, either weighted by GDP or unweighted, only these jurisdictions are included to ensure the comparability of the unweighted and weighted averages. The dataset captures standard top statutory corporate income tax rates levied on domestic businesses. This means:. Jurisdictions that are not part of either source were researched individually. Tax rates for the time frame between and are taken from a dataset compiled by the Tax Foundation over the last years.
GDP calculations are from the U. For , the dataset includes statutory corporate income tax rates of jurisdictions, but GDP data is available for only of these jurisdictions, reducing the number of jurisdictions included in calculated averages to For years prior to , the number of countries included in calculated averages varies by year due to missing corporate tax rates; that is, the average includes statutory corporate income tax rates of 74 jurisdictions, compared to jurisdictions in The Tax Foundation works hard to provide insightful tax policy analysis.
Our work depends on support from members of the public like you. Would you consider contributing to our work? We work hard to make our analysis as useful as possible. Would you consider telling us more about how we can do better? December 9, Elke Asen. Download PDF. Download Data: Rates.
Was this page helpful to you? Thank You! Let us know how we can better serve you! Give Us Feedback. The benchmark we use refers to the highest rate for Corporate Income. Revenues from the Corporate Tax Rate are an important source of income for the government of the United States. Compare Corporate Tax Rate by Country. Calendar Forecast Indicators News. More Indicators. Write for Us. Publish your articles and forecasts in our website.
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However, as with any aggressive approach to tax planning, there is always the possibility that the IRS eventually rejects it. A more cautious approach would be to set up a US C corporation. While it is not tax-free, it can still be quite tax efficient. A C corp must pay tax on the net income after all expenses. Since those expenses include the management fee that the owner pays to themselves, the actual taxable income could be rather small.
When you are just starting out, a tax-free LLC might be a good choice. For more cautious entrepreneurs or those with an established successful business, we recommend considering the C corp instead to mitigate any risk. Discuss your options with an experienced tax accountant.
It is based in Mexico and has no US office or sales agents. All sales are done over the phone or online. All marketing and procurement are managed online by the non-US citizen, who lives in Colombia. In this case, Amazon is not a dependent agent but an independent agent that has its own business with millions of other clients.
Amazon is not uniquely working for this foreign entrepreneur. Even though Amazon is not a dependent agent, the Amazon seller may still engage in a US trade or business. This means the seller may have to pay US income tax. Again, the tax code and courts have been vague if this qualifies as ETOB. To mitigate the risk, setting up a C corporation would be a safer approach. Previously single-member LLCs with foreign owners were not required to file.
In addition, foreign owners should be aware of the LLC tax implications in their local fiscal residence jurisdictions. For Americans there is no tax haven for LLCs. Still, an LLC offers an easy option to formalize business operations and create partnerships. Instead, all its income is passed through to the members of the LLC, who must declare it and pay personal income tax. With two or more partners, each owner reports the allocated portion of the profits on their personal tax return.
Also, note that an LLC may elect to be taxed as a corporation. In many cases, American taxpayers will also be required to pay self-employment tax in addition to income tax. To limit this self-employment tax liability and also offer the option to contribute more to a retirement plan, US taxpayers should consider an S Corp. Click here to learn more about our services and pricing. Photo by Lee Cannon.
Of course, certain rules apply to avoid LLC taxes. In general, not taxable are: Personal services performed from abroad Selling digital products Web design etc. Selling physical products if the shipping point is from outside of the US. Potential Risk of LLCs for Foreigners Be aware that applying this approach to Amazon selling uses a rather aggressive reading of the US tax code and does not come without risks.
He is experienced in individual and small business taxation, holistic financial planning, as well as pensions and investments. Prior to joining Online Taxman, he spent his early career working in financial services, creating needs based financial plans for individuals and built his own tax practice as a sole proprietor in the Chicagoland area.
John also spent time as a client finance manager at Accretive Health and was a financial consultant at Huron Consulting Group, consulting on litigation matters for Fortune companies. John started his expat life in Australia and subsequently lived in Spain, Argentina, and Colombia. He now calls Rio de Janeiro home. Some economic policies, such as stimulation of the economy through quantitative easing, may have some effects on US currency.
There are no restrictions, such as capital controls, on the remittance of profits abroad. However, this rate may be reduced under a tax treaty. Imports Are there any restrictions on the importation of commercial goods? General tariffs Like most other countries, the US governs the importation of goods through tariffs, quotas, duties and other similar taxes.
Generally, the importation of commercial goods and imports into the US is governed by a complex network of treaties, laws and regulations that exceed the scope of this article. However, several key features of this network are outlined below. The scope of the CBP includes:. Protecting US consumers from toxic or hazardous products. Monitoring foreign competition within certain industries and labour associated with such industries. Investigating the introduction of drugs and other illegal substances.
While most of US import law focuses on the importation of goods, the Tariff Act addresses imported services, and specifically unfair competition section The most common issues arising under section are patent violations, although the regulation covers any circumstance in which the president finds that unfair methods are used in the importation of a commercial good.
If a foreign operator is found to have used unfair competition, an investigation by the International Trade Commission is likely to follow. Trump tariffs The current presidential administration recently imposed significant tariffs on a wide range of goods. The majority of these tariffs have been placed on Chinese imports.
However, there have also been broad ranging tariffs on goods, such as steel, that have affected several trade partners. The potential for additional tariffs and impact of such tariffs is unknown. What import duties apply to commercial goods?
The HTS contains several thousand pages and is beyond the scope of this article. The HTS includes a tariff schedule for:. Live animals and animal products. Animal or vegetable fats and oils and their cleavage products, prepared edible fats, and animal or vegetable waxes. Prepared foodstuffs, beverages, spirits and vinegar, tobacco and manufactured tobacco substitutes.
Products of the chemical or allied industries. Plastics and articles of plastics, and rubber and rubber articles. Raw hides and skins, leather, furskins and articles of furskins, saddlery and harness. Travel goods, handbags and similar containers and articles of animal gut other than silkworm gut. Wood and articles of wood, wood charcoal, cork and articles of cork, manufacturers of straw, of esparto or of other plaiting materials, basket ware and wickerwork. Pulp of wood or of other fibrous cellulosic material, waste and scrap paper or paperboard, paper and paperboard and articles of these.
Footwear, headgear, umbrellas, sun umbrellas, walking sticks, seat-sticks, whips, riding-crops and parts of those, prepared feathers and articles made with feathers, artificial flowers and articles of human hair. Articles of stone, plaster, cement, asbestos, mica or similar materials, ceramic products, and glass and glassware. Natural or cultured pearls, precious or semi-precious stones, precious metals, metals clad with precious metal, articles made of such pearls and metals, imitation jewelry and coin.
Machinery and mechanical appliances, electrical equipment, parts of such appliances and equipment, sound recorders and reproducers, television image and sound recorders and reproducers, and parts and accessories of such articles. Vehicles, aircraft, vessels and associated transport equipment. Optical, photographic, cinematographic, measuring, checking, precision, medical or surgical instruments and apparatus, clocks and watches, musical instruments and parts and accessories of such instruments.
Arms and ammunition and parts and accessories of such arms and ammunition. Works of art, collectors' pieces and antiques. Are the safety regulations and standards applicable to commercial goods in your jurisdiction compatible with other standards that are recognised internationally? Generally, the US has high safety standards for the importation of commercial goods and services when compared to other countries.
To comply with such standards, commercial importers must be aware of the relevant regulations governing the following steps of the importation process:. Entry of commercial goods. Right to import commercial goods into the US.
Examination of the goods and required entry documents. Packing the goods and avoiding commingling goods. Country of origin marking and special marking requirements. More information is available at: www. Are there any similar or equivalent restrictions on providing services into another jurisdiction? The regulation of professions in the US is a state government issue and is largely affected by occupational licenses and the regulation of specific industries. Structuring and tax How is foreign investment into your jurisdiction typically structured?
What forms of legal vehicle are attractive to foreign investors? There are several different ways to structure foreign investment in the US. Investment structures vary greatly depending on the type of investment for example, real property, publicly traded stock, oil and gas, and so on , desired returns and tax concerns. Direct investment personally in a US partnership or corporation "naked" investment. Investment in a US partnership or corporation through a foreign corporation foreign blocker.
Investment in a US entity through a wholly-owned US corporation domestic blocker. The tax efficiencies of these structures vary greatly depending on the type of investor individual, trust or business entity and the country of residence of the foreign investor. Tax treaty planning is an essential element for structuring any foreign investment. The US is party to tax treaties with a number of countries which provide for reduced rates in certain circumstances. Any foreign person seeking to invest in the US should always consult a tax advisor with international tax expertise to determine the most tax efficient structure based on the particular facts and circumstances.
What are the circumstances under which a business becomes liable to pay tax in your jurisdiction? A foreign corporation is subject to US tax if it is engaged in a trade or business in the US, whether or not it receives US source income from that trade or business, and whether or not income from such trade or business is exempt from US tax under a tax treaty.
Whether a foreign corporation is engaged in a US trade or business depends on the facts and circumstances of each particular case. The determination is based on the nature and extent of the corporation's economic activities in the US either directly or through an agent, partnership, trust or estate.
Generally, a person is engaged in a US trade or business if those activities are "considerable, continuous, and regular". The mere solicitation of sales by independent contractors, absent any other US activity, is generally not considered to meet the definition of active trade or business. If the foreign business is from a country that signed a tax treaty with the US, there are more favourable rules that apply to the determination of whether income is sourced in the US.
The key test for foreign entities doing business in the US is whether or not the foreign entity's activities and presence amounts to a permanent establishment, as defined in the relevant tax treaty. Entities that have a permanent establishment in the US must pay US tax on all business profits attributed to the permanent establishment.
Most US tax treaties have very similar definitions of permanent establishment PE and typically define PE using the following two general tests:. Whether the corporation has a fixed place of business within the target country, as defined under the language of the specific treaty. Whether the corporation operates in the target country through a dependent agent that habitually exercises the authority to conclude contracts on behalf of the corporation in the target country.
Although many US tax treaties use a similar definition, each treaty should always be examined for exceptions or differences. There are a number of activities that are considered as engaging in a US trade or business under the Federal Tax Code but would not be attributable to a permanent establishment under a tax treaty. Texas taxation Texas franchise tax. A foreign business may be subject to the Texas franchise tax if it is doing business in Texas.
The franchise tax applies to taxable entities that conduct specific activities, including:. Performance of a contract in Texas, regardless of whether the taxable entity brings its own employees into the state, hires local labour or sub-contracts. Delivering items an entity has sold into Texas. Having employees or representatives in Texas carrying on the business of the taxable entity.
Federal enclaves that is, doing business in any area within Texas that is leased or owned, ceded to, or under the control of the federal government. Acting as a general partner in a partnership. Maintaining a place of business in Texas. Assembling, processing, manufacturing or storing goods in Texas. Holding, acquiring, leasing or disposing of any property located in Texas.
Sending materials to Texas to be stored awaiting orders for their shipment. Solicitation: having employees, independent contractors, agents or other representatives in Texas, regardless of whether they reside in Texas, to promote or induce sales of the foreign taxable entity's goods or services.
Texas sales and use tax. A business may also be required to collect sales and use tax on sales made to Texas residents. Under the Rule, an entity is engaged in business in Texas if it satisfies any of the conditions included in the following non-exhaustive list:. Maintains, occupies, or uses, permanently or temporarily, directly or indirectly, or through an agent, by whatever name called, a kiosk, office, place of distribution, sales or sample room, warehouse or storage place, or other place where business is conducted.
Has any representative, agent, salesperson, canvasser or solicitor who operates in Texas under the authority of the seller to conduct business, including selling, delivering or taking orders for taxable items. Promotes a flea market, arts and crafts show, trade day, festival or other event that involves the sale of taxable items.
Uses independent salespersons in direct sales of taxable items. Derives receipts from a rental or lease of tangible personal property that is located in Texas, or owns or uses tangible personal property that is located in Texas, including a computer server or software. Allows a franchisee or licensee to operate under its trade name, provided that the franchisee or licensee is required to collect Texas sales and use tax.
Conducts business in Texas through employees, agents or independent contractors. The state has issued guidance interpreting the factors taken into account to determine whether an entity conducts business in Texas. The law regarding the ability for a state to impose a requirement to collect sales tax on a non-state entity was recently changed based on a Supreme Court Decision. Physical presence requirement Prior law.
The US Supreme Court had established that a seller that has no physical presence in a state is not required to collect sales and use tax on sales to in-state customers Quill v North Dakota US However, a state could require a non-state seller to collect use tax on the sale of property intended for use within the state if the seller acts through local representatives to establish and maintain a market in the taxing state.
It is immaterial whether these representatives are the seller's employees or are acting as independent contractors Scripto, Inc v Carson, US Wayfair decision. States will now be permitted to pass or have upheld laws that require the collection of sales tax from an out-of-state seller that has no physical presence in the state but only an economic presence based on volume of sales to customers within the state.
Impact on foreign sellers. The recent Wayfair decision may require sellers that are out of the country that make significant sales to one or more US states to collect sales tax even though they had previously not been required to collect. What are the main business tax rates? Federal taxation US C corporations are taxed on their profits at two levels:. The corporate level. A tax on corporate profits is paid annually by the corporation when profits arise. The owner level. A tax on dividends is paid by shareholders when a dividend distribution is made.
A branch of a foreign corporation can also be subject to tax through the branch profits tax. The US branch will be subject to the same tax on corporate profits as a US C corporation on its net income that is effectively connected with the US. The branch will also be subject to an annual branch profits tax on any net income that is repatriated to the foreign country or is not invested in qualifying US assets.
Foreign investors may choose to invest through a "pass-through" entity, which carried only one level of taxation. Foreign investors are taxed on pass-through income differently based on which type of income is passed through:. Note that the pass-through entity must withhold income tax on pass-through income to foreign investors. The foreign investors will be required to file a tax return to report the income.
Generally, the amount withheld is greater than the actual tax liability. State taxation The Texas franchise tax see Question 20, Texas taxation : Texas franchise tax applies on the total revenue apportioned to the state, as determined by the entity's federal income tax return, less the greater of the following:. Cost of goods sold. The tax rate of 0.
What is the tax treatment in your jurisdiction of profits from an investee company remitted outside your jurisdiction by an investor? Transfer pricing The Internal Revenue Service IRS can make transfer pricing adjustments in transactions between commonly controlled entities if the price set by the parties is not at arm's-length.
The rules apply to organisations that are owned or controlled, either directly or indirectly, by the same interests. For example, the IRS can make transfer pricing adjustments between a foreign investor and its wholly owned domestic corporation.
The IRS is authorised to allocate income, deductions and other tax items between commonly owned or commonly controlled organisations as necessary to prevent tax evasion or to clearly reflect the parties' income. In the case of a transfer or licence of intangible property, the income from the transfer must be "commensurate with the income attributable to the intangible property". Transfer pricing rules therefore generally attempt to identify the respective amounts of taxable income of the related parties that would have resulted if the parties had been unrelated parties dealing at arm's-length.
Earning stripping rules Interest expense limitation. Interest incurred in a trade or business is generally fully deductible for businesses with gross receipts under USD25 million. Base erosion and anti-avoidance tax BEAT. One such significant change was the introduction of BEAT. In an effort to prevent companies from reducing their US tax liability by stripping earnings from the US, the TCJA established a minimum tax on payments to foreign related parties. Foreign investors investing in the US through C corporations subject to the BEAT that have significant affiliate payments may see their overall tax liability increase.
Incentives What tax incentive or other schemes exist to encourage foreign investment? The federal government does not offer any formal tax incentive schemes for foreign investors. However, states and local municipalities often offer tax incentives for businesses to locate in their jurisdiction on a case-by-case basis.
Texas has a reputation for working with international businesses to help them relocate or start a new branch in the US. Investment guarantees What is your government's track record in this regard? Foreign investors seeking to invest in the US must comply with extensive and complex international laws to be protected by US laws.
Before investing in the US, it is imperative that foreign investors consult competent legal counsel. Foreign investors should be familiar with the key following areas:. Anti-money laundering and bribery laws. In certain circumstances, the US government has rights to expropriate the private property of individuals, regardless of citizenship. Generally, expropriation by the government must comply with international law standards, that is, the expropriation must be:. For a public purpose. Conducted in a non-discriminatory manner.
Subject to the payment of prompt, adequate and effective compensation. Expropriation is not limited to the taking of physical property. There is a large number of circumstances in which an investor can be deprived of the economic value of its investment. The US legal system has a strong record for protecting and enforcing the rights of foreign investors, provided that they comply with all relevant laws. Regardless of where they choose to invest, foreign investors should be aware of bilateral investment treaties BITs and the legal protections afforded by them.
BITs usually grant the following benefits to foreign investors:. Favourable treatment comparable to that of local competitors and other foreign companies most favoured nation treatment. Limits on the expropriation of investments. Guarantee of market rates of exchange for the transfer of funds. Rights associated with fair dispute settlement. Are there any issues in relation to the enforcement of intellectual property rights? US patent law applies to all inventors, regardless of citizenship. One difference concerns the enforcement of patent violations.
Under the Tariff Act of , the International Trade Commission is responsible for the investigation of patent infringement claims involving imported products, whereas the federal government is responsible for domestic patent litigation. US copyright law protects original works of authorship, and gives the producer of such work the exclusive right to sell, license or reproduce the work.
Unlike in most other countries, it is not necessary to register trade marks as US trade mark law protects trade marks that are created through use and at common law. However, developers are encouraged to register their trade mark, as certain protections are only available for registered trade marks. Unless the foreign investor has committed any acts that would draw the suspicion of any US governmental body, the investor can be confident that the US will enforce all laws relating to anti-money laundering and bribery, anti-trust and other relevant laws in a non-discriminatory manner.
Foreign investors are also protected by many bilateral investment treaties BITs see Question 26 and many issues will be dealt with fairly and equitably for example, the delay of a judgement in favour of a foreign investor, compliance and payment of any costs associated with such judgement. Recent developments and proposals for reform Have there been any significant recent or proposed legal developments affecting investors?
This law generally entered into effect on 1 January Although personal exemptions for individuals are eliminated, standard deductions are doubled. The standard deduction is now USD12, for individual taxpayers and USD24, for married couples filing joint returns. The TCJA also limits the amount of property taxes and state and local income taxes that can be deducted to USD10, for all state and local taxes combined.
The TCJA slashed other deductions, such as:. Portfolio expenses such as investment manager fees. Interest deductions for mortgage debt incurred in or later. As with the individual tax rate changes, the TCJA's lower corporate rates are paired with limitations on business deductions. The TCJA disallows business entertainment expenses completely but does not change the meals deduction. Another significant change is the new limitation on interest expense deductions.
Prior law allowed for a full deduction of interest payments. Some analysts have projected that this change may raise tax collections after and increase the cost of borrowing by highly leveraged businesses. Notably, preferred equity returns do not appear to be treated as interest for purposes of this limitation.
Therefore, deductibility of preferred return payments may not be restricted. The TCJA significantly expands immediate expensing under Code Section which allows businesses to deduct the full price of equipment in the year the equipment was purchased and bonus depreciation for depreciable personal property such as medical equipment.
Qualified depreciable personal property placed in service after 2 September , and prior to 1 January , may be fully expensed. Bonus depreciation also is expanded to apply to purchases of used equipment. These changes will likely encourage the purchase of equipment qualifying for the Code Section deduction or bonus depreciation. The pass-through deduction has more limitations for those businesses that are considered "specified service businesses," which include the provision of services as a physician, lawyer, accountant, and any trade or business where the principal asset of such trade or business is the reputation or skill of one or more of its employees or owners.
The pass-through deduction for specified service businesses is subject to phase out and is eliminated for taxpayers with taxable income in excess of USD, USD, if married. The deduction for all other businesses, such as ownership of a laboratory, is subject to limitations based upon the amount of W-2 wages the entity pays and the amount of capital invested by the entity.
Tax planning to maximise the pass-through deduction is a must. The lower corporate tax rate might encourage a business to restructure as a C corporation from a pass-through entity. However, foreign investors should be aware of potential withholding issues and seek US counsel when structuring investments and determining how to remit payments out of the US.
For details of the changes to tariffs, see Question These information sharing treaties require foreign banks to give US taxing authority information on US persons that have accounts with those banks among other provisions.