Corporate Income Tax

Companies pay corporate income tax on their taxable profit, which is broadly revenue minus allowable expenses. Most countries set a headline corporate tax rate, and some also have regional or local taxes on company profits.

For example, under a hypothetical 25% corporate tax rate, a company with taxable profit of 4 million would owe 1 million in tax.

Taxable profit often differs from the profit reported in a company's financial statements. Tax rules may allow faster depreciation, deny deductions for certain expenses or treat some income differently. These differences explain why a company's effective tax rate can differ from the headline rate.

Corporate tax rates vary widely between countries, and multinational companies may operate in many tax systems at once. This creates opportunities and incentives to locate profits in lower-tax countries, which has led to international efforts to set minimum tax levels and tighten rules on profit shifting.

Corporate income tax is a significant source of government revenue. Its design affects investment decisions, where companies choose to operate and how they finance themselves, since interest is often deductible while dividends are not.