7 Types of Corporate Tax You Need to Know in 2021
Corporate tax is a complex and dynamic topic that affects businesses of all sizes and sectors. In this article, we will explain what corporate tax is, how it works, and what are the main types of corporate tax that you need to be aware of in 2021.
What is Corporate Tax?
Corporate tax is the tax that a company pays on its profits or income. It is also known as corporation tax, income tax, or profit tax. Corporate tax is levied by the government of the country where the company is registered or operates.
How Does Corporate Tax Work?
Corporate tax is calculated based on the taxable income of the company, which is the difference between its revenues and its allowable expenses. The taxable income may vary depending on the accounting standards, tax laws, and deductions that apply to the company.
The corporate tax rate is the percentage of the taxable income that the company has to pay as tax. The corporate tax rate may vary depending on the country, the type of business, and the level of income. Some countries have a flat corporate tax rate for all companies, while others have a progressive or regressive system that changes according to the income brackets.
The corporate tax liability is the amount of tax that the company has to pay after applying any credits, exemptions, or incentives that may reduce its tax burden. The corporate tax liability may also depend on the tax treaties or agreements that the country has with other countries to avoid double taxation or to promote trade and investment.
What are the Types of Corporate Tax?
There are many types of corporate tax that a company may have to pay depending on its activities, location, and structure. Here are some of the most common types of corporate tax that you need to know in 2021:
– Income Tax: This is the main type of corporate tax that applies to the profits or income of the company. It is usually paid annually or quarterly based on the financial statements or returns of the company.
– Capital Gains Tax: This is the type of corporate tax that applies to the profits or gains that the company makes from selling or disposing of its assets, such as property, shares, or intellectual property. It is usually paid when the transaction occurs or when the gain is realized.
– Withholding Tax: This is the type of corporate tax that applies to the payments that the company makes to its shareholders, creditors, suppliers, or employees who are not residents of the country where the company operates. It is usually deducted at source by the payer and remitted to the tax authorities.
– Value Added Tax (VAT): This is the type of corporate tax that applies to the value added by the company to its goods or services at each stage of production or distribution. It is usually charged on the final price of the goods or services and collected by the seller from the buyer.
– Sales Tax: This is the type of corporate tax that applies to the sales or transactions of certain goods or services within a specific jurisdiction. It is usually charged on top of the price of the goods or services and collected by the seller from the buyer.
– Excise Tax: This is the type of corporate tax that applies to the production, consumption, or importation of certain goods or services that are considered harmful, luxury, or environmentally unfriendly. It is usually charged on a specific quantity or unit of measure and collected by the producer, importer, or seller.
– Property Tax: This is the type of corporate tax that applies to the ownership, possession, or use of real estate or land by the company. It is usually based on the assessed value or market value of the property and paid annually or periodically.
These are some of the types of corporate tax that you need to know in 2021. However, there may be other types of corporate tax that apply to your specific situation or industry. Therefore, it is advisable to consult a professional accountant or tax advisor before filing your corporate tax returns.
Types of Corporate Tax and Their Impact on Global Demand
Corporate Income Tax
Corporate income tax is a tax on the profits of a corporation. The tax rate and the definition of taxable income vary by jurisdiction. In the United States, the federal corporate income tax rate is 21%, but state and local taxes may also apply. Some countries have a territorial tax system, which means they only tax income derived within their borders, while others have a worldwide tax system, which means they tax income earned anywhere in the world by their resident corporations.
The corporate income tax can affect the global demand for products and services offered by corporations. For example, if a country has a high corporate income tax rate, it may discourage foreign investment and reduce the competitiveness of its domestic corporations in the global market. On the other hand, if a country has a low corporate income tax rate, it may attract foreign investment and increase the competitiveness of its domestic corporations in the global market. However, other factors, such as the quality of infrastructure, labor force, legal system, and market size, may also influence the global demand for products and services offered by corporations.
Other Types of Corporate Tax
Besides corporate income tax, there are other types of taxes that corporations may have to pay depending on their activities and jurisdictions. Some examples are:
– Sales tax: A tax on the sale of goods and services. The tax rate and the scope of taxable items vary by jurisdiction. Some jurisdictions exempt certain items, such as food, medicine, or clothing, from sales tax.
– Excise tax: A tax on the production or consumption of specific goods or services, such as alcohol, tobacco, gasoline, or air travel. The tax rate and the base of taxable items vary by jurisdiction. Some jurisdictions use excise taxes to discourage the consumption of harmful or socially undesirable goods or services.
– Property tax: A tax on the ownership or use of real estate or personal property. The tax rate and the valuation method vary by jurisdiction. Some jurisdictions offer exemptions or reductions for certain types of property, such as residential property, agricultural property, or historical property.
– Payroll tax: A tax on the wages and salaries paid by employers to their employees. The tax rate and the base of taxable income vary by jurisdiction. Some jurisdictions use payroll taxes to fund social security, health care, unemployment insurance, or other public benefits for workers.
These types of corporate taxes can also affect the global demand for products and services offered by corporations. For example, if a country has high sales or excise taxes, it may increase the prices of goods and services and reduce the purchasing power of consumers in that country. On the other hand, if a country has low sales or excise taxes, it may decrease the prices of goods and services and increase the purchasing power of consumers in that country. However, other factors, such as the quality, availability, and preferences of goods and services, may also influence the global demand for products and services offered by corporations.
References:
https://www.nalog.ru/html/sites/www.eng.nalog.ru/Tax%20Code%20Part%20Two.pdf
https://cbo.gov/sites/default/files/cbofiles/ftpdocs/75xx/doc7503/2006-09.pdf
https://en.wikipedia.org/wiki/Corporate_tax
https://en.wikipedia.org/wiki/Corporate_tax_in_the_United_States
https://www.investopedia.com/terms/c/corporatetax.asp
https://smallbusiness.chron.com/types-business-taxes-17187.html
https://www.investopedia.com/terms/c/corporatetax.asp
https://www.oecd.org/tax/tax-policy/corporate-tax-statistics-database.htm
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