Corporate income tax is a tax on the profit a company earns. Almost every country has one, and the rate a company pays is one of the largest inputs into where businesses choose to set up, hire and book revenue.
How taxable profit is calculated
The starting point is accounting profit, then adjustments are made under tax law:
| Step | Example (USD) |
|---|---|
| Revenue | 1,000,000 |
| Less cost of goods sold | (350,000) |
| Less operating expenses (salaries, rent, software) | (400,000) |
| Accounting profit | 250,000 |
| Add back non-deductible items (fines, 50% of meals) | 5,000 |
| Less tax depreciation in excess of book depreciation | (30,000) |
| Less loss carryforward from prior years | (25,000) |
| Taxable profit | 200,000 |
| Federal tax at 21% | 42,000 |
In this example the effective federal rate on accounting profit is 16.8%, below the 21% statutory rate.
Statutory vs. effective rates
The statutory rate is what the law says. The effective rate is what companies actually pay. The gap comes from:
- Depreciation rules: Immediate expensing (like the US's permanent 100% bonus depreciation from 2025) moves deductions forward.
- Credits: R&D credits, investment credits and green energy credits reduce tax dollar for dollar.
- Loss carryforwards: Prior losses offset current profit. The US allows indefinite carryforward limited to 80% of taxable income.
- Preferential regimes: Patent boxes, small-business rates and special zones.
Our country calculators use the statutory rate so you can compare like with like, then show you the breakdown.
Layers of corporate tax
Many countries tax company profit at more than one level of government:
- United States: 21% federal plus 0% to 11.5% state, so combined rates run from 21% to about 30%. See state business taxes.
- Germany: 15% federal plus 5.5% solidarity surcharge plus municipal trade tax averaging about 14%, for roughly 30% combined.
- Canada: 15% federal general rate plus 8% to 16% provincial.
- Switzerland: 8.5% federal on profit after tax plus cantonal and communal tax, combining to roughly 11.9% to 21%.
Corporate tax rates around the world (2026)
| Rate band | Examples |
|---|---|
| 0% | Cayman Islands, Bahamas, Bermuda (outside Pillar Two scope) |
| 9% to 12.5% | Hungary 9%, UAE 9%, Bulgaria 10%, Montenegro up to 15%, Ireland 12.5% |
| 15% to 20% | Cyprus 15%, Singapore 17%, Hong Kong 16.5%, Poland 19%, UK 19% small profits rate |
| 21% to 25% | United States 21% federal, Netherlands 25.8%, United Kingdom 25% main rate |
| 25% to 30% | Germany ~30%, Australia 30%, Japan ~30% |
| Above 30% | France 36.13% with surcharges for the largest companies, Brazil 34%, Colombia 35% |
Browse every country by region: Europe, Asia, Africa, North America, South America, Oceania.
The global minimum tax
The OECD's Pillar Two rules impose a 15% minimum effective rate on multinational groups with consolidated revenue of €750 million or more. More than 50 jurisdictions have implemented an income inclusion rule or a qualified domestic minimum top-up tax. In January 2026 the OECD Inclusive Framework agreed a "side-by-side" package that largely exempts US-parented groups from the undertaxed profits rule in recognition of US minimum tax rules. Below the €750 million threshold, the headline rate still governs.
Taxes that look like corporate tax but aren't
- Gross receipts taxes apply to revenue, not profit. Examples: Washington B&O tax, Ohio CAT, Delaware gross receipts tax, Nevada Commerce Tax.
- Franchise taxes are charged for the privilege of doing business, sometimes based on capital or margin. Texas's franchise tax is effectively a 0.75% tax on margin.
- Withholding taxes apply when profit leaves a country as dividends, interest or royalties, often reduced by tax treaties.
Next steps
- Read the Tax Guide for Founders for entity and equity planning.
- Compare entity types: Corporation, LLC, Partnership, Sole Proprietor.
- Run the numbers for any country with our calculators.
Frequently Asked Questions
What is the difference between the statutory and effective corporate tax rate?
The statutory rate is the headline rate written in law, such as 21% in the US. The effective rate is the tax actually paid divided by accounting profit. Deductions, credits, depreciation rules and loss carryforwards usually push the effective rate below the statutory rate.
Is corporate tax charged on revenue or profit?
Corporate income tax is charged on taxable profit: revenue minus deductible expenses. Some jurisdictions also levy taxes on gross receipts, such as Washington's B&O tax, Ohio's Commercial Activity Tax and Nevada's Commerce Tax, which apply even when a company makes a loss.
What is the average corporate tax rate in the world?
The Tax Foundation's 2025 survey put the worldwide average statutory rate, weighted by GDP, at about 25%, and the unweighted average across roughly 180 jurisdictions at around 23%. OECD countries average about 24%.
Do LLCs pay corporate tax?
A US LLC with default classification does not pay federal corporate income tax; its profit flows through to the owners' personal returns. An LLC can elect to be taxed as a C corporation or S corporation by filing IRS Form 8832 or Form 2553.