Corporate Tax

10 Key excerpts on "Corporate Tax"

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  Comparative Taxation

  Why tax systems differ

  • Chris Evans, John Hasseldine, Andy Lymer, Robert Ricketts, Cedric Sandford(Authors)
  • 2017(Publication Date)
  • Fiscal Publications

    (Publisher)

  5 Corporate Income Taxes 5.1 Introduction Corporate income taxes are an integral part of most countries’ tax systems, averaging about 9% of total tax revenues across OECD countries. But they are not without controversy. Critics charge that because corporations are owned by individuals, their income is ultimately subject to the individual income tax so that the Corporate Tax represents double taxation of the same income. Double taxation of the same income raises objections based on both fairness and economic efficiency—the Corporate Tax may impact business decisions ranging from which organisational form to use for their business to whether and how often to distribute business earnings to owners. Thus, the question naturally arises, “Why do we need a corporate income tax?” As it happens, there are a number of reasons countries choose to tax corporate income. As a matter of administrative efficiency, it may be sensible for the tax on corporate income to be deducted at the source, i.e., at the company level, just as it is administratively efficient for employers to deduct income tax from the wages and salaries of their employees. But that is a different matter, not affecting the amount which individuals would pay. At first glance, treating the profits of corporations exactly like the business profits of individuals or partnerships would seem to be both more equitable, and also more efficient. To this proposition, however, there are a number of objections. First, collecting the tax at the business level is not practical, or more accurately, is practical only for distributed profits. But what about undistributed profits? These are, in principle, the property of the shareholders. When, and at what rate, should they be taxed? Second, there is the “entity” question: there are those who regard the corporation as a tax entity in its own right, which should be taxed as such regardless of concerns over double taxation.

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  Taxation - incorporating the 2021 Finance Act

  • Alan Combs, Ricky Tutin(Authors)
  • 2021(Publication Date)
  • Fiscal Publications

    (Publisher)

  Part III Corporation Tax 18 General principles of corporation tax 18.1 Introduction Corporation Tax is a direct tax on the income and capital gains of companies and other corporate bodies. In this chapter the main elements of the corporation tax system are outlined. It begins with some basic expressions, then forms of organisation liable and exempt from corporation tax are examined, followed by corporation tax self-assessment. The remainder of the chapter deals with the corporation tax accounting periods, and the rates of tax. A summary of corporation tax rates and a specimen computation are provided at the end. Subsequent chapters in this part look in more detail at the measurement of the various categories of a company’s income, and available reliefs, finishing with a chapter on special tax provisions for corporate groups and one summarising the most common international corporation tax issues which commonly affect a UK company which also has non-UK profits. Detailed rules for computing the chargeable (capital) gains or allowable capital losses of a company are covered in Part IV, “Taxation of chargeable gains”. 18.2 Development of Corporation Tax Corporation tax as a separate form of business taxation was introduced by the Finance Act 1965. However, an entirely new set of rules for the determination of business income was not provided, and the substance of the income tax system was preserved, especially in the original rules for measuring companies’ taxable income, and recognition of interest paid and received. From the 1990s, company tax was reformed, so that the rules for certain types of transaction (such as borrowing for trade purposes) no longer mirror the income tax rules for the same type of transaction carried out by an individual.

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  What Every Engineer Should Know about Accounting and Finance

  • Norman Henteleff, Jae K. Shim, Shim(Authors)
  • 1994(Publication Date)
  • CRC Press

    (Publisher)

  13 HOW TAXES AFFECT BUSINESS DECISIONS A corporation is recognized as a separate legal and taxable entity, and it pays its own taxes to many federal, state, and local taxing agencies. If the corporation is operating internationally, it has the additional problem of complying with the tax laws of foreign countries. Taxes may be levied on income, sales, and property. The federal corporate income tax (filed on Form 1120) is the most important because it often represents the largest tax liability. Thus, it can have a major effect on your financial decisions. To make sound financial and investment decisions, you must have an under-standing of the basic concepts underlying the U.S. tax structure and how they affect your decisions. This chapter first discusses the general structure of the corporate income tax, such as taxable income, capital gains and losses, deductible expenses, net oper-ating loss carrybacks and carryforwards, tax rates, and tax prepayments and credits. Then, it reviews various tax planning strategies to help minimize your company's income tax liability in the current year and postpone the payment of taxes to later years. The advantages of electing S corporation status will also be discussed. NOTE: The tax rules discussed in this chapter have been updated for changes brought about by the Revenue Reconciliation Act of 1993. The purpose of this chapter is to provide a brief introduction to corporate income taxation and help the reader (engineer) develop a framework for under-standing the pervasive effects of taxation on business decisions. For clarity of presentation, only important concepts and general tax rules will be emphasized, leaving out many complex details and special applications. The reader should be aware that tax laws must necessarily be very complex to deal with the myriad of possible situations in actual practice. Also, since tax laws are man made and are This chapter was written by Loc T.

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  German Profit Taxes

  • Christoph Freichel, Gernot Brähler, Christian Lösel, Andreas Krenzin(Authors)
  • 2020(Publication Date)
  • UVK Verlag

    (Publisher)

  3Corporate income tax

  3.1Basic principles

  As legal entities, corporations possess their own legal personality. Corporations are thus independent subjects of corporate income tax, value-added tax, land transfer tax, etc. The corporate income tax is assessed as a profit tax on the income from corporations according to a proportional rate. Since corporations are the most important type of corporate entity in the German economy, the following explanations will mainly focus on capital companies.

  Their own legal personality gives rise to the separation between the legal sphere of the capital company and the legal sphere of its shareholders (socalled principle of separability). If a corporation retains its profits, the ability of its shareholders to pay does not increase so that a tax liability does not result for them. Dividends are only taxed at shareholder level when they are distributed, so that a double taxation of the same profit is given.

  Example: For the sake of simplicity, assume that the corporate income tax rate and the personal income tax rate are both 50 %.

  If the capital company generates profits of € 100,000, it would have to pay € 50,000 in corporate income tax. In the event that the profit is distributed, the shareholder, who is a natural person, receives the remaining € 50,000 as a dividend, which is again subject to taxation as income from capital assets within the meaning of Sec. 20 (1) no. 1 EStG at the personal income tax rate of 50 %, i.e. € 25,000. If the corporate income tax and the personal income tax are added together, the profit tax burden amounts to 75 %. In this scenario, capital companies would only be selected as investment alternatives in the most seldom of cases because sole proprietors and/or partnerships are not subject to comparable taxation.

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  Taxation: Policy and Practice (2023/24) 30th edition

  • Andy Lymer, Lynne Oats(Authors)
  • 2023(Publication Date)
  • Fiscal Publications

    (Publisher)

  Corporation tax Introduction 9.1 Corporation tax is charged on the profits of companies. Until 1965 companies were taxed under the income tax rules. In 1965 a reform of the tax system led to the introduction of corporation tax as a separate tax. As you will learn in this chapter, there are similarities between the way in which companies’ profits are taxed under corporation tax rules and the taxation of sole traders and partnerships profits under income tax rules. There are, however, some important differences between corporation tax and income tax that you need to be aware of. At the end of this chapter you will be able to:  describe the imputation system of taxation;  state the basis of assessment of tax for companies;  determine the taxable total profits;  calculate a company’s corporation tax liability; and  determine the date on which the corporation tax is due Further details of other, more complicated, aspects of corporation tax can be found on the website, specifically tax implications of corporate losses and company groups. The liability to corporation tax 9.2 For corporation tax purposes a company is defined as being either a body corporate or an unincorporated association. The definition of a company extends to organisations such as clubs and political associations which are therefore subject to corporation tax. The definition excludes partnerships, however, which are subject to income tax. UK resident companies are liable to corporation tax on their total world-wide profits arising in an accounting period regardless of whether the profits are remitted to the UK or not. However, dividends received by a UK resident company from other companies are generally not liable to further corporation tax in the hands of the recipient. How to determine the residence of a company for tax purposes is further considered in Chapter 12. 9 9 Corporation tax 309 The capital gains of a company are not subject to a separate capital gains tax.

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  Taxation: Policy and Practice (2021/22) 28th edition

  • Andy Lymer, Lynne Oats(Authors)
  • 2021(Publication Date)
  • Fiscal Publications

    (Publisher)

  Corporation tax Introduction 9.1 Corporation tax is charged on the profits of companies. Until 1965 companies were taxed under the income tax rules. In 1965 a reform of the tax system led to the introduction of corporation tax as a separate tax. As you will learn in this chapter, there are still many similarities between the way in which companies’ profits are taxed under corporation tax rules and the taxation of sole traders and partnership profits, which are subject to income tax rules. However, there are some important differences between corporation tax and income tax that you need to be aware of. At the end of this chapter you will be able to:  describe the imputation system of taxation;  state the basis of assessment of tax for companies;  determine the taxable total profits;  calculate a company’s corporation tax liability; and  determine the date on which the corporation tax is due Further details of other, more complicated, aspects of corporation tax can be found on the website, specifically tax implications of corporate losses and company groups. The liability to corporation tax 9.2 For corporation tax purposes a company is defined as being either a body corporate or an unincorporated association. The definition of a company extends to organisations such as clubs and political associations which are therefore subject to corporation tax. The definition excludes partnerships, however, which are subject to income tax like sole traders. UK resident companies are liable to corporation tax on their total world-wide profits arising in an accounting period regardless of whether the profits are remitted to the UK or not. However, dividends received by a UK resident company from other companies are generally not liable to further corporation tax in the hands of the recipient. How to determine the residence of a company for tax purposes is further considered in Chapter 12. 9

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  Taxes and Taxation Trends

  • Jolanta Iwin-Garzy?ska(Author)
  • 2018(Publication Date)
  • IntechOpen

    (Publisher)

  Keywords: corporate income tax, tax competition, tax avoidance, foreign direct investment, multinationals 1. Introduction Corporate income taxes (CIT) are paid by companies including those operating in several countries. Therefore, there is a strong international aspect in its design, administration, and compliance. In scientific and professional literature, this aspect is covered under the topics of tax competition, tax coordination, and tax harmonization. The scientific interest in interna -tional tax competition and related topics is not new. The interest is sustained by a rising capi-tal mobility in the last 40 years and increasing concerns over capital flight and loss of public revenue due to base erosion and profit shifting. The problem stems from the dual objectives of © 2018 The Author(s). Licensee IntechOpen. This chapter is distributed under the terms of the Creative Commons Attribution License (http://creativecommons.org/licenses/by/3.0), which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited. the governments. On the one hand, governments seek to attract investment into the country, or region, or locality, and therefore offer incentives to potential investors often in the form of preferential tax treatment. In doing so, governments engage in harmful or wasteful tax competition. On the other hand, governments need to collect enough tax revenue in order to provide a sufficient level and quality of public services and fulfill other functions demanded by the public. This calls for a rather complicated balancing between those objectives. Loss of revenue may lead to suboptimal provision of public services or require difficult policy deci -sions on the higher level of government or at the supranational level, including tax coordina-tion and tax harmonization.

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  Corporate Tax Law

  Structure, Policy and Practice

  • Peter Harris(Author)
  • 2013(Publication Date)
  • Cambridge University Press

    (Publisher)

  As noted at 1.1.5.2, this is a spectrum issue, and any line drawn between these different types of corporations must be arbitrary. 1.3.2 Taxing the corporation Inevitably, countries that impose an income tax impose that tax on cor- porations with respect to their income. That is the situation with which this subheading is concerned. The primary issue for consideration is the rate at which tax is imposed on the corporation. There is no such thing as a ‘correct’ Corporate Tax rate, only a rate the selection of which may be influenced by particular factors. 434 This subheading first discusses the main factors to be considered in selecting a Corporate Tax rate. The 434 For a comparative analysis of Corporate Tax rates in G-20 countries (plus some), see Harris (2010). . tax treatment  discussion then draws on practical examples in considering the options in selecting a Corporate Tax rate. 1.3.2.1 Factors in selecting a Corporate Tax rate Two categories of issues are relevant in selecting a Corporate Tax rate for retained profits. First, there is a question of how the Corporate Tax rate affects the interface between the tax treatment of retained profits and other aspects of the income tax system – in particular, the personal income tax. This discussion focuses on distortions caused by the selection of a partic- ular Corporate Tax rate, given the fact that no Corporate Tax rate is entirely neutral. Second, philosophical issues of the type described earlier at 1.3.1 may be considered in selecting a Corporate Tax rate. These issues provide some insight into how and the extent to which Corporate Tax rate distor- tions may be addressed. Interfacing issues The taxation of retained profits in the hands of a cor- poration interfaces with any situation that is substitutable with such reten- tion. There are three interfaces that are particularly sensitive to the selec- tion of a Corporate Tax rate.

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  Corporate Duties to the Public

  • Barnali Choudhury, Martin Petrin(Authors)
  • 2019(Publication Date)
  • Cambridge University Press

    (Publisher)

  105 Supra note 103. 106 W. G. Gale et al., ‘The Relationship Between Taxes and Growth at the State Level: New Evidence’ (2015) 68 National Tax Journal 919. 107 Ibid. 108 M. Mathe ´ et al., Tax Shifts (Luxembourg: Office for Official Publications of the European Communities, 2015), p. 8. Tax Law 331 lead[s] to a strong indication that corporate/capital and labour taxes are the most detrimental for growth while consumption and recurrent property taxes are among the least damaging’. 109 This generally supports a shift towards the latter types of taxes. Corporate Tax breaks thus may increase tax revenue and have positive effects on growth and the economy at large, but the results are variable and context specific. What is clear, however, is that the simplistic equation that tax cuts equal more growth and prosperity is, on its own, incorrect and cannot serve as a sound basis for Corporate Taxation. Shifting towards lower tax rates can make economic sense but not for all countries, at all times, under all circumstances. Certainly, the current trend is for governments to reduce Corporate Taxes, usually in the name of competi- tiveness and growth. The UK, for instance, has repeatedly lowered its Corporate Tax rate, which is now at 20 per cent, down from 28 per cent in 2010 and 40 per cent in 1965. 110 The May government – in stark contrast to the Labour Party’s proposals to increase Corporate Tax – has also committed to give Britain the lowest corporation tax of the leading economies, 111 potentially going even below the lowered rate that President Trump’s tax reforms entail. 112 Taken to its extreme, the belief that lower taxes result in increased growth and economic prosperity might even prompt governments to cut Corporate Taxes altogether, leaving them to rely on other sources of revenue instead.

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  Controversies in Tax Law

  A Matter of Perspective

  • Anthony C. Infanti(Author)
  • 2016(Publication Date)
  • Routledge

    (Publisher)

  2 Yet, despite the constantly contemporary nature of Corporate Taxes, they continue to be an enigma, enflaming a policy debate that is based on slogans more than knowledge. The perception of the debate is quite simplistic: conservatives and business interests oppose the Corporate Tax because of its costs, while liberals insist on its qualities in terms of redistribution. In this chapter, I argue that rational analysis should lead to a reversal of these roles. In particular, I argue that she who supports redistribution should wish for the tax's abolition. The path to this conclusion is winding, so I will begin with the basics.

  1 See, e.g., Charles Duhigg & David Kocieniewski, How Apple Sidesteps Billions in Taxes, N.Y. Times, Apr. 28, 2012, at A1. Bloomberg has maintained a now well-known website for articles of the kind. The Great Corporate Tax Dodge, Bloomberg, http://topics.bloomberg.com/the-great-corporate-tax-dodge    (last visited Jan. 29, 2014).

  2 See, e.g., G20 Leaders Declaration ¶ 48 (June 18–19, 2012), available at http://www.consilium.europa.eu/uedocs/cms_Data/docs/pressdata/en/ec/131069.pdf . In response, the OECD launched the so-called BEPS project. See Org. for Econ. Cooperation & Dev., Action Plan on Base Erosion and Profit Shifting (2013); Org. for Econ. Cooperation & Dev., Addressing Base Erosion and Profit Shifting (2013).

  Relying on the legal construct of separate corporate personality (itself a universally accepted legal fiction or metaphor), countries generally view corporations as taxpayers essentially independent of their shareholders and other stakeholders, who may (separately) be taxpayers themselves. Countries impose income taxes on these Corporate Taxpayers under rules that are similar in principle, yet different in detail, from the rules applicable to, for example, flesh and blood taxpayers. Some of the differences between the individual and corporate income taxes stem from the different personhood properties of corporations and individuals (e.g., the residence rules3 ) while other differences are perhaps policy driven because they have nothing to do with such properties (e.g., the rate schedule).

  3

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