A corporate tax, also called corporation tax or company tax, is a direct tax imposed by a jurisdiction on the income or capital of corporations or analogous legal entities.
Many countries impose such taxes at the national level, and a similar tax may be imposed at state or local levels. The taxes may also be referred to as income tax or capital tax. Partnerships are generally not taxed at the entity level. A country’s corporate tax applies to:
- corporations incorporated in the country,
- corporations doing business in the country on income from that country,
foreign corporations who have a permanent establishment in the country, or
- corporations deemed to be resident for tax purposes in the country.
Company income subject to tax is often determined much like taxable income for individual taxpayers. Generally, the tax is imposed on net profits. In some jurisdictions, rules for taxing companies may differ significantly from rules for taxing individuals. Certain corporate acts, like reorganizations, may not be taxed. Some types of entities may be exempt from tax.
Countries may tax corporations on its net profit and may also tax shareholders when the corporation pays a dividend. Where dividends are taxed, a corporation may be required to withhold tax before the dividend is distributed.
A corporate tax is a tax imposed on the net profit of a corporation that are taxed at the entity level in a particular jurisdiction. Net profit for corporate tax is generally the financial statement net profit with modifications, and may be defined in great detail within each country’s tax system. Such taxes may include income or other taxes.