European taxation system may be enough diverse because each country has its own rules and rates.
However general the trend is that many European countries have high tax rates, but also provide a wide range of social services.
For example, countries in Northern Europe, such as Denmark and Sweden, have known high levels of taxation, however, it allows free medical help, high-quality education, and other social benefits for citizens.
In addition, there is a problem of harmonization — or her absence — between the member states of the European Union, which may create problems for cross-border activities.
Here are some of the possible one’s difficulties that can arise during taxation in Europe:
- Variety of systems: Each country has its own tax system and its own rules. This is the problem can happen when the enterprise or a person acts in several countries.
- Double taxation: It may occur when a person or company is subject to taxation in two countries for the same income itself. Stacking is a common practice in countries avoidance agreements with double taxation, but they do not answer everyone’s questions.
- Complex rules for business: Some European countries have high corporate tax rates and complex rules for business. It may be a challenge for businesses, especially for those that only start their activities.
- Changes in legislation: Tax legislation can often change, and this may influence how individuals and companies understand your tax obligations.
The question is about which country has the ” best ” taxation, which can be relative since it depends on specific needs and circumstances.
But some countries in Europe are famous for their own favorable tax policy for businesses and citizens.
Here are a few examples:
This one the country does not have a tax on undistributed profit (0%). Corporate tax on distributed profit is 21%. At the standard VAT rate of 20%, by a lot of categories goods and services spreads reduced rate of 9% and 0%.
In Estonia internet banking, and so on manage by the company you can without physically being in the country.
This one country has some of the lowest income taxes in the EU companies, personal income tax for individuals, and social fees. Corporate tax in Cyprus is 12.5% and for a company in the industry of intellectual property in general – 2.5%.
Tax on dividends from businesses all over the world 0%, regardless of country origin income and transfer of income to Cyprus from other company’s beneficiaries. And you can become a tax resident everything in just 60 days.
Switzerland is famous for low corporate income tax rates (from 3.63 % to 9.8%) and high-quality life.
However, trace takes into account that the taxation system may vary in dependence from the canton – from 11.85% to 22%. The VAT rate is 7.6%.
Of course, every country has its own set taxes, but there are some general, which you find on every continent:
- Added tax cost (VAT): almost every European country has VAT Uncoordinated VAT rules as well they can lead to double taxation, especially in the case of cross-border operations.
- Income tax: levied as income tax on physical persons. Rates and sizes are different depending from countries. In some countries a progressive tax system, and in others – a single tax rate.
- Corporate tax: enterprises usually are paid income tax enterprises. Again, the rates and rules are not standardized leading to diverse approaches.
- Tax on Dividends: When a company pays out dividends to its own shareholders, they can be taxed both corporately and individually levels which will result in a double tax load.
- Wealth tax: some countries enter wealth taxes on physical persons aimed at such assets as property, investments, and savings.
- Inheritance and gift taxes.
- local taxes: except for national taxes, local municipalities can establish their own taxes, especially on property.
There is more a concept that is worth considering companies that lead activity in different countries. It is called transferable pricing.
Internal corporate operations between branches in different countries can encounter difficulties in defining fair transfer prices, and these operations can be taxed in each jurisdiction.
The first point that needs to be clarified when studying question taxation, is this residency. For residents and non-residents, the load will be different.
Importantly also take into account that optimal choice may depend on specific circumstances, such as family, type of activity, volume profit, and other factors.
Before acceptance, a decision on taxation is recommended to contact specialists and receive consultations on relatively specific situations.
If you have a specific question about specific countries or the aspect of taxes, make an appointment for a consultation. We must we will help you with your case!