The economic innovation driven by the 27 member states of the European Union has helped advance previously tarnished economies, and help build the platform for solvent democracies. In the last few years, economic changes regarding corporation tax have shown both the good and the ugly side of EU leaders, as the European Commission battles with tax talks between EU member nations and OECD operatives. 

Some countries in the EU have been decreasing their corporate tax rates in recent years. These decreases are becoming more and more attractive for various large tech giants. Countries such as Irelands, Malta, Hungary, and Luxembourg have been battling vetoes brought forth from the EU Commission housed in Brussels. 

While these countries are remaining complacent with their decision to keep corporate taxes low, for both domestic and international corporations; a push from Washington, OECD, and the EU Commission can still take a while before a universal average comes into effect.

So which EU countries have the lowest corporate taxes, and how are they keeping percentages low to attract larger international corporations to set up shop? Here’s a look at the EU States with the lowest corporate tax.

Hungary 

Among all 27 member states, Hungary has the lowest corporate tax rate at 9%. This is a sharp decline from its previous 19% a decade or so ago. These changes came into effect in early 2017, and low tax rates apply for large corporations, medium and small-sized businesses. 

Reports on Hungary’s low corporate tax rates have proven largely successful, especially for domestic and international companies making more than €2 million in revenue. Although these attractive tax rates may seem beneficial for foreign investment, Hungary still had to raise some other taxes in 2010 to ensure they remain compliant with EU regulations.  

Ireland

The Republic of Ireland has stood strong against the OECD and other EU nations pushing for a minimum average corporate tax rate. Earlier in 2021, Paschal Donohoe, the Irish Finance Minister claimed that if an average universal tax rate is introduced for the EU and other wealthy nations, Irelands may lose nearly 20% of its current tax revenues. 

Against the 19% headline tax in the United Kingdom which is set to rise to 25%, Ireland has a mere 12.5% corporate headline tax. Donohoe is pushing for the corporate tax to remain low, as these figures are helping to boost the economy via multinational investments.

Lithuania 

The small Baltic nation tucked between Poland and Latvia has a mere 15% corporate tax rate. The Republic of Lithuania has created a well-rounded taxation profile for itself in recent years. The tax profile is a statement, claiming that any person, foreign and local will pay a levy of 15% corporate tax for many services and goods sold and rendered within the Republic. 

The Lithuanian government has also introduced more attractive tax rates for personal income and small businesses. Currently, a 0% tax rate applies to businesses that employ less than 10 staff members, and revenue/profit does not exceed €300,000 for the first tax year. Thereafter, the tax rate will increase to 5%. These changes to their taxation system have proven to be successful in the long run, inviting foreign investors to boost the local economy and create employment. 

Switzerland 

Switzerland remains a country of wonders, with its neutral government and advanced infrastructure, it houses one of the lowest corporate tax rates in the world at 8.5%. Although not part of the European Union, or Schengen Area, Switzerland remains part of the European Economic Area. 

The Swiss government still receives a sizable portion of corporate taxes through other channels. Depending on the fiscal size of the business, and its annual turnover, corporate taxes may still lie anywhere between 11.9% and 21.6% respectively. 

Under the Biden Administration, registered agents in the US, and multinational corporations are still reluctant whether a deal can be agreed on between the US, OECD nations, and the European Union. There might still be a long way to go before this can be placed in practice, but for now, businesses and large corporations in these nations are given the chance to boost local economies, in an off-shore tax haven within the European Union.