In this article, we discuss 5 most tax-friendly countries in Europe. If you want to read our detailed analysis of European tax policies and recent developments, go directly to read 15 Most Tax-Friendly Countries in Europe.
5. Liechtenstein:
Corporate Income Tax Rate: 12.5%
Personal Income Tax Rate: 8%
Companies registered in Liechtenstein are subject to corporate income tax. The standard corporate income tax rate is 12.5%. However, companies engaged in specific activities, such as holding companies, may benefit from a reduced tax rate or tax exemptions. Its corporate tax remained unchanged since 2014. The country’s income tax rate is low at just 8% for those earning over 200,000 Swiss francs (CHF). Other taxes in Liechtenstein are also comparatively low, for example, the country has a value-added tax (VAT) of 7.7%.
4. Bulgaria
Corporate Income Tax Rate: 10%
Personal Income Tax Rate: 10%
Individuals in Bulgaria are subject to a flat personal income tax rate of 10% on their income from employment, self-employment, and other sources. Companies operating in Bulgaria are subject to a flat corporate income tax rate of 10% on their profits, compared with a flat 25% tax in France. Realized capital gains are taxed at the same rates as corporate income tax rates and dividends paid by Bulgarian companies to resident individuals and foreign shareholders are subject to a flat tax rate of 5%. In addition to this, the standard VAT rate is 20%. However, there is a reduced rate of 9% for certain goods and services, such as books, medicines, and hotel accommodations.
3. Andorra:
Corporate Income Tax Rate: 10%
Personal Income Tax Rate: 10%
Andorra imposed income taxes on residents in 2015 because of consistent pressures from the European Union. Even then, it remains one of the most tax-friendly countries in Europe. The top rate of 10% personal income tax is applicable to individuals with earnings over €40,000. The country applies a corporate income tax rate of 10% on profits generated by companies operating in the country. This low rate makes Andorra an attractive location for businesses. Andorra also imposes a 15% tax on capital gains but the tax decreases as the years of property possession pass. There is no capital gains tax on properties owned for over 13 years.
2. Hungary:
Corporate Income Tax Rate: 9%
Personal Income Tax Rate: 15%
Hungary is one of the most tax-friendly countries in Europe with a personal income tax rate of 15% of the tax base. The current corporate income tax rate in Hungary stands at 9%. However, the country has agreed to introduce a global minimum tax rate in the EU, through which global corporations with annual revenues over €750 million will pay corporate tax at 15%. The social security tax in Hungary was reduced to 13% in January 2022, from 15.5%. The country also has one of the lowest capital gains tax rates of 15% for an individual filer.
1. Switzerland:
Corporate Income Tax Rate: 8.5%
Personal Income Tax Rate: 11.5%
Switzerland is often considered a tax-friendly country with a low federal corporate tax rate of 8.5%. The country’s different cantons and municipalities have their own different taxes. Taking into account both cantonal/communal and federal taxes, the effective tax rate ranges from 12% to 22%, depending on the location of the company. Individual income tax rates fall between 0% to 11.5% and capital gains are taxed at the same rate as ordinary income. Switzerland is a tax-friendly country because its cantons offer tax incentives to newly established companies, especially for their Research & Development activities.
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