In the world today, countries are competing to attract businesses by offering lower corporate tax rates. Some countries have even gone as far as setting their corporate tax rates at zero to entice companies to set up their headquarters there. This strategy can bring in significant tax revenue that other countries miss out on.
Most of the countries with zero corporate taxes are small island nations in the Caribbean, Pacific, and the British Isles. These countries often do not have income tax or capital gains tax either, making them attractive locations for businesses to establish their presence. However, there are exceptions such as companies in banking & finance, cannabis, and retail with taxable profits above a certain threshold.
In addition to tax havens, some countries do not rely on corporate taxes due to revenue from key industries like oil. For instance, Bahrain does not impose corporate taxes except for firms in the oil and gas sector, which face a high 46% tax rate. Similarly, the Crown Dependencies tax banking and finance companies at 10%, while certain retail businesses and firms in the cannabis industry also face taxation.
It is worth noting that Bermuda will introduce a 15% corporate tax in 2025 for multinational groups with an annual revenue of $800 million or more. This move is part of a global effort to prevent tax havens from exploiting lower tax rates. The Organization for Economic Cooperation and Development (OECD) has proposed a minimum 15% tax rate, and countries with lower rates may face additional taxes imposed by other jurisdictions to offset the difference.
By offering zero or low corporate tax rates, countries aim to attract businesses and stimulate economic growth. However, the trend towards establishing minimum tax rates signals a shift towards global tax cooperation and the prevention of tax avoidance practices. As countries navigate the complex landscape of corporate taxation, businesses must stay informed about changing regulations and plan their operations accordingly to ensure compliance and avoid potential financial risks.
