European Countries with Lowest Taxes

European countries with lowest taxesThe events of the past year have clearly indicated a trend towards the displacement of classical offshore workers from the civilized business world. More and more countries are exchanging tax information, imposing sanctions and restrictions that add to blacklists.

For this simple reason entrepreneurs also modify their business, and some even «move» to other countries where there are taxes, but they are minimal and conditions are quite acceptable. For example, taxes on business in Europe and the general well-being that has developed can serve as an example.

Montenegro. Firms in Montenegro pay a 9% tax. Resident companies are subject to income tax on profits earned worldwide. Non-resident companies are only for the profits that were earned in Montenegro. The withholding tax paid by non-residents for dividends, interest, royalties, and services can be calculated in accordance with the double taxation treaties signed by Montenegro with a number of countries.

Estonia. Profits of an enterprise are not taxed prior to distribution. The tax is deferred until the dividends are distributed. When profits pass the distribution procedure, they are taxed at 20%.

The Estonian taxation system is one of the most profitable in the world. It includes state and local taxes. A tax is a financial obligation that the law imposes on a taxpayer and is enforceable in the manner, amount, and duration prescribed by law. The taxpayer is obliged to pay only the state and local taxes prescribed by law.

  • Income tax on retention rate — 20%.
  • The income tax rate of a legal entity applied to dividends of profits is 20/80. The income tax rate of a legal entity, which is applied to a regularly distributed profit dividend, is 14/86, and income tax is withheld at a rate of 7 per cent in addition to dividends paid to an individual.
  • The amount of income tax-free depends on the income received (up to EUR 500 per month and up to EUR 6,000 per year).
  • The social tax rate is 33%. The monthly rate on which the minimum social tax obligation is based is 584 euros; respectively, the minimum social tax duty is 192.72 euros per month.
  • Social tax is levied to obtain the income necessary for State pension and health insurance, from payments made in the context of an employment or service relationship, from payments made in favour of a member of the management or control body of a legal entity, Payments made under a contract of obligations concluded for the provision of services to an individual, as well as special benefits and income tax paid from that place. In such cases, the payer of the social tax is the person who makes the payment, and the tax period is the calendar month.
  • Unemployment insurance rates: 1.6 per cent for the worker and 0.8 per cent for the employer.
  • The compulsory cumulative pension payment rate is 2 per cent.
  • In calculating the December 2020 payroll and other payments and calculating the taxes (payments) accrued/withheld, it should be borne in mind that taxes are calculated on a cash basis.

Bosnia and Herzegovina. Taxation in Bosnia and Herzegovina includes federal and local taxes. Income tax is levied at a single tax rate of 10 per cent on income from activities, interest, royalties and capital gains.

Hungary. Taxation in Hungary is administered by both national and local governments. The basic tax rate – 9% (+2% – tax base) – is the lowest in the European Union. Capital gains are included in the corporate tax, with some exceptions. In some cases, a company may pay a tax on a minimum tax basis.

Malta. Malta has a very interesting system. While the basic tax rate is 35 per cent, Maltese law provides for four modes of return. Thus, the actual tax, if properly managed, can be reduced to 5% and even 0% if the company makes a profit by being a member of another, foreign company. In addition, Malta is transforming its legislation and moving towards cryptocurrency.

LKS Consult OÜ provides accounting services and legal advice on taxation. Please contact us, and we will be glad to help.