The company tax rate in Australia, at 30%, is very competitive compared with other major economies. Companies in India, Japan, the United States and France all pay higher rates of income tax than those in Australia. New Zealand, Indonesia and Thailand impose the same rate of company tax as Australia.

Currently, the Australian Government is undertaking a comprehensive review, Australia’s Future Tax System, in order to meet contemporary economic, social and environmental challenges, including rapid globalisation, technological advancement, an ageing population and climate change. It is the largest review of the taxation system conducted in 50 years.

Recent measures introduced in response to the Review of International Tax Arrangements (RITA) have already led to significant improvements to Australia’s international tax regime. These include the introduction of the conduit foreign income rules, a temporary resident regime to exempt foreign residents from Australian tax on most foreign source income and certain capital gains for the first four years, and narrowing the range of assets on which a non-resident is subject to Australian capital gains tax to real property and the business assets of Australian branches of a non-resident.

From July 2008, the requirement for tax payers to quarantine foreign losses and foreign tax credits was removed, so that foreign losses can be applied against domestic income and all foreign taxes are creditable against Australian tax assessed. Also effective from July 2008, withholding tax will be reduced from 30% to 7.5% over three years for foreign residents receiving certain distributions from Australian managed funds. This will strengthen Australia’s position as a financial services centre in the Asia Pacific region.

The Australian Government has committed itself to ongoing reform to ensure that Australia has an internationally competitive tax system. These reforms will help attract investment and international skilled labour, reduce tax complexity and compliance costs, assist companies expanding offshore, and encourage innovation.

Footnotes:
It should be noted that the taxable profits (tax base) used for the computation of tax payable may differ between countries, and companies should seek advice on their specific circumstances

1 The effective tax rate for foreign companies with income less than INR 10 million is 41.2% (40% plus education tax of 3% on tax); otherwise it is 42.23% (40%, plus surcharge of 2.5% of the tax, plus education tax of 3% on tax and surcharge). The effective tax rate for domestic companies having income less than INR 10 million is 30.9% (30% plus education tax of 3% on tax), otherwise it is 33.99% (30% plus surcharge of 10% of the tax, plus education tax of 3% on tax and surcharge). A Minimum Alternative Tax applies where tax liability is less than 10% of book profit. For companies with income greater than INR 10 million, MAT is applied at a rate of 11.33% (including surcharges).

2 The corporate tax rate is 30% (22% on the first JPY 8 million for companies with paid-in capital of JPY 100 million or less). In addition, there is a business tax (a local tax which is deductible from taxable income) and prefectural and municipal inhabitant taxes (also local tax), which vary depending on the locality, the amount of paid-in capital of the company, etc. The rate shown (40.69%) is the illustrative effective rate that applies for a company in Tokyo with paid-in capital of more than JPY 100 million after taking into account a deduction for business tax. Size based business tax is also levied on a company with paid-in capital of more than JPY 100 million, so the overall tax rate for such companies can be higher than 40.69%. For small and medium sized companies with paid-in capital of JPY 100 million or less, the effective tax rate in Tokyo is 42.05% with no size based business tax imposed.

3 The federal corporate income tax is applied on a sliding scale. The highest marginal federal corporate income tax rate is 35%, applying to profit above US$18.33 million. State and local governments may also impose income taxes at rates ranging from less than 1% to 12% (top marginal rates average approximately 7.5%). A corporation may deduct its state and local income tax expense when computing its federal taxable income, generally resulting in a net effective rate of approximately 40%. The effective rate may vary significantly, depending on the locality in which a corporation conducts business.

4 After a four year start-up phase, there is a Minimum Corporate Income Tax (MCIT) of 2% on gross income if the MCIT is greater than the corporate income tax determined by applying the 35% corporate income tax rate to the net income.

5 For fiscal years ending after 1 January 2007, the corporate tax rate is 33.3%. An additional social security levy of 3.3% is applied to companies where income taxable at the standard rate exceeds 2.289 million euros. This additional levy of 3.3% is calculated on the basis of the reference amount of corporate income tax less 763,000 euros. Small companies (those which have a turnover of up to 7.63 million euros, and of which individuals hold at least 75% of the share capital, or which are owned by companies meeting the same conditions) are subject to a corporate tax rate of 15% on the taxable profit up to 38,120 euros and the standard rate on remaining profits, and are exempt from the 3.3% contribution.

6 Applicable when company income exceeds IDR 100 million. For the first IDR 50 million, the tax rate is 10%. On the next IDR 50 million, the rate is 15%. Certain income received by non residents is taxed at 20%.

7 The corporate income tax rate is 30% but it may be reduced to 20% or 25% for certain Thai companies which are listed on the Stock Exchange of Thailand prior to 31 December 2009. For small and medium enterprises with paid-up capital of less than THB 5 million, a rate of 0% applies on the first THB 150,000 of net taxable profits, 15% on THB 150,001 to THB 1 million of net taxable profits, and a rate of 25% applies on net profit of over THB 1 million but not exceeding THB 3 million.

8 The rate includes corporate tax at 15% plus a solidarity surcharge of 0.825% (5.5% of the corporate income tax). In addition, a Municipal Trade Tax, which ranges from 7% to 17.15% is levied (around 14-16% on average). This trade tax is not deductible as a business expense from 2008 onwards.

9 Companies with profits of GBP 1.5 million or more pay tax at the full rate of 28%. For companies with taxable profits below GBP 300,000, the rate is 21%. For companies with taxable profits between GBP 300,000 pounds and GBP 1.5 million there is a sliding scale of tax rates.

10 The basic corporate income tax rate is 13% for the first KRW 100 million of taxable income and 25% for taxable income exceeding 100 million KRW. With resident surtax included (10% of corporate tax), the maximum rates will be 14.3% and 27.5%.

11 The standard corporate income tax rate is 25%. The reduced rate applicable to small scale enterprises with low profitability is 20%, and high tech enterprises eligible for key support from the state is 15%.

12 Income of TW$50,000 or less is exempt from tax; a 50% rate less TW$25,000 applies to taxable income between TW$50,001 and TW$71,428, 15% for income between TW$71,429 and TW$100,000, and 25% of taxable income less TW$10,000 for more than TW$100,000. An additional 10% rate applies on retained earnings that remain undistributed by the end of the following year.

13 A partial tax exemption is granted on 75% of the first S$10,000 of regular income (excluding Singapore franked dividends) and 50% on the next S$290,000. For qualifying start-up companies, a three year tax exemption on the first S$100,000 of regular income (excluding Singapore franked dividends) is available, and a partial exemption of 50% on the next S$200,000.

Sources: PricewaterhouseCoopers, 2008 Worldwide Tax Summaries, http://www.taxsummaries.pwc.com; KPMG's Corporate and Indirect Tax Rate Survey 2008.