Europe Corporate Tax - Guide for International Expansion

Are you planning to expand your business operations across Europe? Understanding the corporate tax landscape is essential for making informed strategic decisions about where to establish your presence.

Europe offers a diverse range of corporate tax rates and structures, from competitive low-tax jurisdictions to higher-rate countries with robust infrastructure and market access. Whether you're considering your first European expansion or optimising your existing operations, navigating the continent's varied tax systems is crucial for your business success.

When expanding internationally, having the right financial infrastructure makes all the difference. Wise Business provides local account details across multiple European countries, making it easier to manage payments, receive funds, and handle your corporate tax obligations in local currencies without the burden of high exchange fees.

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This publication is provided for general information purposes and does not constitute legal, tax, or other professional advice from Wise Payments Limited, its subsidiaries or affiliates, and it is not intended as a substitute for obtaining business advice from a tax advisor or any other professional.

European corporate tax rates in 2025

The corporate tax rate across European countries varies significantly, ranging from as low as 9% in Hungary to as high as 35% in Malta.^{1 2} The average corporate tax rate among European countries is 21.5%, which sits slightly below the global average of 23.51%.^{1 3}

European countries generally maintain competitive corporate tax rates compared to other regions globally. Several nations have positioned themselves as attractive business destinations through strategic tax policies, with countries like Ireland (12.5%), Cyprus (12.5%), and Bulgaria (10%) offering particularly competitive rates for international businesses.³

The landscape has been shaped by recent changes, including Austria's reduction of its corporate tax rate to 23% in 2024, whilst countries like Belarus increased their rate from 20% to 25%, and the Czech Republic raised theirs from 19% to 21%.¹ Additionally, the implementation of the OECD's Pillar Two global minimum tax has affected several low-tax European jurisdictions, with countries like Hungary, Ireland, and Bulgaria now applying a 15% effective rate for large multinational corporations, even though their statutory rates remain lower.¹

Germany maintains one of the highest combined rates at approximately 30%, which includes federal corporate tax, solidarity surcharge, and municipal trade taxes. France follows with 25%, whilst The Netherlands applies a tiered system with 19% on the first €200,000 of profit and 25.8% on amounts above that threshold³.

Read more about Corporate Tax Planning best practices

How to pay corporate tax in Europe

Corporate tax payment procedures vary significantly across European countries, but most have modernised their systems to include online filing and payment options. The majority of European Union member states require businesses to file annual corporate tax returns, typically within 3 to 12 months after the end of the accounting period.

Payment Methods and Currency Requirements

Most European countries require corporate tax payments in their local currency. Eurozone countries (19 EU member states) use the Euro, making cross-border operations within this zone more straightforward. Non-Eurozone countries like The UK, Switzerland, Poland, and others require payments in their respective national currencies.

Payment methods typically include:

• Online banking transfers through government portals
• Direct debit arrangements
• Electronic payment systems
• Bank transfers to designated tax authority accounts

Filing Deadlines and Penalties

European countries generally follow similar patterns for corporate tax obligations:

• Annual returns: Most countries require filing within 3 to 12 months after the accounting year-end
• Advance payments: Many jurisdictions require quarterly or monthly advance payments based on estimated annual liability
• Late payment penalties: Interest charges typically range from 0.2% to 1.8% per month for late payments^{4 5}
• Late filing penalties: Fixed penalties or percentage-based charges for delayed submissions
  Tax Calculation Example

For a company with €1.5 million annual turnover and a 10% profit margin (€150,000 taxable profit):³

• In Ireland (12.5% rate): €18,750 annual tax liability
• In Germany (30% combined rate): €45,000 annual tax liability
• In Hungary (9% rate, but 15% effective for large companies under Pillar Two): €22,500 annual tax liability

When operating across multiple European countries, managing different currencies and payment systems can become complex. Wise Business simplifies this by providing local account details in over 10 European currencies, including EUR, GBP, PLN, and CHF. This enables businesses to:

• Receive payments from European customers in local currencies
• Pay corporate taxes directly in the required local currency
• Avoid high foreign exchange fees when converting between currencies
• Maintain cash flow efficiency across multiple European jurisdictions

Having local banking details also helps establish credibility with European suppliers, customers, and tax authorities, whilst ensuring compliance with local payment requirements.

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Tax Compliance in Europe

Some helpful tips to keep your company fully compliant with the tax regulations across Europe:

• Register for corporate tax early: Once your business is incorporated, it is essential to register with theNational Tax Authority without delay. Each EU member state requires companies to declare profits and pay taxes based on local rules. Staying updated on EU corporate tax rates helps you calculate liabilities accurately and avoid unexpected penalties.
• Meet filing deadlines: Annual tax returns must be submitted within the deadlines set by the national tax authorities. Late filing can result in financial penalties and, in some cases, restrictions on business operations. Since tax calendars vary across the EU, businesses expanding into multiple markets should maintain a compliance calendar to keep track of important dates.
• Understand VAT obligations: Besides European corporate tax, companies must comply with the EU’s Value Added Tax (VAT) framework. This includes registering for VAT, charging it correctly, and submitting periodic VAT returns. The rules differ depending on whether your business sells goods or services within the EU or to international markets.
• Use national online portals: Most EU countries provide digital portals for corporate tax and VAT filings, making compliance more efficient. Leveraging these platforms reduces administrative errors and ensures timely submissions.

Companies operating in multiple EU states often face double reporting obligations. The European Commission is gradually introducing initiatives to harmonize reporting rules across member states to simplify compliance.

International Expansion to Europe

Expanding into Europe opens doors to a vast market and a network of opportunities few regions can match. Its 448 million residents and 14.7% share of global GDP make it one of the largest economic regions worldwide. This makes it the third-largest economy after China and the United States.⁶ Companies operating within the EU benefit from access to this large consumer base and a skilled workforce, while the single market allows them to trade freely across all member states.

One major advantage of expanding in Europe is the ease of access to other countries. The Schengen Area facilitates the free movement of people across nations, including Germany, France, the Netherlands, Spain, and Switzerland. This allows hiring talent from multiple countries and smooth travel for business operations, which is supported by excellent rail and road networks.

Europe also leads globally in trade. The EU is the top trading partner for 80 countries, accounting for 16.1% of global trade in goods and services. Over 30 million EU jobs depend on exports, and the union has more than 40 trade agreements with over 70 countries and regions.⁷ Negotiations for additional contracts continue. This is likely to improve international trade opportunities further.

The EU single market is one of its most important achievements, enabling the free movement of goods, services, people, and capital across 27 member states.⁸ Currently, 17 million people live or work in a country other than their own, and 1.8 million are cross-border workers, highlighting the integrated nature of the market.⁷

Besides this, the EU also offers a highly educated workforce. In 2024, 44% of 25 to 34-year-olds had completed tertiary education, and 84% of 20 to 24-year-olds had completed at least upper secondary education.⁹ A stable currency, the euro, is used by 20 EU countries and nearly 350 million people, eliminating currency fluctuation risks and supporting the single market.¹⁰

The region’s infrastructure supports smooth operations and logistics. Ports handle 3.8 billion tons of goods annually and accommodate over 400 million passengers.¹¹ Railways, represented by the Community of European Railway and Infrastructure Companies (CER), connect 70 undertakings and national networks.¹² Air transport directly employs up to 2 million people and supports up to 5.5 million jobs.¹³

When starting a business in Europe, you should:

1. Conduct market research to understand competitors, target audiences, and workforce requirements.
2. Develop a business plan to evaluate the economics of your venture.
3. Select a business name and legal structure.
4. Choose a country within the EU.
5. Register your company and set up tax registration with the local authority.
6. Implement a solid system for record-keeping.

Understanding the corporate tax rate in Europe and local regulations is essential to optimizing investment and ensuring compliance. These considerations make the continent a highly appealing destination for international expansion.

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Incorporation of Business in Europe

Incorporating a business in Europe varies by country, as there is no single European company registry. However, the EU allows freedom of establishment across member states, making it possible to operate in multiple countries once properly registered.

Here’s a step-by-step overview of how to set up a company in Europe:¹⁴

1. Determine the Optimal Country: Consider your product type, strategic location, taxation, economic stability, industry support, and workforce availability before choosing a European country to establish your business.
2. Choose a Legal Structure: Decide the appropriate business entity for your needs (see types below).
3. Prepare Documentation: Gather company name registration, shareholder details, directorship information, organizational structure, and Articles of Association.
4. Deposit Share Capital: Certain company types require minimum capital contributions to start operations.
5. Register Your Business: Submit your application to the relevant national authority, such as the Chamber of Commerce or Companies House, for official registration. Most EU countries provide a Point of Single Contact, allowing businesses to complete registration, tax registration, and apply for permits through a single online portal.
6. **Consider forming a Societas Europaea (SE): **If you plan to operate across multiple EU countries, forming an SE simplifies cross-border management.
7. Tax Registration: Navigate taxation regulations and register for European corporate tax by country.
8. Additional Licenses: Apply for any special permits or licenses required by local regulations.

**Note: **Many European countries require at least one resident director or manager to ensure proper compliance with corporate and tax regulations. If this requirement is not met, some jurisdictions may request a financial guarantee, a local representative, or proof of economic activity within the country to validate the company’s establishment and operational presence.

Common Business Entities in Europe

• European Company (SE): Designed for businesses expanding across multiple EU countries. Allows operation under a single set of rules. Requires presence in subsidiaries or branches in at least two EU countries and a minimum subscribed capital of EUR 120,000.¹⁵
• Limited Liability by Guarantee: Members’ liability is limited to the amount of shares they hold. Suitable for smaller ventures or non-profits.]
• **Public Limited Liability Companies by Shares: **Members’ liability is limited to unpaid amounts for their shares. Companies can invite public investment and may list on stock exchanges. The minimum share capital is higher than that of private limited companies.

Incorporating a business in Europe involves navigating various legal and regulatory landscapes. It's advisable to consult with legal and financial professionals familiar with the specific requirements of the chosen country to ensure a compliant setup.

International corporate tax best practices

Managing corporate tax obligations across multiple European jurisdictions requires strategic planning and adherence to both local and international standards. Here are the essential best practices for businesses operating in Europe.

Ensure Compliance with Local and EU Regulations

Each European country maintains its own corporate tax laws, despite EU harmonisation efforts in certain areas. Businesses must register for corporate tax in each jurisdiction where they have a taxable presence, file returns according to local deadlines, and maintain accurate records in the required format and language. Understanding permanent establishment rules is crucial, as hiring employees or conducting significant business activities in a country can trigger corporate tax obligations even without a formal subsidiary.

Leverage Double Taxation Treaties

Europe has one of the world's most comprehensive networks of double taxation treaties. These agreements prevent the same income from being taxed twice and often provide reduced withholding tax rates on dividends, interest, and royalties between treaty countries. For example, the extensive treaty network within the EU, combined with directives like the Parent-Subsidiary Directive, can significantly reduce the overall tax burden for multinational groups operating across European borders.

Navigate the OECD Pillar Two Implementation

The global minimum tax rules are being actively implemented across Europe, with 28 countries having adopted both the Income Inclusion Rule (IIR) and Qualified Domestic Minimum Top-up Tax (QDMTT) as of 2024. Large multinational enterprises with consolidated revenues exceeding €750 million must ensure their effective tax rate meets the 15% minimum threshold in each jurisdiction.

Maintain Comprehensive Documentation

European tax authorities increasingly require detailed documentation to support transfer pricing policies, substance requirements, and tax positions. This includes maintaining contemporaneous documentation of intercompany transactions, economic substance in each jurisdiction, and clear business rationales for corporate structures. The EU's mandatory disclosure rules also require reporting of certain cross-border arrangements that could potentially be used for aggressive tax planning.

Take the complexity out of international expansion with Wise Business

Researching corporate tax is a crucial step when expanding your business into a new country. The next step is setting up the financial infrastructure to handle the complexities of operating across borders, from managing multi-currency cash flow to mitigating FX risk.

The Wise Business account provides the financial tools to make your international expansion to Europe efficient and simple. It's the one account for managing your money globally.

With a Wise Business account, you can:

• Pay suppliers and initial fees: Pay suppliers, global payroll, and one-off incorporation costs in the local currency.

• Get paid like a local: Use local account details for 8+ major currencies to easily receive payments from customers or investors.

• Manage your money across borders: Hold and exchange 40+ currencies in one account, always with the mid-market exchange rate and low, transparent fees.

• Streamline your accounting: Integrate with tools like Xero or QuickBooks to simplify tracking your company's international finances.

• Empower your team: Provide multi-user access for your finance team and issue expense cards for international spending.

Wise is designed to support every step of your journey, from paying your first registration fee to receiving international payments and managing your global treasury.

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FAQs - Corporate tax in Europe

Who is liable for corporate tax in Europe?

Companies are liable for corporate tax in European countries where they are tax resident or have a permanent establishment. Tax residency is typically determined by the place of incorporation, central management and control, or where the company's effective management is located. The specific criteria vary by country, but most European nations tax resident companies on their worldwide income, while non-resident companies are only taxed on income sourced within that country.

Are there any tax incentives for businesses in Europe?

Yes, many European countries offer various tax incentives to attract businesses. These include reduced rates for small and medium enterprises (SMEs), research and development tax credits, patent box regimes for intellectual property income, and special economic zones with preferential tax treatment.

What is the tax treatment of dividends in Europe?

Dividend taxation varies significantly across Europe. Within the EU, the Parent-Subsidiary Directive generally eliminates withholding taxes on dividends paid between qualifying parent and subsidiary companies (typically requiring at least 10% ownership). However, withholding tax rates on dividends paid to non-qualifying shareholders can range from 0% to 35%, depending on the country and applicable double taxation treaties. Some countries also impose additional taxes on distributed profits.

What is the process for registering for corporate tax in Europe?

Registration processes vary by country but typically involve registering with the national tax authority within a specified timeframe after incorporation or commencing business activities. Most European countries require online registration through government portals, submission of company formation documents, and appointment of local tax representatives in some jurisdictions. Registration must usually be completed within 30-90 days of starting business operations, and failure to register on time can result in penalties.

What are the common pitfalls to avoid regarding corporate tax in Europe?

Common pitfalls include failing to understand permanent establishment rules when expanding across borders, inadequate transfer pricing documentation for intercompany transactions, non-compliance with the new Pillar Two minimum tax rules for large multinationals, and insufficient substance in low-tax jurisdictions. Additionally, businesses often underestimate the complexity of VAT obligations when operating across multiple EU countries, fail to properly document business rationales for corporate structures, and neglect to consider the impact of beneficial ownership requirements and economic substance regulations that have been strengthened across Europe in recent years.

Sources used in this article:

1. Tax Foundation: Corporate Tax Rates by Country 2024
2. Chambers Practice Guides: Corporate Tax 2025 - Malta
3. Tax Foundation: Corporate Income Tax Rates Europe
4. PwC Tax Summaries: France Corporate Tax Administration
5. Estonian Tax and Customs Board: Payment Arrears
6. Eurostat: Euro Area and EU Unemployment
7. European Council: Trade Policy
8. European Council: The EU Single Market - Benefits and Facts
9. Eurostat: Educational Attainment Statistics
10. European Union: Achievements
11. The Parliament Magazine: Europe's Ports
12. The Parliament Magazine: Priorities for Railways
13. European Commission: Air Transport
14. Your Europe: Registration, Permits, and Licences
15. Your Europe: Setting up a European Company

Sources last checked 04/09/2025