Corporate tax is the tax that businesses have to pay on their income. Corporate tax rates vary by country.
When you run a business, or you’re set up as a sole trader, you have to pay tax on your company income. The income is defined as revenue minus expenses.
The corporate tax helps fund the government.
What is the corporate tax rate?
The corporate tax rate varies from country to country. Some countries are considered tax havens because of their low tax rates.
Remember that you get tax deductions for all your business expenses. This means that you subtract all the expenses you’ve had in your business before the tax is calculated. This can save you a lot of money, so make sure to keep receipts for all your business expenses. This is how to manage and keep track of business expenses.
See also: Understanding tax deductions for small businesses
How do I work out my income?
You have to record all your company transactions, in other words everything financial that happens in your business. This is called bookkeeping. The bookkeeping will show your income minus expenses so that you have an idea of what to pay in taxes.
Pro-tip: Bookkeep even if you’re not required to
In some countries, you’re not required to do bookkeeping if you earn below a certain amount, but it’s a good idea to do it anyway, to keep control of your finances and to make good business decisions.
It’s also a good idea to get used to it, if your business ends up growing so much that you hit that income threshold and have to start bookkeeping.
To file taxes when you run a business, you have to complete your accounting for the fiscal year and submit an annual report. The annual report consists of at least three financial statements, the balance sheet, the income statement, and the cash flow statement. The income statement shows your income and expenses.
The tax authorities will check your financial statements and decide how much tax you have to pay.
If you want help with your accounting, you should reach out to an accountant.