Hungary has the lowest small business tax burden in Europe!

Hungary has the lowest small business tax burden in Europe, and one of the lowest in the world, according to a new study from BusinessFinancing.co.uk. Researchers applied tax rates and rules from each country to a model company (with $1M in revenue, $100K profit, and 5-9 employees) to calculate how much tax that company would owe globally.

Corporate or corporation tax is a percentage of a company’s profits that it pays to the government. It is a major source of the cash that states and countries use to fund education, social services, defence, emergency units and much more.

However, corporate tax rates vary widely around the world and even within countries. For example, most American states charge a different local corporation tax on top of the federal rate of 21%. In the UK, the main rate is set at 25%, but small businesses with profits under £50,000 (US$38,550) pay just 19%.

The study

BusinessFinancing.co.uk applied tax rates and rules by country sourced from Deloitte and PricewaterhouseCoopers (PwC) to a model company with fixed parameters, including annual revenue of $1 million, profit of $100k and between five and nine employees. Using these parameters, they calculated the total amount of tax that would be paid by the model company in each country.

Hungary has the lowest small business tax burden

In Hungary, the model company would pay just $9,000 in corporate tax on $100,000 in profit: less than any other country in Europe. This places Hungary as one of the most tax-friendly nations for small businesses.

Important findings

• Guyana is the country with the highest tax rate for small businesses, with the model firm paying $40,000 on profits of $100,000.
• In the Bahamas, Bahrain and the United Arab Emirates, the model company would owe zero corporate tax on profits of $100,000.