Corporate tax
As an entrepreneur, you are required to pay taxes on the profit your business generates. Depending on the legal structure of your business, this could be income tax or corporate tax. This article focuses on corporate tax (CT). How do you file a return? When do you need to deal with it, what are the rates, and what should you pay attention to?
Who pays corporate tax?
If you operate a private limited company (BV), public limited company (NV), or a cooperative, your legal entity must file a corporate tax return. Corporate tax is a direct tax on the profits of a legal entity. Other legal entities, such as foundations or associations, are only required to pay corporate tax in certain circumstances. This article primarily focuses on BVs.
Filing corporate tax returns
Typically, your accountant, bookkeeper, or tax advisor will file the corporate tax return on your behalf. The filing is done online through the Tax Administration's website. You are only required to review the return before it is officially submitted.
When reviewing the return, it is useful to understand how corporate tax works.
Preliminary assessment
If your company needs to file a corporate tax return, you will receive a preliminary assessment (PA) from the Tax Administration at the beginning of the year. This PA includes a provisional amount based on previous years. You should thoroughly review and, if necessary, adjust this amount. A PA can be increased up to three times a year. You can also object to a PA. Ultimately; a final assessment will always follow.
Do you expect to owe corporate tax and do not receive a PA automatically? Contact the Tax Administration to request one.
Tax over the financial year
Corporate tax is calculated on the profit of your company’s financial year. The financial year can coincide with the calendar year, but it does not have to. The duration of the financial year is specified in the articles of association. For a calendar year, you must file the corporate tax return by June 1 of the following year. If the financial year does not align with the calendar year, file the return within five months after the end of the financial year. If timely filing is not possible, request an extension.
What is corporate tax paid on?
Corporate tax is paid on the taxable profit of the legal entity. This is the profit remaining after deducting any offsetable losses.
To calculate your company’s taxable profit: subtract the cost of goods sold and business expenses from the revenue. Business expenses include wages and depreciation. The remaining amount is your gross profit. Next, determine if there are any deductions or offsetable losses that reduce this gross profit. After these deductions, the remaining amount is the taxable profit. See the example calculation below.
If you have losses, you may offset them. The profit you finally have left is the 'taxable profit', and corporate tax is calculated as a fixed percentage of this taxable profit. Usually, an accountant or tax advisor calculates the profit for a BV.
Using deductions and regulations
When determining profit, you can use various regulations, such as investment deduction or debt cancellation exemption.
For asset depreciation, the rules are generally the same as for income tax, with the exception of building depreciation. For corporate tax purposes, the WOZ value of the property is the minimum value. This means you can depreciate the property for corporate tax purposes down to the WOZ value.
There are also specific tax regulations for corporate tax, such as the participation exemption and fiscal unity. Check if you meet the conditions before applying for these, as they can be beneficial.
Consult with your accountant, bookkeeper, or tax advisor to optimize your use of deductions.
Corporate tax rates 2024
The corporate tax rate depends on your profit. In 2024, you will pay 19% tax on profits up to 200,000 euros. For profits over 200,000 euros, the rate is 25.8%. These rates and amounts may vary each year, so always check the rate applicable to the year for which you are filing a corporate tax return.
Example corporate tax calculation
Below is an example of how to calculate corporate tax.
| Item | Amount in Euros |
|---|---|
| Revenue | 500,000 |
| Costs of goods sold | -100,000 |
| Other expenses | -200,000 |
| Gross profit | 200,000 |
| Deductions | None |
| Offsetable losses from 2023 | -100,000 |
| Taxable profit | 100,000 |
| Corporate tax rate 2024 | 19% |
| Corporate tax payable | 19,000 |
For more detailed guidance and assistance with your corporate tax return, always consult with a professional accountant or tax advisor.