Corporate Tax Rates in Europe 2026: Complete Comparison of All 27 EU Countries

Corporate tax rates across Europe vary enormously. From 0% on reinvested profits in Latvia and Estonia to over 30% in France and Germany, the gap is massive. For an entrepreneur starting or relocating a business, choosing the right country can mean tens of thousands of euros in savings every year.

This guide covers corporate income tax rates in all 27 EU member states, plus three notable non-EU European countries (Switzerland, Norway, United Kingdom). We cover standard rates, special SME regimes, the impact of the OECD Pillar Two, and the real-world advantages for business owners.

How corporate tax works in Europe

Corporate income tax (CIT) is a tax levied on the net profits of companies. Each EU member state sets its own rate, subject to certain European and international rules.

There are three main models of corporate taxation in Europe:

• The classical model: tax is calculated each year on net profit, whether distributed or not. This is the case in most countries (France, Germany, Netherlands, etc.).
• The deferred taxation model: tax is only due when profits are distributed. This is the case in Latvia and Estonia. As long as profits stay in the company, the rate is 0%.
• The imputation model: tax is paid at the nominal rate, but refunds significantly reduce the effective rate. This is how Malta works (35% nominal, 5% effective).

OECD Pillar Two: a global minimum tax of 15%

Since 2024, the OECD's Pillar Two (GloBE rules) establishes a minimum effective tax rate of 15% for multinational groups with consolidated revenue exceeding EUR 750 million. This threshold excludes the vast majority of SMEs and mid-cap companies. Individual entrepreneurs and small businesses are not affected.

For countries with rates below 15% (Hungary at 9%, Ireland at 12.5%, Bulgaria at 10%), Pillar Two means that large multinationals operating there must top up their taxation to 15%. Local SMEs continue to benefit from the lower rates.

Comparison table: corporate tax rates in Europe 2026

This table presents CIT rates across all 27 EU countries, plus Switzerland, Norway, and the United Kingdom. Columns indicate the standard rate, any SME regime, and membership in key European organisations.

Sources: European Commission, OECD, national legislation. Data updated March 2026.

Special regimes worth knowing

Beyond the standard rates, several European countries offer specific tax regimes that significantly reduce the effective tax burden. Here are the most important ones.

Latvia and Estonia: deferred taxation (0% reinvested)

Latvia (since 2018) and Estonia (since 2000) apply a model unique in Europe: profits reinvested in the company are not taxed. Tax is only due when profits are distributed (dividends, expenses unrelated to business activities).

• Latvia: 20% on distributed profits (calculated as 20/80, meaning 25% of the gross amount distributed)
• Estonia: 22% on distributed profits (calculated as 22/78, meaning approximately 28% of the gross amount)

This model benefits companies in growth mode that actively reinvest. An important detail: Latvia is slightly more advantageous than Estonia on the distribution rate (20% versus 22%).

Malta: the imputation system (5% effective)

Malta has the highest nominal rate in the EU at 35%. In practice, through its tax refund system (6/7 of the tax paid is refunded to shareholders), the effective rate drops to approximately 5% for non-resident shareholders. This system is legal but complex to set up and requires a specific holding structure.

Hungary: the lowest flat rate in the EU at 9%

Hungary applies a flat 9% rate to all companies, regardless of size. It is the lowest nominal rate in the European Union. However, the local business tax (IPA) adds approximately 2%, bringing the effective rate to around 11%. Hungary remains attractive for companies that regularly distribute their profits, since the tax is due regardless of distribution.

Romania: the 1% micro-company regime

Romania offers a micro-company regime with a 1% rate on turnover (not on profit). This regime is available to companies with turnover below EUR 500,000. It is a very low rate, but calculated on revenue rather than profit, which can be disadvantageous for low-margin businesses.

Ireland: the Knowledge Development Box at 10%

Ireland applies a reduced 10% rate on income from qualifying intellectual property (patents, protected software). Ireland's standard 12.5% rate remains among the lowest in the EU for the classical model. Since Pillar Two, large multinationals present in Ireland pay a minimum of 15%.

Cyprus: the IP Box at 3% effective

Cyprus offers an intellectual property regime (IP Box) that can reduce the effective rate to approximately 3% on IP-related income. The standard 15% rate is already competitive, but the IP Box makes it particularly attractive for technology companies. Note: Cyprus is not a Schengen member, which can be a drawback for mobility.

The Pillar Two effect: which countries are affected?

The OECD's Pillar Two, transposed into EU law since late 2023, imposes a minimum effective rate of 15% for multinational groups with consolidated revenue exceeding EUR 750 million. Here is its practical impact:

• Directly affected countries: Hungary (9%), Bulgaria (10%), Ireland (12.5%), Cyprus (15% but IP Box below). These countries have introduced a national top-up tax (QDMTT) so the difference is collected locally rather than by another country.
• Not affected in practice: Latvia and Estonia. Their deferred taxation model is compatible with Pillar Two because tax is calculated at the time of distribution. For SMEs (the vast majority of businesses in these countries), Pillar Two does not apply.
• Countries above the threshold: France (25%), Germany (~30%), Italy (~28%). These countries are unaffected because their rates already exceed 15%.

For an entrepreneur building an SME or mid-cap company, Pillar Two has zero impact. Only multinationals exceeding EUR 750 million in consolidated revenue are affected.

Which rate actually matters for entrepreneurs?

The nominal CIT rate does not tell the full story. For an entrepreneur, several factors determine the real tax burden:

Nominal vs effective rate

The nominal rate is the headline rate in the legislation. The effective rate accounts for deductions, surcharges, local contributions, and special regimes. Some examples:

• Germany: nominal rate of 15% (KSt), but the effective rate reaches ~30% when the local trade tax (Gewerbesteuer) is added.
• Malta: nominal rate of 35%, but effective rate of ~5% through the refund mechanism.
• Italy: nominal rate of 24%, but the IRAP surcharge brings the effective rate to ~28%.

The importance of distribution tax

A low CIT rate means little if the dividend tax is high. In France, the flat tax of 30% is added on top of the 25% CIT. In Latvia, dividends are not subject to double taxation: the 20% tax applied at the time of distribution covers both corporate tax and dividend tax.

Social contributions

For a director who draws a salary, social contributions weigh as much (or more) than CIT. In France, employer and employee contributions exceed 60% of gross salary for a self-employed director. In Latvia, total contributions amount to 34.09% (23.59% employer + 10.50% employee), on a legal minimum wage of EUR 700 per month.

Legal stability and transparency

A low rate is only valuable if the legal environment is stable and predictable. EU countries, and particularly members of the Eurozone and OECD, provide this guarantee. Latvia is a member of all four (EU, Eurozone, OECD, Schengen), making it one of the safest frameworks for legal tax optimisation.

Latvia's unique position in Europe

Among all the countries in this comparison, Latvia occupies a distinctive position. Here is why.

The 0% on reinvested profits, explained

Since 2018, Latvia has adopted the Estonian model of corporate taxation. The principle is simple and radical: as long as profits remain in the company, no corporate tax is due. Tax only applies when profits leave the company as dividends or business-unrelated expenses.

This model creates a powerful compounding effect. A company that fully reinvests its profits for five years has 100% of its earnings available to fund growth. In a country with a classical 25% tax, the same company would retain only 75% after tax each year.

Latvia vs Estonia: similar models, real differences

Both Baltic states share the same deferred taxation principle, but with notable differences:

• Distribution rate: 20% in Latvia versus 22% in Estonia. On a EUR 100,000 distribution, the difference amounts to EUR 2,000.
• Cost of living: Riga is slightly cheaper than Tallinn, reducing operational costs.
• Digitalisation: Estonia leads in e-governance (e-Residency), but Latvia is rapidly catching up with the digitalisation of its tax administration.
• Full EU integration: both countries are EU, Eurozone, Schengen, and OECD members.

Where Latvia is not the best choice

Latvia is not the answer for every profile. Here are situations where other countries may be more suitable:

• Large multinationals subject to Pillar Two: for groups exceeding EUR 750 million in revenue, the 0% benefit is neutralised. Ireland or the Netherlands offer a more mature ecosystem for large structures.
• High-distribution businesses: if you plan to distribute 100% of your profits every year, Hungary (9% + local tax) may be more competitive.
• Local market: Latvia's market is small (1.9 million inhabitants). If your model relies on local sales, other countries offer broader commercial opportunities.
• Intellectual property: for structures focused on IP revenue, the IP Boxes in Cyprus (3% effective) or Ireland (10%) may be more advantageous.

Frequently asked questions (FAQ)