It is now the third year when Tax Foundation has announced that Estonia has the best tax code in the industrialized world. This is great news for existing and future 1Office Estonia clients.
1Office clients in Sweden and Latvia have also reason to feel positive about their choice of business location. “Latvia has a relatively low corporate tax rate of 15 percent, speedy cost recovery, and a flat individual income tax, and Sweden has a lower than average corporate income tax rate of 22 percent, no estate or wealth taxes, and a well-structured value-added tax and individual income tax,” according to the Tax Foundation.
Other countries in the top 5 of the International Tax Competitiveness index Rankings were New Zealand, Switzerland, Sweden, and Netherlands.
What makes Estonian tax system great?
The Tax Foundation brought out in its 2016 report four positive reasons that make the Estonia’s tax system unique in the OECD.
“Firs, it has a 20 percent tax rate on corporate income that is only applied to distributed profits. Second, it has a flat 20 percent tax on individual income that does not apply to personal dividend income.Third, its property tax applies only to the value of land rather than taxing the value of real property or capital. Finally, it has a territorial tax system that exempts 100 percent of the foreign profits earned by domestic corporations from domestic taxation, with few restrictions,” states the report.
Tax Competitiveness Index
Tax Foundation’s International Tax Competitiveness Index (ITCI) seeks to measure the business competitiveness of national tax systems. In order to do this, the ITCI looks at over 40 tax policy variables, including corporate income taxes, individual income and payroll taxes, consumption taxes, property taxes, and the treatment of foreign earnings.
The ITCI scores the 34 member countries of the OECD (the Organisation for Economic Co-operation and Development) based on these five categories in order to rank the most competitive tax codes in the industrialized world.
The Tax Foundation is the leading independent tax policy research organization in the United States. Since 1937, its principled research, insightful analysis, and engaged experts have informed smarter tax policy at the federal, state, and local levels.
Read the full report here: 2016 International Tax Competitiveness Index.
