A Corporate Duty: All of the Basics about Corporate Tax
All the things that we earn and spend on have an equivalent tax. Even businesses, for this matter, have their own taxable obligation that they must adhere to; otherwise, they may face penalties in the foreseeable future.
The tax in question is known as corporate tax.
First-time entrepreneurs may have a hard time understanding what they're all about. In such a case, there is no need to worry. We have written a couple of helpful tidbits below that highlight the basics of corporate taxes.
What Is Corporate Tax?
Corporate taxes, as mentioned above, refer to a kind of tax that business entities need to pay. It may be imposed on the companies' income and assets.
What Is Taxable Income?
Taxable income is the amount of income you must pay corporate tax on. Once you know the taxable income, you can deduct several expenses from it.
What Are Taxable Assets?
Taxable assets are the physical and intangible assets that are subject to taxes. The ones primarily considered for the purpose include properties, equipment, inventory, property, and cash transfers.
How Does It Work?
The corporate tax rate may vary from one jurisdiction to another. Usually, companies must pay a certain percentage of their income in taxes. Still, every country has different rules, so you should also look into your company's ability to deduct expenses.
There are a few factors that you will also have to consider:
The corporation's size
Its financial position
Its source of earning
What Are the Corporate Tax Rates?
The next thing to consider is the tax rate. Being a business owner, you have to know the country's tax rate where you are doing business. The thing is, it could either be flat or progressive.
Some countries, including Australia, the United Kingdom, and the United States, have a progressive corporate tax rate. In other words, the tax rate is based on how much taxable income a company earns.
If a company earns more than a certain amount of taxable income, it will be taxed more. On the other hand, other countries, such as Mexico and New Zealand, have a flat corporate tax rate.
Who Is Liable to Pay Corporate Taxes?
The sole owners, directors, and other persons who have a stake in the company are the ones who are liable to pay the corporate tax. If a company decides to pay its employee as a cash bonus, and such employees also have something to do with the company, they are also liable to pay such taxes.
Who Is Exempted from Corporate Taxes?
Businesses that are for purely charitable purposes are exempt from corporate taxes. Some tax-exempt companies are charitable organizations, societies, and religious organizations.
What Are the Corporate Tax Deductible Expenses?
You may have heard about corporate tax allowable expenses. What exactly are these expenses? Basically, these are the expenses you can deduct from your taxable income. All businesses are eligible for such costs. If your company is a non-resident company, then there are different allowable expenses that you can avail of, such as:
Business expenses
Travel expenses
Overnight expenses
Employee benefits
Interest
Contributions to community organizations
Repair and maintenance expenses
Insurance
Conclusion
Overall, a lot of people simply look at the corporate tax rate and assume that the company is obliged to pay only a certain percentage of its income. The fact is that there are plenty of corporate tax-deductible expenses that you can avail of.
Just remember that every country has its own set of rules; that is why you should look into how profitable your company would be so you can get a rough idea of how much tax you need to pay.
If you are looking for an accounting company that offers business tax filing services in Denver, look no further than our expertise here at Tottax. We help small businesses and their owners solve problems associated with accounting by doing personalized business consulting, depending on their needs and goals. Call us today and let us handle your corporate taxes for you!
