Accounting terms

Dictionary of all accounting terms





What is Corporation Tax?

A corporation tax is a tax on a company's taxable profits by national and even state or local governments throughout the world.

The corporation tax, also known as a corporate tax company tax, is a tax placed on the profits of a firm that are taxable.

For any country, the corporate tax may be applied to the following:

  • any corporations that have been incorporated in the country
  • any corporations currently doing business in the country and receiving income from that country
  • any foreign corporations with permanent offices in the country
  • any corporations that have a status as resident for tax purposes in the country

In the UK, for example, corporation tax must be paid on profits for limited companies, foreign companies with a UK branch or office, and any unincorporated association, such as a club, co-operative, or community group.

Most countries apply taxes to corporations' net profit, but some countries also tax the shareholders when dividends are paid out. In this scenario, tax is withheld before dividends are distributed.

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