The Chancellor of the Exchequer in the UK, George Osborne has delivered an Autumn statement announcing a further 1% cut in corporation tax in 2014 which will bring the rate down to just 21%. When compared to recent levy’s in the US – 40%, France – 33% and Germany 29%, this will make the UK the lowest rate of any major western economy.
Mr Osborne had announced earlier in the year that this would be cut from 24% to 22% by April 2014 it may seem that as corporation tax has become a bigger issue in the UK in recent months due to the publicity corporate giants such as Starbucks, Google and Amazon have received a bad press over the amount of tax they have paid in the UK. This may have impacted on his decision to cut the rate lower than previously advised bringing this into line with Luxembourg who also charge 21% whose tax regime was favored by these corporate entities over Britain’s. The message is very clear from Mr Osborne that this cut is to promote investment into the UK.
As well as Luxembourg, Ireland and Bermuda were also citedas jurisdictions that were receiving the majority of the profits from large corporations due to their favorable tax regime with Ireland at just 12.5% and Bermuda with no corporation tax. Ireland has come under increasing pressure from EU politicians regarding their low rate of corporation tax, but in a recent budget speech Finance Minister Michael Noonan has reiterated that the Irish government’s intension is to maintain that rate.
So the UK may now be the lowest rate of any major western economy, but there are many jurisdictions around with much lower corporate tax rates so it will be interesting to see if this cut will bring the investment that Mr Osborne hopes.
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