7 European Countries with the Lowest Corporate Tax Rates
1.
Hungary – 9%
2.
Bulgaria – 10%
3.
Andorra– 10%
4.
Cyprus – 12.5%
5.
Ireland – 12.5%
6.
Lithuania – 16%
7.
Montenegro – 9% -15%
Taxes — an unavoidable aspect of business, and one that every company want to minimise. But what if you could operate in a country with a more favourable tax environment?
For entrepreneurs and companies set on expanding or operating in Europe, finding a country with lower corporate tax rates can make a significant differences to your profits. The good news is that several European countries that offer low corporate tax rates alongside business-friendly policies.
In this article, we’ll examine the seven European countries with the lowest corporate tax rates, highlighting key incentives and factors to consider for your business.
Disclaimer: The information provided is accurate as of January 2025 and may have been updated since.
1
Hungary
Hungary, situated in Central Europe and surrounded by Slovakia, Ukraine, Romania, Serbia, Croatia, Slovenia, and Austria, distinguishes itself in Europe not only through its competitive tax rates but also through its favourable business climate.
This is reinforced by its high-income mixed economy, skilled workforce and appealing investment incentives for SMEs. The country's prominent industries today encompass automotive, telecommunications, computer technology, food processing, light manufacturing, and construction sectors.
Key Information
Corporate Tax Rate | A flat rate of 9% |
Other Tax Incentive | A territorial tax system that fully exempts dividends and capital gains and does not impose withholding taxes. SMEs (under 250 employees, revenue up to EUR 50 million) can deduct loan interest on tangible asset acquisitions from their tax due, subject to EU law limitations. |
Economic Outlook | GDP growth is forecast to rise from 1.8% in 2025 to 3.1% in 2026, with consumption as the main growth driver. Exports and investment are expected to expand gradually due to moderate growth in trade partners. |
Business Setup | Non-residents can set up a company in Hungary. There are no specific requirements for business activity or investment, except in restricted sectors like agriculture. A residence permit may be issued if the company generates sufficient income, generally from EUR 1,500 per month. |
Language and Currencies | The official language of Hungary is Hungarian, and the currency is the Hungarian Forint (HUF). Hungary is currently preparing to adopt the euro. |
Other Considerations | One of the highest VAT rates in Europe at 27%. Although corporate tax is low, there is a potential for complexity of the tax system and regulations. |
2
Bulgaria
Popular for its diverse landscapes, including rugged mountains and the tranquil Black Sea coastline, the Republic of Bulgaria is a country in Southeast Europe bordered by Romania, Greece, Turkey, and Serbia. Its strategic location has long made it a crucial route between northern and eastern Europe and the Mediterranean, as well as from central Europe to the Middle East.
The Bulgarian economy was once highly centralised, but today it is an open, upper-middle-income economy. Key sectors driving its growth include energy, mining, agriculture, automotive, technology, tourism, and manufacturing.
Key Information
Corporate Tax Rate | Corporate income in Bulgaria is generally taxed at a flat rate of 10%. Bulgarian tax residents are taxed on their worldwide income, while non-residents are only taxed on income from Bulgarian sources. |
Other Tax Incentive | No provincial or local corporate income taxes. Additional tax deductions for employing long-term unemployed individuals, people with disabilities, or elderly persons. Up to 100% of corporate income tax can be refunded for investments in regions with high unemployment, though this is a rare occurrence. |
Economic Outlook | Bulgaria is a developing, industrialised high-income country. GDP growth is projected to rise from 2.4% in 2024 to approximately 3% in both 2025 and 2026, driven by domestic demand and exports. |
Business Setup | Starting a business in Bulgaria is relatively straightforward, but opening a bank account may be challenging. It is recommended to use local services for assistance. Key industries include the chemical industry, electronics, engineering, and healthcare. |
Language and Currencies | The language spoken is Bulgarian. Its currency is the Bulgarian lev (BGN), although the country is on its way to adopt the Euro once the required conditions are met |
Other Considerations |
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3
Andorra
Known for its winter sports and made up of a series of mountain valleys whose streams come together to form a river, Andorra, the sixth-smallest state in Europe, is not only small in size – even its taxes are small. In fact, because of the low tax and the lack of customs duties, Andorra attracts millions of visitors for its duty-free shopping.
Benefiting from its scenic landscapes, Andorra's economy is heavily centred around tourism. Other important sectors include banking, retail, and real estate. With a skilled workforce and robust infrastructure, Andorra remains a strong attraction for foreign investments, especially in financial services and luxury tourism.
This independent, landlocked European microstate shares its borders with France and Spain.
Key Information
Corporate Tax Rate | The standard corporate tax rate stands at 10%. |
Other Tax Incentive |
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Economic Outlook | A developed economy with a high per capita income surpasses the European average. |
Business Setup | To establish a business in Andorra, foreign investors must obtain “a foreign investment authorisation”, open a bank account, and submit required documents to a notary. Non-residents can own up to 100% of a company, with the minimum share capital set at EUR 3,000, and must meet specific legal requirements. The process typically takes two months. |
Language and Currencies | The official language of Andorra is Catalan, although Spanish and French are widely spoken. English is also commonly used. The country’s official currency is the Euro (EUR). |
Other Considerations | Andorra's market is limited, heavily relying on a few key sectors, and there may be a need for in-person visits to manage some administrative tasks. |
4
Cyprus
The Republic of Cyprus, the third-largest island in the Mediterranean, is located in the eastern Mediterranean, southeast of Greece and south of Turkey, surrounded by Syria, Lebanon, Israel, Palestine, and Egypt. Although geographically part of West Asia, Cyprus’s cultural identity is predominantly Southeast European, making it a crossroads of European and Asian influences.
Cyprus has a diverse economy, with key sectors such as tourism, shipping, financial services, real estate, and high-tech industries. It offers several investment benefits, including Eurozone membership, a welcoming stance toward foreign direct investment (FDI), and a highly developed legal and accounting system.
Key Information
Corporate Tax Rate | The standard corporate tax rate in Cyprus is 12.5%. Tax-resident companies are taxed on worldwide income, while non-resident companies are taxed on Cyprus-source income. Non-distributed profits of controlled foreign companies (CFCs) may be taxed in Cyprus, with some exceptions. |
Other Tax Incentive |
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Economic Outlook | The GDP growth rates for the coming years are projected to be 3.6% in 2024, 2.8% in 2025, and 2.5% in 2026. Household purchasing power and consumption are expected to grow. |
Business Setup | Moderately challenging but entirely achievable. Only licensed legal professionals in Cyprus are authorised to draft the necessary documents for business registration, so you may need to hire a local professional to assist with the process. |
Language and Currencies | The official language of Cyprus is Greek, and the currency used is the Euro (EUR). English is widely spoken. |
Other Considerations |
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5
Ireland
The Republic of Ireland, located in north-western Europe, is the third-largest country on the continent and one of the richest countries in the world. It shares its only land border with Northern Ireland (part of the UK) and is bordered by the Celtic Sea, the Irish Sea, and St. George's Channel, with the Atlantic Ocean surrounding it.
Ireland's economy is primarily driven by its renowned pharmaceutical and medtech industries, life sciences, financial services, agriculture, and tourism sectors. The nation's highly educated workforce, alongside robust research and development efforts, fuels innovation. In addition, the country's strategic location as an English-speaking gateway to the EU further enhances its appeal to global investors..
Key Information
Corporate Tax Rate | Standard corporate tax rate: 12.5%. Resident companies taxed on worldwide profits. Non-resident companies taxed on Irish branch profits and certain Irish-source income. |
Other Tax Incentive |
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Economic Outlook | Mixed, trade-dependent economy with a positive growth outlook. GDP growth is projected at 3.7% for 2025 and 3.5% for 2026. A strong labor market is driving the domestic economy. |
Business Setup | Regulatory environment can be challenging but setting up a company is feasible. For non-EU/EEA nationals, investment or business setup possible via the Immigration Investor Programme or Start Up Entrepreneur Programme. |
Language and Currencies | The official languages of Ireland are Irish and English, with both widely spoken. The currency used is the Euro (EUR). |
Other Considerations | Profit resource rent tax applies to certain petroleum activities, with rates ranging from 25% to 40% depending on profit yield. Close companies may face additional taxes on undistributed investment income and professional service income (e.g., from solicitors, accountants, and doctors). |
6
Lithuania
Ranked the 19th happiest country in the world in 2024, Lithuania is the largest and southernmost of the Baltic states, located at the crossroads of Northern, Eastern, and Western Europe. It is bordered by Latvia, Belarus, Poland and the Baltic Sea.
Key industries in Lithuania include petroleum refining, fertiliser production, wheat and chemical manufacturing. While Russia has been a significant trading partner, Lithuania has increasingly diversified its trade relationships, expanding with countries like Latvia, Estonia, Germany, and the UK. Recently, Lithuania has also emerged as a startup hub, particularly in the financial sector, attracting a number of fintech companies.
Key Information
Corporate Tax Rate | 16% from 1 January 2025 (Formerly 15%). |
Other Tax Incentive |
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Economic Outlook | Lithuania is a developed, high-income country. GDP is projected to grow by 3% in 2025. Growth is driven by exports and household spending. |
Business Setup | Ranked 11th in the World Bank's Doing Business index, starting a business in Lithuania is not considered difficult, although it may be more challenging for non-EU nationals. The process involves submitting documents to the Register of Legal Entities. |
Language and Currencies | The official language of Lithuania is Lithuanian, and the official currency is the Euro (EUR). |
Other Considerations | Business immigration is the most common route for obtaining a residence permit in Lithuania. However, the country has challenges, such as a small domestic market, a tight labour market, and inconsistent infrastructure. |
3
Montenegro
Montenegro, in Southeastern Europe, lies between the Adriatic Sea and Serbia, bordered by Croatia, Bosnia and Herzegovina, Serbia, Kosovo, and Albania. Though small, it boasts diverse landscapes.
Montenegro's economy, a small open market, is mainly driven by tourism, with agriculture and transport also playing a role. Its export items include aluminium products, mineral oils, fuels, wood goods, charcoal, iron, and steel. As a service-based economy, Montenegro's tourism sector, a major contributor to GDP, is vulnerable to natural disasters and climate risks, prompting investments in greener technology. The country is also on track to potentially join the EU by 2026.
Key Information
Corporate Tax Rate | A progressive corporate income tax ranging from 9% to 15% depending on profit.
Resident taxpayers are taxed on worldwide income, while non-residents are taxed on Montenegrin-sourced income, with withholding tax on certain payments. |
Other Tax Incentive |
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Economic Outlook | Montenegro’s economic growth is expected to be moderate in 2025, with ongoing fiscal challenges. The country’s small, open economy heavily depends on tourism and has a limited industrial base. |
Business Setup | Foreign entrepreneurs must obtain a temporary residence permit, which can be secured through company registration. It is recommended to hire local professionals to help with the process. |
Language and Currencies | Language and Currencies The official language is Montenegrin, and the official currency is the Euro (EUR) |
Other Considerations | Language barriers can be a challenge for foreign entrepreneurs in the country. Additionally, Montenegro’s service-based economy can be susceptible to external factors, making macroeconomic stability depens highly on fiscal policy. |
Other Notable European Locations & Their Corporate Taxes
In this section, we take a closer look at several other popular countries within Europe and their relatively low combined statutory corporate income tax rates. This includes not only the federal or national corporate income tax but also any additional taxes or levies imposed at the regional, state, or municipal level.
- Romania: 16.0%
- Croatia: 18.0%
- Poland: 19.0%
- Switzerland: 19.6%
- Finland: 20.0%
- Latvia: 20.0%
- Sweden: 20.6%
- Czech Republic: 21.0%
- Iceland: 21.0%
- Slovakia: 21.0%
- Denmark: 22.0%
- Estonia: 22.0%
- Greece: 22.0%
- Norway: 22.0%
- Slovenia: 22.0%
- Austria: 23.0%
- Luxembourg: 24.9%
Looking to start a business abroad? Check out the best countries with the lowest corporate tax rates and find out more about the top places to start a business as a foreigner.
While some countries have higher corporate tax rates, they may provide other benefits like a stable economy, a large consumer base, or a favourable regulatory environment that can help offset the tax burden. For example, Switzerland is favoured for its strong financial sector, economic stability, and privacy laws, while the Czech Republic is popular among startups for its lower overhead costs. Similarly, Denmark is known for having one of the best business environments in Europe.
Tips On Doing a Business in Europe
Europe offers diverse and dynamic markets, but doing business there requires an understanding of each location’s regulations and economic environments. Here are some tips to consider:
Review Double Taxation Agreements (DTT)
Before setting up a business in any country outside of your own, it's crucial to understand the Double Taxation Agreements (DTT) or tax treaties in place. DTT ensure that businesses are not taxed on the same income in two different countries.
Many European nations have DTTs with other countries, reducing the risk of being taxed twice. You can visit the official government tax websites of the respective countries or consult the OECD (Organisation for Economic Co-operation and Development) website for a comprehensive list of existing DTTs.
Note: Not all taxes are covered under DTTs. For example, local taxes and value-added tax may not be included.
Understanding Your Tax Burden
It's important to consider not just corporate income tax but the entire tax policy in your jurisdiction. Key areas to be aware of include:
- VAT: If you're entering the local market, different Value-Added Tax (VAT) rates may impact your pricing strategy. VAT is common across most European countries, but rates and exemptions can vary significantly. For instance, some countries offer reduced VAT rates for certain products, such as food or books. It's crucial to know when VAT applies and how to handle VAT returns accurately.
- Personal Income Tax: Though primarily affecting individuals, personal income tax can influence business expenses, such as employee wages and executive compensation. For partnerships and sole proprietorships, profits are taxed as personal income.
- Property Taxes: If your business owns or leases property, you may be subject to property taxes.
- Excise Duties: Specific products, such as alcohol or fuel, may incur additional excise taxes.
- Environmental Taxes: Certain industries, like manufacturing, may be required to pay environmental taxes or levies.
The European Commission's website or local tax authority websites are good resources for up-to-date information.
Know the Legal Requirements for Foreign Investment
Regulations for foreign investment vary across European countries. Some nations may restrict foreign ownership, require investment approval, or mandate residency permits.
Even in countries with more relaxed rules, additional documentation—such as proof of investment or the creation of local jobs—is often required. Minimum capital investments are also commonly needed. Understanding these requirements ahead of time can help avoid delays when establishing your business.
Eurozone vs. National Currencies
Currency plays a key role in your business operations. European Union member states have adopted the Euro, streamlining cross-border transactions in the eurozone. However, countries outside the Eurozone use their own currencies, creating potential exchange rate risks.
To manage these risks, you could consider hedging strategies like forward contracts or options. These can help protect against currency fluctuations, but they may still involve some uncertainty and additional costs.
Leverage Free Economic Zones (FEZ)
Free Economic Zones (FEZ) are special areas designed to attract foreign direct investment (FDI) by offering benefits like tax breaks, simplified customs, and fewer regulations. These zones can be great for boosting economic growth and lowering operational costs.
Before committing to an FEZ, it's important to understand the eligibility requirements and any restrictions. Certain products and services may be limited, and there might be regulations on how goods are handled, stored, or moved within the zone.
Make sure you research the zone’s rules and how the benefits apply to your business.
Hire Local Professionals
Dealing with foreign bureaucracy and legal requirements can be tricky, especially if you're unfamiliar with the language or customs. Bringing in local experts—like an accountant or a lawyer—can simplify the process and ensure you're compliant with all regulations.
Although there are costs associated with these services, the investment is worthwhile as it saves time, reduces risk, and helps you navigate the local environment more effectively.
Consider Labour and Employment Laws
Understanding labour and employment laws is essential for your business. Pay attention to wages, benefits, working hours, and employee protections to ensure compliance. In many European countries, employee well-being is highly valued, and building a positive reputation as an employer can be just as important as financial success.
In some countries, hiring local talent may also provide tax incentives or grants.
The Bottom Line
There you have it – the 7 countries with the lowest corporate tax rates in Europe.
While the corporate income tax rate is an important factor, companies often consider more than just taxes when choosing where to set up operations. Factors such as the business environment, reputation of the country, industry-specific considerations, and regulatory complexities play crucial roles in the decision-making process.
If Europe isn’t the right fit, consider the Asian market. With access to key markets like China and Southeast Asia, you can tap into some of the world’s fastest-growing economies. Business hubs like Hong Kong and Singapore combine low corporate taxes with supportive environments—Hong Kong even offers 0% tax on offshore profits. Exploring these options could unlock significant benefits for your business.
FAQs
Which EU country imposes the lowest corporate tax rate?
Hungary imposes a corporate tax rate of 9%, the lowest in the EU.
Which EU country imposes the highest corporate tax rate?
Which EU country is best for starting a business?
