What is Corporate Tax?

What is Corporate Tax?

Let’s get focused for this discussion: what is corporate tax? Among the tax forms imposed in any country today, corporate tax evolved from the very principle of business income generation. Legal entities are obliged to pay this tax  imposed by the federal government, or by any other level of jurisdiction.

Generally, corporate taxes are based on the net profit figures. Depending on the imposed rule, certain corporate activities may be excluded from this taxation scheme. Reorganizations, for instance, may not be taxed.

What is corporate tax from a corporation’s viewpoint? For definition purposes, let’s take a closer look at what exactly a corporation is . A corporation is a legal creation and a juridical person under a specific set of laws. For most taxation systems, they are entities recognized to have limited liabilities for members under any untoward circumstance.  Corporations are imposed taxes separate from their owners, by virtue of being juridical persons.

Corporate taxes are tantamount to income taxes for a business. Rates vary among countries but the calculations are somewhat similar. Specific tax rates multiplied by the determined amount of taxable income yield the amount of tax payments. Tax exemptions and tax deductions are considered first before getting the final tax figure through the formula.

The definition of taxable income varies from one jurisdiction to another. While it is true that the foundation of taxation remains universal, the application differs. Criteria in recognizing income, expense and deductions also matter, as accounting principles also vary from one country to another.

What is corporate tax that it seems to be a very crucial item? It cannot be denied that governments frown upon violations and neglect of duties to the state. Corporate taxes are crucial as they constitute bulk of the economy nowadays. Failure to pay means loss for revenue to the country or province. More importantly, tax evasion, as the term appropriately applies, can also mean court cases and future losses, both in reputation and in earnings.

The big deal behind corporate taxes is that they comprise the major income tax form from the corporate sector. Governments are not just concerned with every business’ adherence to the existing laws; they also care about doing the right thing right, from income source identification to the ultimate payment of tax.


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