Corporate Tax Rate in Africa

Corporate Tax Rate in Africa

How does the government raise money to fund its operations? There are several sources of funding available to the government. Some of them include; commerce, loans, grants, and levies on citizens and businesses (i.e. tax). Usually, the government receives significant revenue by levying taxes on individuals and businesses to carry out governance activities at a determined rate. Read on to learn about the Corporate Tax Rate in Africa.

What is corporate tax?

Corporate tax is a type of tax that is levied on the profits of a corporate body after all expenses have been deducted from the corporation’s revenue. These rates vary from country to country, with some having high rates and others low.

Depending on the relevant tax laws of each country, you may be taxed if your company falls under any of these categories: 

  1. Corporations that have been incorporated under the laws of that country;
  2. Companies that are incorporated in another country but carry on business in the country or otherwise derive income from that country;
  3. Businesses considered to be ‘resident’ in that country for taxation.

These taxes are levied on the net income of the corporation and may also be applied to income within the country or worldwide income. Consequently, taxes can be reduced by making deductions, taking advantage of reliefs/holidays, and subsidies. 

Corporate tax rate in African countries

Most countries of the world have a corporate tax rate prescribed by statute. Only 15 jurisdictions don’t have a general income tax on corporations. As expected, many of these tax-free jurisdictions are small island nations, popular for their lack of corporate taxes or attractive beaches. Some of these countries include the Bahamas, Bermuda, and the Cayman Islands, popular tax havens for offshore investing.

Africa has the highest average corporate tax rate among all continents at 27.97%, while Asia holds the title for the lowest at 19.62%. Furthermore, this disparity is reflected at the country level, with Africa housing eight of the world’s top 20 countries with the highest statutory income tax rates. Despite this, the continent continues to attract investors and entrepreneurs because of its expanding economies.

Countries with the highest corporate tax rate in Africa

One of the countries with the highest tax rate in the world is Comoros. Comoros has a corporate tax rate of 50%, which makes it the jurisdiction with the second highest corporate tax rate in the world, behind only the United Arab Emirates. 

Some other countries with corporate tax rates in Africa significantly above the regional average statutory corporate tax rate include: 

  • Mozambique & Namibia at 32% each; 
  • Cameroon and Seychelles at 33%; 
  • Chad, Equatorial Guinea, Guinea, Sudan and Zambia at 35%. 
  • Nigeria, Congo, Ethiopia, Gabon, Kenya, Malawi, Senegal, Rwanda, Sierra Leone, and Uganda have their corporate tax rates set at 30%.

It is common to see companies in these countries attempt to reduce their tax liability through tax avoidance and evasion. They do this by moving money and business units to countries with more favourable tax systems. However, these actions may not always be considered illegal.

Countries with the lowest corporate tax rate in Africa

Some of the countries with the lowest corporate tax rates in Africa include 

  • Mauritius and Tunisia levy 15%
  • Libya and Madagascar at 20%
  • Botswana at 22% 
  • and Egypt at 22.5

Countries that have a lower tax rate tend to be more attractive to investors, provided all other endearing factors are present, such as security and a healthy economy.

Africa’s corporate tax rate varies greatly among countries, with some having high rates and others having low rates. This is because Governments usually aim to find a balance between attracting investors and raising revenue.

In addition, here’s an easier way to incorporate your company in any African country with the most favourable tax rate.

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