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16 Corporate Tax Rate Survey 2006

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43 Korea, Republic of (2006 rate = 27.5%) Effective January 1 2005, the corporate income tax rate was reduced by two percent as part of the Korean government’s measures to stimulate corporate investment in Korea. Therefore, where taxable income exceeds KRW 100 million a tax rate of 27.5 percent (previously 29.7 percent) applies (including resident surtax). For lower taxable income a tax rate of 14.3 percent (previously 16.5 percent) applies ( including resident surtax).

44 Latvia (2006 rate = 15%) The tax rate on corporate income is 15 percent. There are four regions in Latvia called Special Economic Zones (SEZ). Companies operating in these zones pay a 25 percent corporate income tax, but are granted 80 percent corporate income tax relief.

45 Lithuania (2006 rate = 15%/13%) The standard corporate tax rate is 15 percent. A rate of 13 percent applies if the average number of employees of an entity does not exceed 10 and if the income does not exceed LTL 500,000 (app. EUR 144,800). Certain exemptions apply. If an entity’ average number of employee’s does not exceed 10 and the income does not exceed LTL 1,000,000 (app. EUR 289,600), the income minus LTL 25,000 (ca EUR 7,240) is taxed at a 15 percent rate. The following special profit tax reliefs are currently in force:

  • 1)

    Free economic zone companies in which capital investment is at least one million EUR – such companies are exempt from profit tax for six taxable periods, starting with the taxable period in which the investment reached one million EUR. For the subsequent 10 taxable periods a 50 percent reduction in the profit tax rate applies. To qualify for these reductions, at least 75 percent of the companies’ income must be from the production, treatment, processing, etc. of goods in a free economic zone.

  • 2)

    The profit tax is reduced by 20 percent or more for manufacturing companies deriving more than half their income from their own production activities and employing people with disabilities.

  • 3)

    Tax reliefs for credit unions and agricultural companies.

From January 1 2006 to December 31 2007 Lithuanian and foreign taxable units are subject to social tax. The social tax rates are four percent on a taxable profit of a Lithuanian taxable unit in 2006 and three percent in 2007. The provisional social tax is similar to a corporate income tax, so the taxable profit is subject to an overall tax rate of 19 percent (for 2006) and 18 percent (for 2007).

46 Luxembourg (2006 rate = 29.63%) A corporate tax rate of 22.88 includes a four percent employment fund contribution. Municipal business tax rates vary; the rate for the city of Luxembourg is 6.75 percent.

47 Macau (2006 rate = 12%) Progressive tax rates apply from three percent to a maximum rate of 12 percent for taxable income over MOP 300,000.

48 Malaysia (2006 rate = 28%) A special five percent corporate income tax rate applies to corporations which conduct an inward reinsurance business or an offshore insurance business (as defined in the Malaysian Income Tax Act, 1967). Income generated by a life fund of an insurance company is taxed at eight percent. A non-resident corporation is

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