In most European countries, corporate income istaxed twice—once at the entity level and once at the shareholder level. Before shareholders pay taxes, the business first faces corporate income taxA corporate income tax (CIT) is levied by federal and state governments on business profits. Many companies are not subject to the CIT because they are taxed as pass-through businesses, with income reportable under the individual income tax. on its profits. Thus, when shareholders pay their layer of taxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities., they are doing so on dividends or capital gains distributed from after-tax profits. The integrated tax rate on corporate income reflects both the corporate income tax and the dividends or capital gains taxA capital gains tax is levied on the profit made from selling an asset and is often in addition to corporate income taxes, frequently resulting in double taxation. These taxes create a bias against saving, leading to a lower level of national income by encouraging present consumption over investment. —the total tax levied on corporate income.

For example, suppose a French corporation earns €100 in profit. It must pay corporate income tax of €36.13 (by applying the top marginal tax rate, including thesurtaxA surtax is an additional tax levied on top of an already existing business or individual tax and can have a flat or progressive rate structure. Surtaxes are typically enacted to fund a specific program or initiative, whereas revenue from broader-based taxes, like the individual income tax, typically cover a multitude of programs and services.), which leaves the corporation with €63.87 in after-tax profits. If the corporation distributes those earnings as a dividend, then the income is taxed again at the individual level at a top dividend rate of 34 percent, resulting in €21.72 in dividend taxes. Thus, the final after-tax income is €42.15, implying that the €100 in original corporate profits faces an integrated tax rate on corporate income of 57.85 percent. The same calculation can be done for corporate income realized as capital gains.

For dividends, France’s top integrated tax rate was the highest among European countries (57.85 percent), followed by Ireland (57.13 percent),Denmark (54.74 percent) and the United Kingdom (54.5 percent). Latvia (20 percent),Estonia (22 percent), and Hungary (22.65 percent) levy the lowest rates. Estonia and Latvia’s tax on distributed profits means that the corporate income tax is the only layer of taxation on corporate income distributed as dividends.

For capital gains, France (57.85 percent), Denmark (54.76 percent), the Netherlands (52.51 percent) and Norway (51.52 percent) have the highest integrated rates among European countries, while Cyprus (12.5 percent), Romania (16.84 percent), Bulgaria (19 percent),Switzerland (19.61 percent), and Greece andSlovenia (22 percent) levy the lowest rates. Several European countries—namelyBelgium, Cyprus, Greece, Luxembourg, Malta, theSlovak Republic, Slovenia, Switzerland, and Turkey—do not levy capital gains taxes for long-held shares without substantial ownership, making the corporate tax the only layer of tax on corporate income realized as long-term capital gains.

On average, European countries levy an integrated tax rate of 39.23 percent on dividends and 36.03 percent on capital gains. In comparison, theUnited States levies an average integrated top tax rate of 47 percent on dividends and capital gains.

Double taxationDouble taxation is when taxes are paid twice on the same dollar of income, regardless of whether that’s corporate or individual income. of corporate income can lead to economic distortions, such as reduced savings and investment, a bias toward certain business forms, and debt financing over equity financing. Several European countries have integrated corporate and individual tax codes to eliminate or reduce the negative effects of double taxation on corporate income.

2025 Notable Changes

• Over the past year, some countries have raised their statutory corporate rates, including Estonia (from 20 to 22 percent), France (from 25.8 to 36.13 percent),Lithuania (from 15 to 16 percent), and the Slovak Republic (from 21 to 24 percent). Others have lowered their corporate tax rates, includingIceland (from 21 to 20 percent), Luxembourg (from 24.94 to 23.87 percent), andPortugal (from 31.5 to 30.5 percent).
• Five countries have raised their top personal tax rates on long-term capital gains, such as theCzech Republic (from 0 to 23 percent), Estonia (from 20 to 22 percent), Latvia (from 20 to 28.5 percent) Spain (from 28 to 30 percent), and the United Kingdom (from 20 to 24 percent). In contrast, Portugal has reduced its top personal tax rate on long-term capital gains from 28 to 19.6 percent.
• Spain increased its top personal dividend tax rate from 28 to 30 percent, while the Slovak Republic reduced its top personal dividend tax rate from 10 to 7 percent.