Corporate tax is a direct tax associated with the income or capital of corporations and similar legal entities. This lesson introduces what corporate tax is, why governments levy it, which corporations may be subject to it, and why economists debate its effects.
A corporate tax—also called corporation tax, company tax, or corporate income tax—is generally imposed on a corporation's income or capital. It is normally assessed at the entity level, meaning the company is treated as the taxpayer for this tax.
All flashcards
What is tax incidence?
Who ultimately bears a tax's economic cost, which may differ from the legal taxpayer.
How can taxable income differ from accounting profit?
Tax law may require adjustments for timing, exemptions, or deductions that financial accounting treats differently.
What is an imputation system?
A system that may credit shareholders for corporate tax already paid on distributed earnings.
What does a thin capitalization rule do?
It may restrict interest deductions when related-party debt is excessive compared with equity.
What is self-assessment in corporate taxation?
A system in which the corporation calculates its tax liability on its return.
Quiz questions
What is the main purpose of transfer pricing rules for related-party transactions?Answer: To apply appropriate pricing standards to transactions between related parties.
What income may a worldwide corporate tax system include for a resident corporation?Answer: Income from both domestic and foreign sources.
What does group relief generally allow qualifying companies to do?Answer: Use certain tax losses or other tax items across group members.
When a corporation withholds tax from a payment to another person, what is the withheld amount generally?Answer: The recipient's tax collected and remitted through the corporation.
What is one purpose of an alternative minimum tax?Answer: To ensure some tax applies when regular deductions reduce ordinary tax substantially.
Based on the Wikipedia article Corporate tax, licensed CC BY-SA 4.0. Adapted into a summary, flashcards and quizzes.