HomeAnalyticsGuidesCorporate Tax Rates in Europe 2026: A Ten-Jurisdiction Tracker

Corporate Tax Rates in Europe 2026: A Ten-Jurisdiction Tracker

Corporate tax rates across Europe in 2026 range from 12.5% on trading income in Ireland to combined burdens exceeding 30% in Germany and France for large groups, making jurisdiction selection one of the most consequential structural decisions for any international business. This tracker compares the headline and effective rates in ten jurisdictions – Portugal, Spain, France, Italy, Germany, the Netherlands, Luxembourg, Cyprus, Ireland and the United Kingdom – drawing on enacted legislation and verified sources. Rates alone do not determine optimal structure; anti-avoidance rules, transfer pricing requirements, treaty access and the treatment of passive income all shape the real tax cost.

Why This Comparison Matters for International Groups

For multinational groups, founders establishing holding structures and funds making cross-border investments, the choice of jurisdiction is rarely driven by the headline rate alone. The interaction between the statutory corporate tax rate, applicable surcharges, tax treaty networks, controlled foreign company rules and Pillar Two minimum tax obligations determines the actual effective rate a group bears. A rate that appears competitive in isolation may look less attractive once municipal levies, sectoral surtaxes or exit taxes are factored in.

The ten jurisdictions covered here represent the most frequently considered locations for European headquarters, intermediate holding companies, operating subsidiaries and intellectual property holding vehicles. Each has undergone legislative change in the 2025–2026 cycle, meaning that planning based on earlier rate assumptions may already be out of date.

If you are currently reviewing your group's European structure in light of these changes, we are happy to assist. Write to info@ferrazwhitmore.com or visit our contacts page to arrange an initial discussion.

Ten-Jurisdiction Rate Tracker (2026)

Facts last verified: 22 September 2026. All figures are drawn exclusively from the enacted legislation and sources listed in the Sources section below. Where combined or effective rates are shown, the components are identified separately.

Jurisdiction Headline / Statutory Rate Key Thresholds & Variations Combined / Effective Rate Notes Primary Source
Portugal 19% (2026); 18% (2027); 17% (2028) General IRC rate for tax periods starting on or after 1 January 2026 Reduction path enacted; municipal surcharge (derrama) applies separately Law 64/2025 of 7 Nov 2025
Spain 25% standard Newly created companies: 15% for first two profitable years; micro-enterprises: 19% on first EUR 50,000, 21% above; SMEs (turnover under EUR 10m): 23%, falling to 20% by 2029 Multiple rate tiers depending on size and status Law 27/2014 (LIS)
France 25% standard SMEs (turnover under EUR 10m): 15% on first EUR 42,500 of profit; large groups (turnover EUR 1.5bn+): exceptional surtax applies for a second year under Finance Act 2026 Surtax gives overall rates of approx. 30.98% (EUR 1.5–3bn turnover) and approx. 36.13% (above EUR 3bn) Art. 219 CGI; Finance Act 2026 (Law 2026-103 of 19 Feb 2026), art. 12
Italy IRES 24% Regional IRAP 3.9% (regional variations apply) Combined IRES + IRAP burden varies by region TUIR; Legislative Decree 446/1997
Germany 15% corporate income tax + 5.5% solidarity surcharge = 15.825% Trade tax typically 14–17% depending on municipality; CIT rate to fall by 1 percentage point per year from 2028 to 2032 Combined burden approximately 29–33% KStG; GewStG
Netherlands 19% on first EUR 200,000; 25.8% above Two-bracket structure No additional municipal income tax surcharge at corporate level Wet Vpb 1969
Luxembourg 16% corporate income tax (from tax year 2025) Municipal business tax and employment fund surcharge apply Combined rate approximately 23.87% in Luxembourg City LIR
Cyprus 15% (from 1 January 2026; previously 12.5%) Reform passed by House of Representatives 22 December 2025 Rate increase of 2.5 percentage points; interaction with notional interest deduction regime to be considered Income Tax Law as amended 2025
Ireland 12.5% on trading income; 25% on passive and certain foreign income Groups with revenue of EUR 750m or more: 15% minimum effective rate applies Pillar Two domestic minimum top-up tax enacted TCA 1997; Finance (No. 2) Act 2023
United Kingdom 25% main rate (profits above GBP 250,000); 19% small profits rate (below GBP 50,000) Marginal relief between GBP 50,000 and GBP 250,000; corporate interest restriction above GBP 2m net interest expense No separate municipal corporate income tax; R&D reliefs available CTA 2009/2010; TIOPA 2010

Jurisdiction-by-Jurisdiction Notes

Portugal

Portugal's IRC rate reduction – from 19% in 2026 to 18% in 2027 and 17% in 2028 – was enacted by Law 64/2025 of 7 November 2025 and represents the most clearly scheduled rate path in this group. The reduction applies to the general rate; the municipal surcharge (derrama) continues to apply on top. For groups considering a Portuguese holding or operational base, the downward trajectory strengthens the jurisdiction's competitiveness relative to peers, provided the overall structure satisfies substance and anti-avoidance requirements.

Spain

Spain's rate architecture is notably segmented. The standard 25% rate applies to most companies, but micro-enterprises benefit from a 19%/21% two-tier rate, SMEs with turnover under EUR 10m are taxed at 23% (with further reductions planned through to 2029), and newly created companies may access a 15% introductory rate for their first two profitable years. Foreign investors establishing Spanish operating subsidiaries should identify the applicable tier at the outset, as the classification affects not only the rate but also associated reporting thresholds.

France

France presents a split picture. For most companies the 25% standard rate remains, with an SME carve-out at 15% on the first EUR 42,500 of profit. However, very large groups face a significantly elevated burden in 2026: the Finance Act 2026 (Law 2026-103 of 19 February 2026) extended an exceptional corporate income tax contribution for a second financial year. For companies with turnover between EUR 1.5 billion and EUR 3 billion the contribution is 20.6% of corporate income tax, producing an overall rate of approximately 30.98%; for turnover above EUR 3 billion the contribution rises to 41.2% of corporate income tax, giving an overall rate of approximately 36.13%. Groups at or near these thresholds should model the surtax impact before repatriating profits or completing transactions in 2026.

Italy

Italy imposes IRES at 24% alongside the regional IRAP levy at 3.9%, though IRAP rates vary by region and sector. The combined burden differs across the country, and IRAP applies on a broader base than IRES in several sectors. Transfer pricing compliance and the interaction between IRES and Italy's participation exemption regime are recurring concerns for inbound investors and international groups with Italian subsidiaries.

Germany

Germany's corporate tax burden remains among the highest in this group on a combined basis. The federal corporate income tax stands at 15% plus the 5.5% solidarity surcharge (producing 15.825%), but the trade tax – levied at the municipal level – typically adds a further 14–17%, bringing the combined burden to approximately 29–33%. Legislation provides for the federal corporate income tax rate to fall by 1 percentage point per year from 2028 to 2032, which will gradually reduce the combined rate. The trade tax is deductible for CIT purposes, but its variability across municipalities means that the location of a German operating subsidiary is a material planning decision.

Netherlands

The Netherlands applies a two-bracket structure: 19% on profits up to EUR 200,000 and 25.8% above that threshold. The jurisdiction retains a strong tax treaty network and an established participation exemption, making it a frequently used location for intermediate holding companies. However, anti-avoidance rules – including substance requirements and conditional withholding taxes introduced in recent years – have raised the compliance bar for groups seeking to use Dutch structures primarily for treaty access.

Luxembourg

Luxembourg reduced its corporate income tax rate to 16% from tax year 2025. Including the municipal business tax and the employment fund surcharge, the combined rate in Luxembourg City is approximately 23.87%. Luxembourg remains a primary jurisdiction for investment fund structuring, intellectual property regimes and intra-group financing. Substance requirements under both domestic rules and the EU Anti-Tax Avoidance Directives apply to all structures. For a closer look at the available structuring options, see our Luxembourg tax structuring services.

Cyprus

Cyprus raised its corporate income tax rate to 15% from 1 January 2026 – an increase of 2.5 percentage points from the previous 12.5% rate. The reform was passed by the House of Representatives on 22 December 2025. Groups with existing Cyprus structures should review how the rate change interacts with the notional interest deduction regime and any applicable tax treaty provisions. Cyprus continues to offer an extensive treaty network and an IP box regime, but the cost-benefit calculation for new structures changes with the higher rate.

Ireland

Ireland retains its 12.5% rate on trading income, but the picture is more complex for large groups. Following the implementation of the OECD Pillar Two framework through the Finance (No. 2) Act 2023, groups with annual revenue of EUR 750 million or more are subject to a 15% minimum effective rate. Passive and certain foreign income continues to be taxed at 25%. For qualifying trading companies below the Pillar Two threshold, Ireland remains one of the lowest headline jurisdictions in this group, and the country's treaty network and EU membership support its use as a base for European operations.

United Kingdom

The UK main rate of 25% applies to profits above GBP 250,000, with a small profits rate of 19% for companies with profits below GBP 50,000 and marginal relief in between. The corporate interest restriction rules limit deductibility of net interest expense above GBP 2 million, a constraint that is particularly relevant for leveraged acquisition structures and intra-group financing arrangements. Post-Brexit, UK companies no longer benefit from EU parent-subsidiary or interest and royalties directives, making treaty analysis essential for any UK-continental European structure.

How to Choose a Jurisdiction: Key Factors Beyond the Headline Rate

The headline rate is a starting point, not a conclusion. International groups and founders should assess the following factors when comparing jurisdictions:

  • Effective rate after surcharges and local taxes: Germany and France illustrate how the combined burden can deviate substantially from the federal statutory rate.
  • Pillar Two applicability: Groups with consolidated revenue of EUR 750 million or more face a 15% global minimum effective rate regardless of where profits are booked. Ireland's 12.5% rate does not eliminate Irish tax for qualifying large groups; it triggers a top-up obligation.
  • Anti-avoidance and substance rules: EU Anti-Tax Avoidance Directives (ATAD I and II), domestic controlled foreign company provisions and general anti-abuse rules apply across all EU member states. Structures that lack genuine economic substance face material reclassification risk under a tax audit.
  • Transfer pricing: All ten jurisdictions maintain transfer pricing regimes aligned with OECD guidelines. Intercompany transactions – whether for goods, services, IP licences or financing – must be priced at arm's length and documented accordingly.
  • Tax treaty network: The scope of withholding tax reductions available for dividends, interest and royalties depends on the applicable treaty. Our separate guide on dividend withholding tax rates compared in 2026 provides a complementary analysis.
  • Tax rate trajectory: Portugal, Germany (from 2028) and Spain (SME rates to 2029) all have enacted future rate reductions. Structures with a multi-year horizon should model projected rather than current rates.
  • Interaction with domestic participation exemptions: Where dividends or capital gains flow between group entities, the availability and conditions of participation exemptions vary materially between jurisdictions.

Common Errors Made by Foreign Clients

In advising international groups, Ferraz & Whitmore frequently encounters the same structural and compliance errors. The most common include:

  • Relying on outdated rate information: Cyprus raised its rate by 2.5 percentage points at the start of 2026; Portugal's rate fell simultaneously. Structures designed on the basis of pre-2026 rates may no longer be optimal or may produce unexpected tax costs.
  • Conflating the statutory rate with the effective rate: Groups establishing in Germany or France that focus on the federal or standard rate without modelling the trade tax or surtax obligations consistently underestimate their actual burden.
  • Underestimating Pillar Two's reach: Groups approaching but not yet at the EUR 750 million revenue threshold sometimes discount Pillar Two as a near-term concern. Growth projections and M&A activity can move a group across the threshold quickly, and tax risk management requires advance planning.
  • Ignoring substance requirements in holding locations: Placing a holding company in Luxembourg, the Netherlands or Cyprus without adequate economic activity at that level exposes the structure to challenge under domestic anti-avoidance rules and potentially to denial of treaty benefits.
  • Failing to document transfer pricing contemporaneously: Several jurisdictions impose penalties not only for transfer pricing adjustments but for late or inadequate documentation. A tax audit in any of these jurisdictions that identifies a transfer pricing exposure will typically examine documentation first.
  • Overlooking interest deductibility constraints: The UK's corporate interest restriction and equivalent rules under ATAD in EU jurisdictions can significantly affect the deductibility of intra-group financing costs, particularly in leveraged structures.

Reviewing your current structure with these factors in mind – ideally before a transaction or a significant change in group revenue – reduces the likelihood of a costly correction later. Our corporate law team works alongside our tax advisers to ensure that structural decisions are legally sound across jurisdictions. To discuss a specific situation, contact us at info@ferrazwhitmore.com or through our contacts page.

Decision Checklist for International Groups

Before selecting or restructuring around a European jurisdiction, consider the following steps:

  • Confirm the current and projected headline rate, including all surcharges and local levies.
  • Determine whether the group meets the Pillar Two EUR 750 million revenue threshold, now or within a foreseeable planning horizon.
  • Map the treaty position for each relevant income flow (dividends, interest, royalties, capital gains).
  • Assess substance requirements: board composition, decision-making location, local employees, and operational presence.
  • Review transfer pricing documentation obligations and ensure that intercompany agreements reflect arm's length terms.
  • Model the interaction between the selected jurisdiction's participation exemption and the group's existing dividend flows.
  • Identify any pending legislative changes – such as Portugal's scheduled rate reductions or Germany's planned cuts from 2028 – that may affect the structure's efficiency over its intended lifespan.
  • Obtain confirmation of tax treatment from local counsel before finalising any structure.

Sources

If this tracker has raised questions about how your group's current structure compares to available alternatives, Ferraz & Whitmore can provide a structured analysis. Write to info@ferrazwhitmore.com or use our contacts page to start the conversation.

Disclaimer: This publication is provided for informational purposes only and does not constitute legal advice. The information herein should not be relied upon as a substitute for professional legal counsel tailored to your specific circumstances. Ferraz & Whitmore assumes no liability for actions taken or not taken based on the contents of this material. For advice regarding your particular situation, please contact info@ferrazwhitmore.com.

Reviewed by
Sophie Laurent
Legal Analyst · Tax & Data Protection