Corporate Income Tax CIT
Stands for: Corporate Income Tax
A direct tax levied on the net profits of a company by the country where it is resident or has taxable presence.
Definition
What it is
Corporate Income Tax (CIT) is the primary direct tax that companies pay on their taxable profits. The base is normally accounting profit adjusted for tax-deductible expenses, depreciation rules, loss carryforwards, and special incentives such as R&D credits or patent boxes. Rates vary widely: Hungary applies 9%, Ireland 12.5% on trading income, the United States 21% federal CIT, Germany roughly 30% combined with trade tax, and the UAE introduced a 9% federal CIT in 2023.
How the base is built
Most jurisdictions start from financial-statement profit and run through a reconciliation: add back non-deductible items (entertainment, certain fines, related-party interest above thin-cap limits), subtract exempt income (qualifying dividends under participation exemption), apply loss relief, and then apply the statutory rate. Multinationals must layer transfer-pricing adjustments, CFC inclusions, and Pillar Two top-up tax on top of the local CIT computation.
Why the rate alone is misleading
Founders often compare jurisdictions by headline CIT rate, but the effective tax rate (ETR) depends on deductions, depreciation, group relief, and treaty access.
When you'll encounter it
You will encounter CIT every fiscal year when filing the corporate tax return, when projecting net profit to shareholders, and when comparing jurisdictions for a holding or operating entity. It also matters during fundraising due diligence, since investors model post-tax cash flows, and during exit planning, where deferred tax balances and unused losses affect deal value.
Used in our guides
FAQ
Is CIT the same in every country?
No. Headline rates range from 0% in some Gulf free zones to over 30% in Germany, France, and parts of the United States. Each country also defines its own taxable base and deductions.
Do I pay CIT on revenue or profit?
On profit. CIT applies to taxable income, which is broadly accounting profit adjusted for non-deductible expenses, exempt income, and tax-specific timing differences.
Can losses reduce my CIT?
Yes, in most jurisdictions tax losses can be carried forward (and sometimes back) to offset future profits, subject to ownership-change and time limits.
References
- OECD Tax Database - Corporate income tax rates https://www.oecd.org/tax/tax-policy/tax-database/
- IRS - Corporations https://www.irs.gov/businesses/corporations