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Reviewed by Jul 18, 2022| Updated on
A corporate tax is a levy which the government imposes on the income of a company. The money collected from corporate taxes is used as the source of revenue for a country. Operating earnings of a company are determined by deducting costs from the cost of the product sold (COGS) and income depreciation.
First, tax rates are applied to establish a legal duty the corporation owes to the government. Regulations relating to corporate taxes vary widely across the world, but they must be voted on and approved by the government of a country for enactment.
Some regions, like Jersey, are considered tax havens, and are highly coveted by companies as such.
A corporation is an individual with a distinct and autonomous legal body compared with its shareholders. According to the Income Tax Act, domestic and international corporations are liable to pay income tax.
While a domestic corporation is taxed on its universal income, a foreign corporation is imposed only on the income earned within India, i.e. accrued or obtained within India.
For tax calculation under the Income Tax Act, the types of companies may be described as:
1. Domestic Company: Domestic Company is one that is listed under India's Companies Act and also involves the foreign-owned firm that has control and management wholly based in India. A domestic business includes both private and public companies.
2. Foreign Company: Foreign Company is one that is not listed under the Indian Company Act and has control and management outside of India.
Corporate tax is based on a company's taxable profit or net income. A company's operating profit/net profits is the overall sum left with the company after the requisite deduction of different expenditures has been made. A company incurs a host of expenses for selling products.