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Corporation Tax is a tax levied on the profits of incorporated companies. In most countries, companies must file accounts with the government each year, reporting their income, expenditures and profits over the 12-month period. Typically, there are penalties, including fines and even imprisonment if the directors of the company fail to file accounts in a timely and accurate fashion.
Corporation tax is usually levied as a standard single rate, rather than in a graduated series of rates as is common with income tax. It is often the case that some companies are charged at special rates, however. For example, governments may decide that they want to support the growth of small companies and so charge them a lower rate of corporation tax than large companies. Companies which exist only to invest in other companies, such as unit trusts for example, are often also charged corporation tax at a lower rate.
In most legal dispensations, companies are allowed to offset many costs incurred in the course of doing business against their taxable income before corporation tax is charged on it. For example, money spent on research and investment can often be written off against tax liabilities in whole or in part.
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