KPMG Corporate Tax Rate Survey January 1999

KPMG Corporate Tax Rate Survey January 1999 The KPMG International Tax Centre recently surveyed the corporate tax rates of 60 countries, including the 29 member countries of the Organisation for Economic Co-operation and Development (OECD) and most countries in the Asia Pacific and Latin American regions. Findings Lower tax rates in Latin American and Asia Pacific regions. The survey reveals that, in general, countries in less developed regions of the world levy lower tax rates compared to the more developed nations. The developed countries in the OECD have an average corporate income tax rate of about 34.8%. The comparatively less developed nations in the Asia Pacific that were surveyed have an average rate of 31.7%. At 28.6% the average rate among Latin American countries is even lower (see Table 1). Lower rates tend to prevail in less developed regions due to efforts by local governments to attract investment. Trend toward lower corporate tax rates in developed countries continues. Among industrialised countries of the OECD, corporate tax rates fell in Denmark, France, Germany, Ireland, Japan, Poland, Switzerland and Turkey in the past year. Rates held steady across the rest of OECD, except in Mexico which experienced the only rate increase. The trend toward lower rates appears to be a long-term one as Table 2 shows, over the past four years the average corporate tax rate among OECD countries has dropped by almost three percentage points at 1 January 1999. (Argentina and Pakistan were the only other countries surveyed to increase their corporate tax rate during the past year.) Tax rates under pressure from increasing business mobility and European economic integration. The trend toward lower tax rates is due in part to the increasing globalisation of business and the rapidly evolving new technologies that are making it possible. As business and capital become more mobile, developed countries are under more pressure to keep their corporate tax rates competitive or risk seeing businesses migrate their activities and profits to lower tax jurisdictions. Economic and Monetary Union in Europe is also exerting downward pressure on tax rates. Table 2 also shows that since 1996 the average corporate tax rate among EU countries has dropped by about three percentage points to approximately 36%. With the introduction of the euro at the start of 1999, the pressure for competitive tax rates among EU countries may become even greater. Developed countries combining forces to counteract globalisation s effects. Countries seeking to shore up their tax bases recognise that any new tax rate increases or tax measures will be counter-productive if they are out of synch with industrialised countries and cause businesses to move elsewhere. Recent years have seen greater co-operation in tax enforcement and tax policy development efforts aimed at protecting tax bases and ensuring full compliance with existing rules. International organisations such as the OECD and the European Commission are taking a more prominent role in the development of unified global tax policy in areas such as transfer pricing, the elimination of harmful tax competition and the taxation of electronic commerce. The tax collection authorities of many developed countries are making more resources available for international tax audits, introducing stricter reporting requirements for foreign

activities and intensifying co-operation by agreeing to greater exchanges of information and conducting co-ordinated joint audits of multinational corporate groups. Corporate tax rates only part of the equation A comparison of direct corporate income tax rates is only one element to consider in analysing the underlying costs to business. Companies can be affected by direct and indirect forms of taxation, the tax base on which taxes are levied, the degree of sophistication of tax legislation, compliance monitoring by authorities and the various forms of incentives offered by countries to attract specific business activities. Table 1 Average Corporate Tax Rates at 1 January 1999 40 35 Average Corporate Tax Rate as of 1 January 1999 30 25 20 15 10 5 0 OECD Member Countries EU Member Countries Asia Pacific Countries Latin American Countries Table 2 OECD and EU Average Corporate Tax Rates 1995-1999 39 38 Average Corporate Tax Rate 37 36 35 34 33 32 1995 1996 1997 1998 1999 OECD Member Countries EU Member Countries

KPMG Corporate Tax Rates Survey January 1999 Asia Latin OECD EU Pacific America Country 1 Jan 1998 1 Jan 1999 Notes (%) (%) Argentina 33 35 Australia 36 36 1 Austria 34 34 2 Bangladesh 35 35 3 Belgium 40.17 40.17 4 Belize 35 N/A 5 Bolivia 25 25 Brazil 33 33 6 Canada 44.6 44.6 * 7 Chile 15 15 China 33 33 8 Colombia 35 35 9 Costa Rica 30 30 10 Czech Republic 35 35 Denmark 34 32 11 Dominican Republic 25 25 Ecuador 25 15 12 El Salvador 25 25 13 Fiji 35 35 14 Finland 28 28 France 41.66 40 15 Germany 56.66/43.60 52.31/43.60 16 Greece 35/40 35/40 17 Guatemala 30 27.5 18 Honduras 40.25/30 25 19 Hong Kong 16.5 16.5 20 Hungary 18 18 21 Iceland 30 30 22 India 35 35 23 Indonesia 30 30 24 Ireland 32 28 25 Israel 36 36 Italy 41.25 41.25 26

Asia Latin OECD EU Pacific America Country 1 Jan 1998 1 Jan 1999 Notes (%) (%) Japan 51.6 48.0 27 Korea, South 30.8 30.8 Luxembourg 37.45 37.45 * 28 Malaysia 28 28 29 Mexico 34 35 30 Netherlands 35 35 31 New Zealand 33 33 Norway 28 28 32 Pakistan 30 35 Panama 37 37 Papua New Guinea 25 25 33 Paraguay 30 30 34 Peru 30 30 Philippines 34 33 35 Poland 36 34 Portugal 37.4 37.4 36 Singapore 26 26 37 Spain 35 35 Sri Lanka 35 35 38 Sweden 28 28 39 Switzerland 27.8 25.1 40 Taiwan 25 25 41 Thailand 30 30 Turkey 44 33 42 Uruguay 30 30 43 United Kingdom 31 31 44 United States 40 40 * 45 Venezuela 34 34 46 Vietnam 30-35 30-35 47 Note: A simple comparison of tax rates is not sufficient for assessing the relative tax burdens imposed by different governments. The method of computing the profits to which the tax rates will be applied ( the tax base ) should also be taken into account. The above rates do not reflect payroll taxes, social security taxes, net wealth taxes, turnover taxes and other taxes not levied on income. Arrows signify an increase ( ) or decrease ( ) in a country s corporate income tax rate at 1 January 1999 as compared with that country s rate at 1 January 1998. * = approximate rate While every effort is made to ensure that this survey s contents are accurate, no action should be taken without first contacting your KPMG adviser. For enquiries please contact your local KPMG adviser or KPMG's International Tax and Legal Centre, Amsterdam. Copyright KPMG 1999. All rights reserved.

1 Australia (1999 rate = 36%): As part of a long-term and wide-ranging tax reform initiative, the federal government has announced its intention to reduce the company tax rate to 30% in the future. 2 Austria (1999 rate = 34%): Due to restrictions on expenses, the tax base for corporations usually differs from financial statement profits. 3 Bangladesh (1999 rate = 35%): This rate applies to publicly traded companies including banks, insurance companies and other financial institutions that qualify as publicly traded companies. Other companies are taxed at a rate of 40%. A 50% rebate is allowed on income from exports. Companies (including branches of foreign companies) that derive 100% of their income from the construction business may elect to pay tax at a rate of 3% of gross income. 4 Belgium (1999 rate = 40.17%): A lower rate applies to companies owned more than 50% by individuals. The tax rate incorporates a crisis levy of 3%. 5 Belize: Due to a recent change in government, the tax system of Belize is currently in a state of flux. The country s corporate tax was abolished and replaced by a Business Tax on gross income at rates ranging from 0.75% to 3.0% in July 1998. However, a new government elected on August 27, 1998 has promised to repeal the country s VAT and Business Tax and replace them with alternative measures. A government review board is expected to recommend new measures before the end of March 1999. 6 Brazil (1999 rate = 33%): The 33% rate is the sum of Corporate Income Tax and Social Contribution Tax on Profits. The corporate income tax rate is 25%, which comprises a 15% basic rate plus a surtax of 10% on annual income over BRL 240,000. The Social Contribution Tax on corporate income is 8%(the rate is 18% for financial institutions). 7 Canada (1999 rate = 44.6%): This rate comprises 29.1% federal tax (including surtax) plus provincial tax (the province of Ontario s 15.5% rate is used for illustrative purposes). Depending on the province, the total effective rate ranges from 38.0% to 46.1% (24.6% to 39.1% for manufacturers). 8 China (1999 rate = 33%): The rate comprises a 30% state tax rate plus 3% local tax rate and it applies to foreign investment enterprises and foreign enterprises. The state tax rate is reduced to 15% or 24% if the enterprise is located in one of China s specially designated zones and/or is engaged in a prescribed industry. The 3% local tax may be waived or reduced by the local government. Foreign banks deriving income from RMB business are also taxed at the 30% state tax rate. 9 Colombia (1999 rate = 35%): In addition to the 35% corporate tax rate, a 1% municipal industrial and commerce tax applies. The municipal tax is deductible for income tax purposes. Until 2000, a financial transaction tax applies at a rate of.002%. 10 Costa Rica (1999 rate = 30%): The country also levies a 1% asset tax computed as total assets less current assets and investments in securities and equities, less CRC 39,000,000. The tax is creditable against regular income tax payable. However, if the income tax liability is less than the asset tax liability in the same tax year, the latter must be paid in full. Companies generating losses may carry forward the credit for asset tax for one year to offset income tax liabilities in the following year. 11 Denmark (1999 rate = 32%): Corporations must either pay corporation tax on account during the income year or pay a surcharge. There are no local taxes on corporations. 12 Ecuador (1999 rate = 15%): For 1998 the corporate income tax rate was 25% (distributed or undistributed profits). For 1999 a new tax law is in force which changes the tax structure of Eduador by establishing a 1% tax on capital circulation which applies to credits or deposits to checking or savings accounts, time deposits or any other type of investment carried out through the Ecuadorian financial system (including offshore) and drawing of cheques, transfers or payments of any kind made from Ecuador to abroad with or without intervention of the Ecuadorian financial system. In accordance with Labour Law, all companies are obliged to distribute 15% of income before 1% tax on capital circulation between their employees (net of income tax benefit). This increases the effective tax rate to 36.25%.

13 El Salvador (1999 rate = 25%): The 25% corporate tax rate is the maximum rate in a progressive rate structure. The rate is applicable on profits in excess of SVC 75,000. Legislation may be introduced to apply the 25% rate to all profits. 14 Fiji (1999 rate = 35%): The corporate tax rate is 45% for companies operating in Fiji as a branch of a non-resident company. 15 France (1999 rate = 40%): The 40% rate comprises the standard income tax rate of 33.33% plus two 10% surcharges and is applicable to all companies except those which turnover is less than FRF 50,000,000 and of which at least 75% of the share capital is held by individuals. 16 Germany (1999 rate = 52.31%/43.6%): The first rate quoted applies to retained profits and the second to distributed profits. Both include corporate tax at 45% (retained profits), 30% (distributed profits) and trade tax on income. The trade tax varies from 15% to 25.75%, with an average of 17.49%. From 1 January 1998, the corporate tax rates for both retained and distributed profits were increased by a solidarity surcharge of 5.5% on the corporate income tax. 17 Greece (1999 rate = 35%/40%): The 35% rate applies to listed A.E. companies (corporations) and to E.P.E. entities (limited liability companies). The 40% rate applies to domestic unlisted A.E. companies, banks and credit instructions operating as co-operatives and branches of foreign entities. Discounts of 2.5% are allowed to companies which pay their corporate tax in full when they file their tax returns. A 3% surcharge applies to gross rental income but the surcharge may not exceed the primary corporate tax. 18 Guatemala (1999 rate = 27.5%): The corporate tax rate was reduced from 30% to 25% as of 1 July 1997 in phases as follows: for tax periods starting on or after of 1 July 1997, the income tax rate is 25% plus a 20% surcharge (effective rate 30%); for tax periods starting on or after 1 July 1998, the income tax rate is 25% plus a 10% surcharge (effective tax rate is 27.5%); for tax periods starting on or after 1 July 1999, tax rate is 25% and no surcharge applies. 19 Honduras (1999 rate = 25%): Until April 30, 1998, the 40.25% corporate tax rate comprises corporate tax of 35% plus a 15% surcharge on the corporate tax where income exceeds HNL 1,000,000. Lower rates apply progressively to income below HNL 1,000,000. After April 30, 1998, the corporate tax rate is 15% on the first HNL 200,000 of taxable income and 30% (25% for 1999) on the excess over HNL 200,000. A tax of 1% (0.75% for 1999; 0.50% for 2000; 0.25% for 2001 and 0% for 2002) applies on the monetary value of assets that appear on the balance sheet less allowances for doubtful accounts and accumulated tax depreciation. The amount of income tax paid in the prior fiscal year may be used as a credit against this tax. 20 Hong Kong (1999 rate = 16.5%): The corporate tax rate will be reduced to 16% as of 1 April 1999 (i.e., the 1998/99 Year of Assessment). 21 Hungary (1999 rate = 18%): The tax rate on a corporation s taxable profits is 18%. The local business tax of 1.4% for 1998 and 1.7% for 1999 (rising to 2% in 2000) is deductible from the corporation s tax base. A 20% withholding tax is imposed on dividends paid to foreign companies unless the recipients re-invest the dividends directly in a Hungarian company. However, most of Hungary s tax treaties reduce the domestic withholding tax to 5-15%. Dividends paid to Hungarian companies are not subject to withholding tax. 22 Iceland (1999 rate = 30%): This rate applies to limited liability companies. The rate for unlimited liability companies is 38%. 23 India (1999 rate = 35%): Minimum alternate tax is levied at this rate on 30% of the adjusted book profits of those companies whose taxable income is less than 30% of their book profits (i.e., the effective tax rate is 10.5%). The dividend paying company pays additional income tax at 10% of the dividend amount. Foreign companies are taxed at 48%. Non-residents and foreign companies engaged in shipping, air transport, and oil and gas and turnkey power projects are taxed on a deemed profit basis of 7.5%, 5% and 10% respectively (i.e., the effective tax rate for these companies is 3.6%, 2.4% and 4.8% respectively). 24 Indonesia (1999 rate =30%): This rate applies to a resident s income over IDR 50 million. Income between IDR 0-25 million is taxed at 10% and income between IDR 25-50 million is taxed at 15%. Certain income received by non-residents is taxed at 20%. An additional 20% branch profits tax is imposed on the after-tax profits of a permanent establishment (subject to treaty relief).

25 Ireland (1999 rate = 28%): A 25% rate applies to the first IEP 100,000 (IEP 50,000 in 1998) of group income. A 10% rate applies to manufacturing and many internationally traded services. The Irish government, with EU endorsement, has committed to reducing the corporation tax rate by an average of 4% per year until 2003 in conjunction with the early phase out of the preferential tax regimes which apply to manufacturing companies and companies located in the International Financial Service Centre (IFSC). As of 1 January 2003, a standard corporation tax of 12.5% will apply. Starting in 2000 the rate applying to non-trading income will be 25%. The 25% rate will apply after 2003. Nontrading income is currently undefined. 26 Italy (1999 rate = 41.25%): The rate comprises a 37% federal rate and a 4.25% IRAP rate. As of 1 January 1998, the local income tax (ILOR) has been replaced by IRAP, the regional tax on productive activities. IRAP is applied on a broader tax base than that considered for corporate income tax purposes. As such, the effective rate is generally higher than indicated. For banks and insurance companies, the rate will be 5% in 1999 and 4.75% in the following tax year. 27 Japan (1999 rate = 48%): Includes corporate income tax (37.5% for 1998 and 34.5% for 1999), business, prefectural and municipal taxes. The rate shown is the effective tax rate after taking into account a deduction for business tax. 28 Luxembourg (1999 rate = 37.45%): The standard corporate income tax rate (excluding a 4% surcharge) amounts to 30%. The 37.4% rate includes municipal business tax at an effective rate of 9.09% (although rates vary among regions). Municipal tax is deductible from the (national) corporate tax on income. As of 1 January 1999, the municipal tax exemption for partnerships is increased to LUF 1,200,000 (from LUF 900,000). 29 Malaysia (1999 rate = 28%): Profits from inward reinsurance and offshore insurance are taxed at 5%. Income from a life fund is taxed at 8%. A non-resident is taxed either on 5% of gross shipping or air transport income derived from Malaysia or, on that part of the Malaysian gross income computed in the proportion of world-wide profits to world-wide gross income. Income derived by residents from the transportation of passengers or cargo on board Malaysian ships is exempt. Companies engaged in petroleum operations are subject to petroleum income-tax at 40% of net profits. Leasing income received by a non-resident without a permanent establishment in Malaysia for use of movable property is taxed at 10%; if leasing income constitutes business income of a permanent establishment, it will be taxed at 28%. 30 Mexico (1999 rate = 35%): As of 1999, a 5% tax can be deferred provided the remaining profits are reinvested. The tax deferred is payable when dividends are distributed on a grossed-up basis by a factor of 1.5385. 31 Netherlands (1999 rate = 35%): As of 1 January 1998, a flat corporate tax rate of 35% applies. In 1997, the first NLG 100,000 of taxable profits was taxed at 36% (37% for 1996). 32 Norway (1999 rate = 28%): For 1999, the rate comprises a 21.25% tax equalisation (11% for 1998) plus 6.7% municipal tax (17% for 1998). 33 Papua New Guinea (1999 rate = 25%): Resident large scale mining companies pay tax at 35%. Petroleum companies pay tax at 50%. Gas companies pay tax at 30%. Non-resident mining companies pay tax at 48%. A branch of a foreign company is taxed at 48%. Non-residents are taxed on deemed profit basis: 5% (shipping: 2.4%) and 10% (insurance: 4.8%). Foreign contractors engaged in civil works, installation, leasing of equipment etc. can elect to be taxed on a deemed profit basis of 25% (i.e., the effective tax rate works out to 12% of gross income). 34 Paraguay (1999 rate = 30%): Since Paraguay does not levy personal income tax, certain payments to non-taxpayers are not fully deductible for corporate income tax purposes. As such, the effective rate is higher than 30%. Profits remitted to non-resident shareholders are subject to an additional 5% rate of tax. Where a company reinvests its earnings in industrial fixed assets, the income tax rate is 10%. Corporate income tax is not deductible from taxable profits. 35 Philippines (1999 rate = 33%): Certain income payments are subject to final withholding tax at the following rates: 15% of profits remitted by a branch of a foreign corporation to its head office; 2.5% of gross revenue derived by international air/sea carriers from the carriage of persons, excess baggage, cargo and mail originating from the Philippines; 10% of interest income derived by

Offshore Banking Units (OBU) from foreign currency loans granted to residents of the Philippines; 7.5% of interest income derived by a resident of the Philippines under the expanded foreign currency deposit system; 10% of net income derived by a Regional Operating Headquarters; 25% of gross rental income derived by non-resident lessors, owners or film distributors; 4.5 % of gross rental income derived by non-resident owners or lessors of vessels chartered by Philippine nationals; 7.5% of gross rental income derived by non-resident owners or lessors of aircraft, machineries and other equipment; and 20% of gross interest on foreign loans. 36 Portugal (1999 rate = 37.4%): The rate includes a 3.4% municipal tax. This is considered by the tax authorities to be non-deductible although a court decision has cast doubt on this view. Municipal tax at a maximum of 10% of the national tax rate is levied in most municipalities. The government has legislative authority to reduce the tax rate by up to 2%. It is not known if this authority will be exercised. 37 Singapore (1999 rate = 26%): The concessionary tax rate of 10% applies to entities engaged in certain offshore activities including offshore banking, offshore leasing, offshore insurance and reinsurance, offshore oil trading and offshore commodity trading, finance and treasury centres and operational headquarters companies. Shipping enterprises transporting outbound passengers, mail, livestock or goods from Singapore are exempt from tax. The government is expected to present its 1999 budget at the end of February 1999. For the year of assessment 1999, a 10% rebate will be granted on corporate tax payable (excluding Singapore dividends). 38 Sri Lanka (1999 rate = 35%): Export or deemed export profits of all exporters and indirect exporters (other than those dealing with traditional products) and specified profits of agricultural businesses and businesses engaged in the promotion of tourism enjoy a concessionary tax rate of 15%. Remittance of profits by a non-resident company attracts a remittance tax of 33 1/3%, to a maximum of 11.11% of taxable income in the fiscal year in which the remittance is made. 39 Sweden (1999 rate = 28%): An optional provision for untaxed income is available. The provision must not exceed 20% of the tax base and must be dissolved within the following five years. 40 Switzerland (1999 rate = 25.1%): The effective corporate tax rate comprises federal, cantonal and municipal taxes. The rates shown are the maximum statutory (after-tax) rates for an ordinary company in the city of Zurich. These rates are fairly typical. The effective tax rate, based on pretax income, is lower than the statutory rate and amounts to 25.1%. Most cantonal income tax rates are progressive, which is determined on the basis of the ratio of income to shareholder's equity. 41 Taiwan (1999 rate = 25%): If the corporation has no undistributed earnings, the effective tax rate is 25%. If the corporation has undistributed earnings, the undistributed earnings portion will have effective tax rate at 32.5% after the 10% surtax on undistributed earnings. However, under a dividend imputation system effective on 1 January 1998, a tax credit on dividends received by Taiwanese individual shareholders will be available for corporate income taxes paid. For Taiwanese corporate shareholders, dividends received will be fully exempt from tax. Thus, all Taiwan residents are no longer subject to withholding tax on dividends received. For foreign investors, dividends paid to non-resident corporations and to non-resident individuals are still subject to 25% and 35% withholding tax rates respectively. Dividends paid by companies with Foreign Investment Approval (FIA) to their foreign shareholders are still subject to 20% withholding tax. A credit against the withholding tax is available if the 10% surtax on undistributed earnings has been paid on such dividends. 42 Turkey (1999 rate = 33%): Calculated as 30% corporation tax, plus a 10% surcharge. A further withholding tax and surcharge of 11% applies on dividends distributed, providing an effective tax rate of 40.37% on company income and paid-out dividends. 43 Uruguay (1999 rate = 30%): Corporate income tax is not deductible from taxable profits for purposes of applying the 30% rate. 44 United Kingdom (1999 rate = 31%): A lower rate of 21% applies to companies with profits up to GBP 300,000. Marginal relief applies on profits up to GBP 1,500,000. These limits are reduced where there are associated companies. As of 1 April 1999, the general corporate rate will be reduced to 30% and the small companies rate will be reduced to 20%.

Bermuda, Gibraltar, Guernsey, Jersey and the Isle of Man These countries are Dependent Territories or Crown Dependencies of the United Kingdom, which has formally confirmed that the OECD Convention applies to these countries. Details of their corporate tax rates are provided here, but these countries are not included in calculating the averages and ranges indicated above. Bermuda: Bermuda levies no tax on profits, dividends or income, nor is there any withholding tax, capital gains tax, gift tax, or any personal tax. Exempt companies can apply for legal protection against the possibility of future taxes up to the year 2016. Gibraltar: Resident companies are subject to corporate tax at the rate of 35%. Special rules apply to qualifying and exempt companies. Qualifying companies pay corporation tax at a rate agreed with the tax authorities, which may be between 0% and 35%. Exempt companies are liable to a fixed payment of GBP 225 per annum if resident, and GBP 200 if non-resident. Guernsey: Resident companies are subject to the standard income tax rate of 20%. Special rules apply to banks, captive insurance companies, investment funds and certain other entities which may pay tax at rates as low as 2%. Certain companies may also become exempt and pay only GBP 500 per annum. International Companies may agree a rate of tax from just above 0% to 30%. Jersey: Resident companies are subject to the standard rate of income tax of 20%. Certain companies may also become exempt or gain the status of International Business Company (IBC). Exempt companies pay GBP 500 per annum. IBC s pay tax at 2% or less on profits from international activities and 30% on Jersey-source income. Isle of Man: Resident companies are subject to the standard rate of income tax of 20%. Insurance companies and certain banks can be exempted from tax and funds management companies pay tax at an effective rate of 5%. Certain other companies can either apply for exemption from tax for a fee of GBP 300 per annum or apply to become an International Company and pay an agreed rate of tax from a minimum of GBP 300 per annum to 35%. 45 United States (1999 rate = 40%): The federal tax rate is 35%. State and local income tax rates generally range from less than 1% to 12%. A corporation may deduct its state and local income tax expense when computing its federal taxable income, generally resulting in an effective rate of approximately 40%. The effective rate may vary significantly depending on the locality in which a corporation conducts business. 46 Venezuela (1999 rate = 34%): The effective tax rate depends on the application of investment tax credits for investments in fixed assets, which are currently 20% for corporations (except corporations in the hydrocarbons industries). Corporations engaged in the exploitation of hydrocarbons and related activities are generally subject to a 67.7% rate of tax on their income, including income from other sources. The rate indicated does not include municipal business taxes which apply at rates ranging from 0.3% - 9.4% of gross income, depending on the district and the business activity. VAT, corporate registration fees and a 1% business asset tax also apply. 47 Vietnam (1999 rate = 30% - 35%): A 25% tax rate applies to resident joint venture companies. Vietnamese companies and non-resident companies are taxed at rates from 32% to 45%. Oil and gas companies are taxed at a rate of 50%. Tax holidays or tax incentives for preferred projects can reduce the rate below 25%. Turnover tax rates range from 0-30%, but most commonly fall within a range of 2% - 8%. The turnover tax applies to gross income and is deductible in calculating taxable corporate profits. It is replaced by VAT as of 1 January 1999.