For many companies it is a serious question whether to pay corporate income tax (TAO) or the small business tax (KIVA). There is no universal answer: every company’s situation is different, so it is worth working through the actual numbers.
KIVA’s main advantage is that it replaces part of the payroll taxes, so it typically favours labour-intensive companies with high wage costs. It can also be advantageous when profits are reinvested. Corporate tax has a different structure: investment-related allowances, the development reserve and certain tax-base reductions apply there, which can be attractive for capital-intensive companies that invest heavily.
Before choosing, we always model the company’s tax burden under both regimes, based on actual wage, profit and investment data. That way the decision is made on numbers, not on gut feeling.
This article is based on the legislation in force on the day of publication and provides general information. Please consult us before making a specific decision.
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