When expanding or relocating a business in 2025, tax efficiency remains a critical factor. Knowing which European jurisdictions offer the lowest corporate tax in Europe can translate into substantial savings and better cash flow.
But it’s not just about picking the lowest headline rate – you also need to weigh incentives, legal requirements, banking access, and economic stability.
This article presents a comparative guide to the top 10 European jurisdictions by their corporate tax attractiveness. We’ll compare corporate taxes by country, assess the broader economic and regulatory environment.
Here’s a glance comparison of the 10 jurisdictions with some of Europe’s lowest corporate tax regimes in 2025:
| Country | Corporate Tax Rate (2026) | Other Incentives | Currency | Ease of Setup / Key Notes |
|---|---|---|---|---|
| Hungary | 9% | R&D incentives; treaty network | HUF | Fast incorporation, strong manufacturing base. |
| Montenegro | 9–15% (progressive) | Free zones; WHT reductions | EUR | Small market; flexible, evolving rules. |
| Bulgaria | 10% | Flat CIT; low labor costs | BGN (pegged to EUR) | Straightforward, low-cost setup. |
| North Macedonia | 10% | Sector incentives | MKD | Cost-efficient, proximity to EU. |
| Andorra | 10% | Low direct taxes overall | EUR | Niche hub; non-EU. |
| Cyprus | 12.5% | IP regime; dividend exemptions | EUR | Popular holding location. |
| Ireland | 12.5% (trading; 15% for large MNEs under Pillar Two) | R&D credit; robust treaty network | EUR | Multinational hub; substance needed. |
| Lithuania | 15% standard / 5% for micro companies (annual turnover up to €300,000 and up to 10 employees) | FEZ tax holidays; investment incentives | EUR | Baltic hub; FEZ can slash effective tax. |
| Romania | 16% | Micro regimes (conditions); sector incentives | RON | Competitive rate; stable headline CIT. |
| Croatia | 18% (10% for SMEs in certain regions) | SME reliefs | EUR | EU member; straightforward regime. |
But, choosing the right jurisdiction isn’t just about spotting the smallest percentage on a tax chart.
The following country profiles look beyond headline rates to capture the full business environment: incentives, economic climate, ease of incorporation, currency considerations, and other strategic factors that may influence your decision.
1. Hungary
Hungary consistently tops the list with its 9% flat corporate income tax rate, the lowest in the European Union. This regime is particularly attractive to manufacturers and logistics operators because of Hungary’s central location and strong infrastructure network.
The government also supports innovation through generous R&D credits, and a well-developed treaty network can minimize withholding tax leakage. Incorporation is fast and affordable, though companies should be prepared for standard annual filing and audit requirements.
The Hungarian forint is the local currency, and the banking sector is well-developed, though foreign owners may need to navigate additional due diligence.
Overall, Hungary offers an appealing mix of ultra-low taxes and strategic market access, but businesses should monitor regulatory developments closely.
2. Montenegro
Montenegro applies a progressive corporate income tax system ranging from 9% to 15%, with the lower bracket covering most small and mid-sized enterprises. Although not yet an EU member, Montenegro uses the euro as its de facto currency, providing stability and predictability.
Free zones and industry-specific incentives make it especially attractive for tourism, shipping, and energy-related projects. Setting up a company is relatively straightforward, though investors should account for evolving compliance requirements as the country aligns its legislation with EU standards.
For businesses targeting the Adriatic or Balkan markets, Montenegro offers a flexible, cost-effective base with room for future growth.
3. Bulgaria
With a 10% flat tax rate, Bulgaria is one of the most competitive corporate tax jurisdictions in Europe. The country combines its low tax regime with relatively low labor costs, making it a popular destination for manufacturing, outsourcing, and logistics hubs.
Incorporation is quick and inexpensive, and ongoing compliance obligations are manageable. Bulgaria uses the lev (BGN), which is pegged to the euro, giving businesses a stable currency environment ahead of planned euro adoption.
While the business environment has improved in recent years, investors should be mindful of bureaucratic hurdles and governance challenges. For many, however, the tax savings outweigh these considerations.
To simplify the process, Lawhill now provides full company formation services in Bulgaria through Lawhill.bg, assisting clients with company registration, legal address, and bank account setup. This allows entrepreneurs to benefit from Bulgaria’s favorable 10% corporate tax rate with professional, locally based support from an experienced team.
4. North Macedonia
North Macedonia matches Bulgaria with a 10% corporate tax rate and offers additional incentives through free and technological development zones, especially for export-oriented industries.
Its geographic proximity to the EU allows businesses to integrate into European supply chains while benefiting from lower operational costs. Incorporation is affordable, and compliance requirements are not overly burdensome.
The local currency is the Macedonian denar (MKD), which introduces some foreign exchange considerations for euro-based investors, but the banking sector is functional and foreign-friendly. This jurisdiction is best suited for cost-sensitive operations looking for a foothold in Southeast Europe.
5. Andorra
For entrepreneurs seeking a niche, low-tax jurisdiction, Andorra provides a 10% corporate tax rate and a generally favorable personal tax regime. Located in the Pyrenees between France and Spain, Andorra is well-suited for holding companies, wealth management structures, and specialized service firms.
Although it is not an EU member, it uses the euro and maintains a well-developed private banking sector. Incorporation requires a careful approach to compliance and substance requirements to benefit from tax advantages. Given its small size and non-EU status, Andorra is ideal for businesses prioritizing privacy and favorable taxation over market scale.
6. Cyprus
Cyprus has built its reputation as an international business hub with a 12.5% corporate tax rate, one of the lowest in Western Europe, and a highly attractive intellectual property (IP) regime.
Dividends received from qualifying subsidiaries can often be exempt from tax, and there is no withholding tax on dividends paid to non-residents under many circumstances. Its strategic location between Europe, Africa, and the Middle East makes it a popular choice for holding companies and shipping businesses.
The country’s legal system, based on English common law, offers familiarity and predictability. Substance requirements are increasingly important, so businesses should maintain real operations or employees to sustain benefits.
7. Ireland
Ireland is renowned for its 12.5% corporate tax rate on trading income, which has attracted tech giants and pharmaceutical multinationals for decades. Under OECD Pillar Two rules, large multinational groups now face a minimum 15% effective tax rate, but Ireland remains competitive thanks to its strong R&D tax credit and extensive treaty network.
Incorporation is efficient, though maintaining genuine local substance is essential to preserve tax advantages. Operating in Ireland means access to an English-speaking, highly skilled workforce and the EU single market, though costs-particularly in Dublin-can be higher than in other jurisdictions.
8. Lithuania
Lithuania applies a 16% corporate tax rate from 1 January 2025, slightly above the rates of its Baltic neighbors but still below the European average.
The country stands out because of its Free Economic Zones (FEZs), where qualifying investments can enjoy a 10-year exemption from corporate tax followed by a 50% reduction for another six years.
In addition, Lithuania offers one of the most attractive micro company tax regimes in Europe – a reduced 6% profit tax for small companies with annual turnover up to €300,000 and up to 10 employees.
This regime is designed to support startups and growing entrepreneurs, dramatically lowering the effective tax burden in the early stages of business development.
As a result, Lithuania ranks among the most appealing jurisdictions in Europe for launching a new company, combining low entry costs, digital accessibility, and strong EU market access.
Lithuania’s economy is highly digitalized, with strong fintech, logistics, and manufacturing sectors. Company formation is straightforward, and the country uses the euro, simplifying cross-border transactions. Investors should ensure they meet the minimum investment and substance requirements to benefit fully from FEZ incentives. Lawhill provides real value-offering end-to-end support in setting up companies, securing FEZ status where applicable, and ensuring compliance with local regulations.
9. Romania
Romania’s 16% corporate tax rate is competitive for a large EU economy. It also offers microenterprise regimes for smaller companies and sectoral incentives for IT and manufacturing.
Romania is experiencing consistent growth, supported by EU funds, a large labor market, and increasing digitalization of public services. Company registration follows EU norms, and compliance obligations are clear, though investors must be mindful of social contributions and local levies.
The Romanian leu (RON) is the currency, and the banking sector is well-connected regionally. For businesses seeking a cost-effective base with access to a sizable domestic market, Romania is an attractive choice.
10. Croatia
Croatia applies an 18% corporate tax rate, which is reduced to 10% for companies with annual revenues below €1 million-a significant advantage for SMEs.
As an EU and eurozone member, Croatia offers regulatory stability and seamless access to the single market. Its economy benefits from tourism, services, and an increasingly modern infrastructure. Incorporation is relatively straightforward, and compliance follows EU standards.
For smaller businesses and startups, the preferential 10% bracket makes Croatia a compelling location.
Europe-Wide Trends to Watch in 2025
Across Europe, corporate taxation is undergoing steady but significant change. The average statutory corporate income tax rate now sits at roughly 21.5%, which means the countries featured in this guide remain considerably more competitive than the continental norm.
One of the most influential developments shaping the landscape is the global minimum tax initiative under OECD Pillar Two, which sets a 15% floor for multinational enterprise (MNE) groups with global revenues above €750 million.
Countries such as Ireland have already implemented the Income Inclusion Rule (IIR) in 2024 and the Undertaxed Profits Rule (UTPR) in 2025, while jurisdictions like Cyprus and others are aligning their legislation.
For large groups, this means that even if they choose a jurisdiction with a low statutory rate, top-up taxes may bring their effective tax liability closer to the global minimum.
Rate adjustments are also worth monitoring. Lithuania has increased its corporate tax rate from 15% to 16% as of January 1, 2025, and has approved a further rise to 17% in 2026, part of a broader effort to increase fiscal revenues while staying competitive.
In contrast, Finland is moving in the opposite direction, having announced plans to gradually reduce its corporate tax rate from 20% to 18%, subject to parliamentary approval. These shifts show that Europe remains dynamic, with jurisdictions adjusting their policies to balance competitiveness with fiscal needs.
Key Considerations Beyond the Headline Rate
While tax rates often grab the headlines, smart location decisions demand a more holistic view. Low rates and generous incentives are increasingly tied to substance requirements, meaning that businesses must demonstrate real operations, staff, and decision-making within the jurisdiction. Without this, the benefits can be challenged under anti-avoidance rules.
Another critical factor is the treaty network and the ease of repatriating profits. Favorable double taxation agreements can dramatically improve after-tax returns by reducing withholding taxes on dividends, interest, and royalties.
Compliance costs can also tip the scales. Filing requirements, audit thresholds, and local surcharges can add meaningful administrative overhead. Similarly, practical considerations like workforce quality, wage levels, logistics infrastructure, and real estate costs can make a location with a slightly higher tax rate more attractive overall.
For businesses operating outside the eurozone, currency exposure can also affect profitability, particularly in jurisdictions with volatile exchange rates. And for larger groups, modeling exposure to Pillar Two top-up taxes is essential to avoid surprises when effective rates are recalculated.
In short, the lowest corporate tax rate on paper is only the starting point – the total cost of doing business should be your guide.
How Lawhill Can Help
Navigating these variables can be complex, but Lawhill makes the process straightforward. Our team specializes in helping founders, SMEs, and international investors identify the most suitable jurisdiction and execute a clean, compliant setup.
We offer full company formation services across all major legal entity types, as well as ready-made companies complete with a legal address and bank account in Vilnius for those who want to move quickly.
Our corporate law experts can handle articles of association amendments, share capital changes, and board restructuring, ensuring you remain compliant as your business evolves.
As specialists in Lithuanian law, we are uniquely positioned to help clients take advantage of Lithuania’s updated 16% corporate tax rate and explore the benefits of Free Economic Zones (FEZs), where qualifying businesses can enjoy 10 years of 0% CIT, followed by a 50% reduction for another six years.
We guide clients through eligibility requirements, substance planning, and ongoing compliance so these incentives hold up under scrutiny.
Conclusion
Finding the lowest corporate tax in Europe is a strategic starting point-not the finish line. In 2025, a handful of jurisdictions offer materially lower rates than the European average, led by Hungary (9%), several 10% regimes (Bulgaria, North Macedonia, Andorra), and attractive mid-teens options such as Lithuania (16%) and Romania (16%), with Croatia (18%) competitive-especially for small taxpayers.
Lithuania stands out even more with its 6% micro company tax regime, available to small enterprises with annual turnover up to €300,000 and up to 10 employees.
This preferential rate makes Lithuania one of the most attractive and accessible EU jurisdictions for startups and early-stage businesses, combining low taxation with digital incorporation and EU single-market access.The right answer depends on incentives, substance, total cost of employment, banking access, and your scale (particularly under Pillar Two). Lawhill can help you navigate those trade-offs and execute-end-to-end-from planning and incorporation to ongoing corporate law support in Lithuania.
