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In this blog, we’ll break down and compare tax rates in the United States with the tax systems of Colombia, Argentina, Mexico, Peru, Chile, Bolivia and Ecuador. This comparison will help you understand the differences in corporate and personal income tax rates across these countries.
1. Taxes in the United States
The U.S. tax system operates at federal, state, and local levels. There are two main types of taxes: corporate income tax and personal income tax.
Federal Rate: The federal corporate tax rate is 21%. This rate applies to corporate earnings and is relatively competitive compared to other countries.
State Taxes: In addition to the federal rate, some states impose additional corporate taxes, which range from 0% to 12%. For example, Wyoming and South Dakota have no state corporate tax, while California imposes an additional 8.84% tax.
Personal Income Tax:
Federal Rate: The federal personal income tax is progressive, ranging from 10% to 37%, depending on net income.
State Taxes: Like businesses, individuals may also face state income taxes. Some states, such as Florida and Texas, do not impose state income taxes, while others, like New York and California, have rates as high as 13.3%.
Other Relevant U.S. Taxes:
Sales Tax: This varies by state and can range from 0% to 10%.
Payroll Taxes: Both employees and employers contribute to Social Security (6.2%) and Medicare (1.45%), along with other state employment taxes.
2. Taxes in Colombia
Colombia has a robust and progressive tax system, with various taxes impacting both businesses and individuals.
Corporate Income Tax:
The general corporate tax rate is 35%. This rate has remained stable in recent years, though there are additional taxes for certain sectors.
Personal Income Tax:
Individual tax rates range from 0% to 39%, depending on income levels.
Other Relevant Taxes in Colombia:
Value-Added Tax (VAT): The standard VAT rate is 19%, though some goods and services have lower rates.
Local Taxes: Companies also face municipal taxes on industry and commerce.
3. Taxes in Argentina
Argentina’s tax system is complex, with high tax rates for both individuals and businesses.
Corporate Income Tax:
The general corporate tax rate is 35% on corporate earnings.
Personal Income Tax:
Individual tax rates vary from 5% to 35%, depending on personal income.
Other Relevant Taxes in Argentina:
VAT: The standard VAT rate is 21%, though certain products have lower rates.
Wealth Tax: Individuals with assets exceeding certain thresholds are subject to wealth taxes, which range from 0.5% to 2.25%.
4. Taxes in Mexico
Mexico has a relatively simple tax system compared to other Latin American countries, with moderate tax rates.
Corporate Income Tax:
The corporate income tax rate is 30% on business earnings.
Personal Income Tax:
Progressive tax rates for individuals range from 1.92% to 35%, based on income.
Other Relevant Taxes in Mexico:
VAT: The standard VAT rate is 16%, with certain exemptions and reduced rates in specific regions.
5. Taxes in Bolivia
Bolivia’s tax system features relatively low rates compared to other countries in the region.
Corporate Income Tax:
The general corporate tax rate is 25%.
Personal Income Tax:
Bolivia applies a flat rate of 13% on personal income.
Other Relevant Taxes in Bolivia:
VAT: The VAT rate is 13%.
6. Taxes in Chile
Chile is known for its business-friendly tax system, with relatively low rates compared to other Latin American countries.
Corporate Income Tax:
The corporate tax rate is 27% under the full integration regime.
Personal Income Tax:
Individual tax rates are progressive, ranging from 0% to 40%, depending on income.
Other Relevant Taxes in Chile:
VAT: The standard VAT rate is 19% on most goods and services.
7. Taxes in Ecuador
Ecuador has a tax system with moderate rates for both businesses and individuals.
Corporate Income Tax:
The corporate tax rate is 25%, though it can be reduced to 22% if profits are reinvested in certain sectors.
Personal Income Tax:
Progressive personal tax rates range from 0% to 35%, depending on income.
Other Relevant Taxes in Ecuador:
VAT: The standard VAT rate is 12%.
General Tax Comparison
Conclusion
This comparison shows that tax rates vary significantly across these countries. The U.S. stands out for having a competitive corporate tax rate of 21%, while personal income taxes can be higher than in some Latin American countries, depending on the state.
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