Definition
Corporate tax is calculated on the company's taxable profit — revenue minus deductible expenses — at a rate set by the jurisdiction. Rates vary widely: many countries sit between 15 and 25 percent; some are lower (Ireland 12.5 percent for trading income), some higher (above 30 percent in parts of Africa and South Asia, and US federal + state combined).
Sole traders and most partnerships do not pay corporate tax. Their business profit is taxed as personal income at the owner's marginal rate. Limited companies and corporations pay corporate tax on profits, and shareholders then pay personal tax on dividends or salary drawn — the well-known 'double taxation' issue.
Why it matters
If you operate as a company, the tax is owed by the company even if the money has been spent. Reserving for corporate tax separately from operating cash is essential — and the discipline that prevents most year-end tax surprises.
Where this appears in your tools
The Tax Survival Calculator uses default corporate tax rates per country, which you can override per scenario. It estimates the reserve required from current revenue based on your expected profit margin.
Example
A UK limited company makes 80,000 profit at the 25 percent main rate. Corporate tax owed: 20,000. If the cash has already been spent on owner draws or new hires, the company has to find that 20,000 from somewhere — usually a credit line, at interest.
Common confusion
Corporate tax applies to profit, not revenue. A company with 1m revenue and 950k of legitimate costs only owes corporate tax on the 50k profit — not on the full 1m. But VAT and payroll taxes are still due regardless.