Corporate Tax vs. Individual Tax: Key Differences Simplified
Introduction
Corporate tax and individual tax may sound similar, but they apply to very different entities. Corporate tax is levied on the profits earned by companies, and rates often vary depending on the size and type of business. Corporations can deduct expenses such as salaries, rent, and operational costs before calculating taxable income, and they may also benefit from specific incentives or exemptions. This system is designed to ensure that businesses contribute to government revenue while encouraging reinvestment and growth.
Individual tax, on the other hand, applies to personal income earned by individuals through salaries, business profits, or investments. Tax rates are usually progressive—meaning higher income brackets pay a higher percentage. Unlike corporations, individuals have limited deductions, though they can claim benefits like housing loan interest, medical expenses, or retirement savings. In short, corporate tax focuses on business profits, while individual tax targets personal earnings, making the rules, rates, and deductions distinct for each.