Business tax glossary

Plain-English definitions of the taxes, legal forms and regimes behind every BizTaxCalc calculator. From income tax and social security to country-specific schemes like Italy's forfettario, France's micro-entrepreneur and the US QBI deduction, each entry explains what the term means, how it is worked out and how it differs across countries.

Autonomo (Spain)Spain's autonomos pay RETA social security of about 31.4% of an income-based contribution base, plus IRPF on profit.C corporationA C corporation is a separate US taxpayer whose profits face corporate tax and again as dividend tax when distributed.Capital gains taxCapital gains tax applies to the profit from selling an asset, charged on the gain after costs and any annual exemption.Corporate taxA tax on incorporated company profits, charged after deducting allowable business costs.DividendA distribution of company profits to shareholders, taxed after corporate tax and often at preferential rates.Dividend taxDividend tax is the personal tax on income from company shares, paid on top of the corporation tax already charged.Double taxationDouble taxation is when the same income is taxed twice, relieved through tax treaties using exemption or credit methods.Effective tax rateThe average share of your income paid in tax: total tax divided by total income.Flat-rate tax schemeA flat-rate scheme lets small businesses pay tax as a fixed percentage of turnover instead of tracking every expense.Forfettario (Italian flat-rate scheme)Italy's flat-rate scheme taxes small businesses at 5% or 15% on income set by an ATECO profitability coefficient.Franking credit (dividend imputation)A franking credit passes company tax paid on dividends to shareholders, preventing double taxation under imputation.Freiberufler (Germany)Germany's Freiberufler liberal professionals are exempt from trade tax and pay only progressive income tax on profit.Gestione Separata (INPS separate social security scheme)Gestione Separata is the INPS scheme funding pensions for Italian freelancers, at about 26.07% for 2025.Gewerbesteuer (German trade tax)German municipal trade tax runs about 14-17% on business profit after a EUR 24,500 allowance; Freiberufler are exempt.Income taxA progressive tax governments charge on wages, profits and other earnings after allowable deductions.IRAP (Italian regional production tax)IRAP is Italy's regional production tax, standard rate 3.9%, abolished for most sole traders since 2022.IRES (Italian corporate income tax)IRES is Italy's flat 24% corporate income tax on company taxable profit for 2025 and 2026.IRPEF (Italian personal income tax)IRPEF is Italy's progressive personal income tax, charged in three bands from 23% up to 43% for 2025 and 2026.Limited companyA limited company is a separate legal entity whose owners enjoy limited liability and which pays corporation tax on profits.Limited liability company (LLC)An LLC is a US entity giving owners limited liability while profits usually pass through to their personal tax returns.Marginal tax rateThe tax rate applied to your next unit of income, set by your highest income band.Micro-entrepreneur (France)France's micro-entrepreneur status taxes turnover at flat social rates of 12.3%, 21.2% or 24.6% by activity type.National Insurance (UK)UK self-employed pay Class 4 National Insurance at 6% on profits then 2% above the upper profits limit.Payment on accountA payment on account is an advance instalment toward next year's tax bill, based on your previous year's liability.Profitability coefficient (ATECO)Italy's ATECO profitability coefficient sets the taxable share of revenue in the forfettario, from about 40% to 86%.Progressive taxationProgressive taxation charges higher tax rates on higher income bands, so effective rates rise with earnings.Qualified Business Income (QBI) deductionThe US QBI deduction lets pass-through business owners deduct up to 20% of qualified business income under Section 199A.Regime simplificado (Portugal)Portugal's regime simplificado taxes a fixed share of turnover set by coefficients of 0.75, 0.35 or 0.15 by activity.S corporationAn S corporation is a US tax election that passes profits to shareholders and can cut an owner's self-employment tax.Self-employedSelf-employed people work for themselves and pay their own income tax and social contributions rather than via an employer.Self-employment taxThe charge self-employed workers pay to fund pensions and health cover, covering both employer and employee shares.Social security contributionsCompulsory payments funding pensions, healthcare and unemployment cover, usually shared between employer and employee.Sole traderA sole trader is an individual who owns an unincorporated business and is personally taxed on all its profits.Tax allowanceA tax allowance is income you can earn tax-free, or a fixed sum you may deduct, setting where taxation begins.Tax bracketA tax bracket is an income range taxed at a set rate, so only income within each band pays that band's rate.Tax deductionA tax deduction subtracts an expense from gross income, lowering the taxable base rather than the tax bill directly.Tax residencyTax residency decides which country can tax your worldwide income, based on presence, home, and personal ties.Tax yearA tax year is the 12-month period income is measured over, calendar-based in most countries but 6 April to 5 April in the UK.Taxable incomeThe part of income tax is actually charged on, after subtracting allowances, deductions and reliefs.Value added tax (VAT)VAT is a consumption tax on value added at each stage, collected by businesses but ultimately borne by the final consumer.Withholding taxTax a payer deducts at source and remits to the authority on the recipient's behalf.