Abstract: When evaluating corporate income tax (CIT) regimes, businesses compare postponed taxation to annual taxation. Under postponed taxation, companies defer CIT until profits are distributed to owners—as in Latvia’s 2018 model, which levies a 20 % tax on distributed profits. This approach allows firms to retain and reinvest untaxed earnings, accelerating development and expansion. In contrast, annual taxation demands immediate CIT payment upon profit realization, regardless of distribution. While annual taxation simplifies planning and ensures timely revenue collection for governments, it restricts retained earnings and may limit growth opportunities, particularly for companies in expansion phases. Each regime presents advantages: postponed taxation may enhance reinvestment capacity and strategic flexibility, whereas annual taxation offers predictability and administrative simplicity. The selection between these regimes depends on a company’s financial strategy, growth stage, and the regulatory landscape, and combining a postponed tax regime with a patent box could offer further incentives for innovation.

Keywords: corporate income tax, postponed taxation, annual basis taxation, patent box regime, tax system improvements, tax strategies

Pages: 1220-1226