Income tax is levied by most countries today and is paid at varied rates depending on a country’s tax laws. Income tax is essentially a tax charged on the net income of an individual or a business. This tax has to be filed annually by the taxpayer and it acts as a source of revenue for governments.
In 2019 the highest income tax was collected in Sweden where individuals with highest incomes paid more than 50 per cent of their taxable income. Countries situated in Northern Europe and North Atlantic generally have greater income taxes.
On the other hand there are some countries with minimal and virtually no income tax at all. Such countries are either tax havens or they are countries whose economies are highly dependent on natural resources like oil. The revenues obtained from these oil rich countries stabilise their economies to a degree that they can do without collecting income tax from their residents.
Countries with zero income tax rates are generally situated in the oil rich Gulf region and the Caribbean islands. These countries known around the world for being popular destinations for foreign investors and expatriates.
Here is a list of some countries without income tax:
United Arab Emirates
This Arab country is highly rich in natural resources like oil and its free trade zones that are open to foreign ownership and zero taxes make this country a popular destination for global investments.
UAE has zero income taxes for individuals granting them the privilege of tax-free salaries. Corporate tax is levied only on foreign banks and oil companies leaving other industries tax free. Excise duty is levied on a handful of goods and services where as Value Added Tax (VAT) is imposed on a majority of goods from 2018.
UAE also grants the avoidance of Double Taxation on overseas investment to all public and private companies and other companies operating in the country under the Double Taxation Agreements (DTA).
This Caribbean country has tax friendly laws which makes it an attractive destination for business investments and foreign financial institutions. This 'tax haven' does not collect taxes on personal or corporate income. Corporate taxes are levied on international companies operating in the Bahamas only if the revenue is derived locally. Other areas that are tax-free include wealth, inheritance and capital gains. The tax-free income benefits can be enjoyed by the residents of the country irrespective of getting a citizenship.
This Arab nation grants tax-free personal income to individuals. However, commercial activity is subjected to company taxation that entails 10 per cent of the company's total state income and has to be paid annually. A 10 per cent fixed tax rate is exacted from rental income too.
Its tax-free environment and sophisticated infrastructure attract a number of expatriates to this country. However, expatriates from specific countries including the United States, United Kingdom, Australia, Canada, Ireland and South Africa are subject to taxes according to the tax laws of their respective governments.
Anyone residing in Kuwait, irrespective of their nationality, is granted the privilege of tax-free personal incomes. This essentially means that the Kuwait’s tax law does not define the concept of resident and non-resident. However, a corporate tax is levied on foreign corporates in the country. These foreign companies have to pay 15 per cent of their income to the Kuwaiti government.
Monaco's personal and business laws related to taxes makes it a well-known tax-haven. It does not collect taxes from personal incomes of its residents. A person residing in Monaco for six months or more becomes a resident and is thereafter exempted from paying income tax.
This city state also does not collect taxes on capital gains and net wealth. Residents can enjoy tax-free property ownership in Monaco, however 1 per cent tax is collected from rented properties annually.
Monaco also does not have a general corporate tax. Only certain types of companies whose profits are 25 per cent or more on their operations existing outside the country gets subject to taxation.
These tax laws along with a high regard for financial secrecy and data privacy makes this country a highly appealing destination for expatriates and foreign investors.
This Gulf nation has lenient and business friendly tax laws. It does not collect taxes on personal incomes of residents or non-residents. Wealth, capital gains along with property all come under the ambit of these tax-free laws.
Business and companies are subjected to 15 per cent tax collection on their taxable income. However companies involved in petroleum operations have to pay a 55 per cent tax. An income tax can be imposed on expatriates.
Panama is considered a pure 'tax haven' country with flexible legal structure and tax friendly laws. It does not impose income taxes on individuals as well as offshore companies. Offshore companies that engage in business outside the country are granted zero income and corporate tax. However, offshore companies engaged in business locally will be subject to minimal local taxes.