If we look at personal income tax rates in different countries, we would be surprised to find out that they may range from a jaw-dropping 58.95% (Aruba, Sweden, and Denmark) and 39.6% in the United States (which is still an impressive figure) to 0% in some countries (and we are now talking about well-developed jurisdictions, like the UAE or the Cayman Islands). No wonder people who find the tax burden too heavy at some point in their lives look for low-tax destinations and relocate their families and businesses.
Does the zero (or low) income tax mean that the residents will have no tax (or other) obligations whatsoever? No, it does not: it is simply impossible. The country has to find a way to replenish its budget somehow. And still – you will pay surprisingly less! In this post, we are going to look at several low-income-tax jurisdictions that you may find convenient for life or business. See a full list of low-tax expat destinations in the article on our portal.
If you are thinking of tax optimization and/or relocation abroad along with your business or family, you will find consultants on our portal who will help you do so hassle-free and advise you on the best options currently available. We do not deal with aggressive tax optimization (that verges on tax evasion), though – we simply offer absolutely legal ways of paying less.
Let’s explore how some countries manage to prosper without high personal income tax rates.
United Arab Emirates (UAE)
The country has one of the highest per capita income indicators in the world, and at the same time, it does not impose personal income or capital gains taxes on its residents. This factor helps the UAE attract a lot of foreign capital and benefit from it.
However, the main budget receipts come from oil companies that pay 55% of corporate income tax. The indicator is quite high (for example, foreign banks only pay 20%), but it does not make oil and gas extraction an unprofitable activity, so everyone has its benefits.
And what taxes do the residents pay? Well, citizens pay 5% as social insurance contributions and employers are liable for about 15% payable to the social fund. Taxes on property, municipal taxes, and road tolls are also imposed. Alcohol tax rates often draw special attention as they are very high: from 30% on average across the Emirates to 50% in Dubai.
The Cayman Islands is a popular tax haven where entrepreneurs flock to register an offshore company and citizens of other countries seek to obtain tax residence to enjoy freedom from personal income tax, capital gains tax, and even social security payments! How do the country’s retirees live then? Well, it is the employers’ duty to organize a pension plan for them.
Companies registered on the islands also enjoy freedom from VAT and sales taxes. However, there are some indirect taxes (in the form of import duties, for example), and these may reach 25%.
The country’s budget has a deficit from time to time, and there were even attempts to think about a personal income tax introduction. However, this idea faced protests from numerous foreigners that contribute over 50% to the jurisdiction’s budget and was abandoned. The offshore destination continues to create attractive conditions for businesses from all over the world to keep afloat.
This is yet another oil and gas empire whose budget is replenished by the income tax payable by extraction companies. It is not as high as in the UAE, though, and reaches only 35%. Nevertheless, the country is considered to be the wealthiest one in the world as it has the highest GDP per capita.
It invested heavily in the oil and gas production infrastructure as its reserves are really enormous and is now enjoying the fruits of its labor. If you live here, you will be free from personal income, capital gains, or property tax. Social contributions are payable, though: 5% for individuals and 10% for companies. There is also a 5% import duty.
The country is on the verge of introducing VAT to reduce its dependence on raw materials, but meanwhile, businesses are still free from this burden.
The Bermuda Islands are one of the most developed nations in the Caribbean region, and the cost of living here is quite high. In return, you get high-quality roads, an easy-to-use public transportation system, and excellent infrastructure. All this combined with the natural appeal of pink sand palm-fringed beaches and high-class restaurants makes the Bermuda Islands a really attractive low-tax jurisdiction.
The jurisdiction does not impose the income tax – but how does it replenish its budget then? Well, most of the profit comes from customs duties (that may reach up to 25%). A considerable share is also derived from international corporations that choose to be registered in this tax haven (the Bermuda Islands offer low taxes, but not a complete tax exemption).
Employees have some tax burden as well: for example, they are obliged to pay 7% of payroll tax on the first 750,000 US dollars they earn (the other 7% is paid by the employer). 30 to 40 US dollars is charged weekly as social security contributions – on the employer and on the employee.
If you have real estate on the islands, you will be liable for up to 19% (depending on the land rental cost). The stamp duty on property ranges between 5% and 20%.
You can follow the above link to our portal to read about six more low-tax countries that are very appealing to foreigners wishing to avoid excessive tax burden. We also invite you to book a session with our specialists if you want to start a business, open a bank account, or relocate your company or family members to a country with a more beneficial tax regime.
Some of our services are free: for example, we do not charge anything for analyzing your situation and choosing the most appropriate jurisdiction to obtain a residence permit or form a company, or a suitable bank that will match your needs.
If you have any questions or doubts, please share them with our specialists, and we are sure to offer you a solution that would be beneficial!