Many people ask, “Which countries around the world have the lowest income tax rate?”. It turns out that a huge number of individuals (and organizations) believe that the countries where they are making money have high income tax rates and they are analyzing the options they have.
Income tax represents a type of tax that governments around the globe impose on income created by individuals and businesses within their jurisdiction. Just to be clear – regardless of the country where you reside and generate income, you will probably have to pay income tax (although there are a few exceptions). The good news is that every country has a different policy related to this tax and some countries have way lower income tax rates compared to others.
- Learn more about the basic facts about the countries with lowest income tax
- Check information about their economies
- Find out more about their permanent residency and citizenship terms
We will use this guide to share information about 19 countries with lowest tax income. These countries have decided to use simple tax systems that usually attract foreign investors. By becoming a resident of any of these countries you can expect to avoid the high taxes on income that you are paying in your native country.
1. Bulgaria
Continent: Europe
GDP: $171 billion
Currency: Lev
Income tax rate: 10%
With an income tax rate of 10%, Bulgaria is one of the best places in Europe. It’s also worth mentioning that corporate tax in Bulgaria is 10% too with added 5% on distribution of profit. These are some of the reasons why so many foreign business people are investing in Bulgaria in the recent period.
Of course, we should also mention that after a long transition, Bulgaria finally managed to become a stable country in terms of economy and politics. They are a member of the European Union and NATO. According to some experts, Bulgaria tries to keep their income tax rates and other tax rates low because many Bulgarians are leaving their country in order to earn more in Western countries. On top of that, Bulgaria has one of the lowest replacement fertility rates in the world.
Bulgaria is a country blessed with beautiful nature. It has access to the Black Sea on the East and interesting mountainous regions in the west. They are bordering Macedonia, Serbia, Romania, Greece, and Turkey. The capital city – Sofia – is the most developed and most attractive city in this country.
2. Singapore
Continent: Asia
GDP: $589 billion
Currency: Singapore dollar
Income tax rate: 0% – 22%
Do you remember how we said that some countries with lowest income tax actually have 0% income tax? Well, Singapore is one of these countries. Situated in Asia, this city-state is one of the so-called financial tigers in the Far East.
When it comes to the income tax, we should mention that the tax rate of 0% doesn’t apply to all residents. Namely, if the income is below 22.000 Singapore dollars per year then you don’t have to pay anything to the tax revenue agency. However, in case this amount is higher than this sum (which is roughly around 14.300 Euro), then you can expect an income tax rate of 22%.
What’s interesting is that city-state borders two countries – Malaysia and Indonesia. This country has a well-developed market economy. They are known for their trading sector. Generally speaking, their economy can be described as inventive, dynamic, and free. Another interesting thing is that there are over 7000 international corporations from Europe, Japan, and the United States present in Singapore today.
3. Romania
Continent: Europe
GDP: $541 billion
Currency: Leu
Income tax rate: 10%
Romania is a country located in Southeast Europe which was once part of the Soviet-dominated Warsaw Pact. However, today, Romania is part of NATO and the European Union, and a country which has positive economic indicators. This European country has an income tax rate of 10% making it one of the countries with the lowest income tax rates in the world. You should know that the corporate tax is relatively low too – 16%.
This is a significant change compared to the 38% flat rate that they had before. We should also mention that their income tax was higher in the past too. All these things mean that Romania is focused on easing taxes in general, so it won’t be a surprise if we witness another change in the near future. Starting from 2000, Romania is a hotspot for many investors from the Western countries.
They have excellent infrastructure and they have a few well-developed sectors like tourism, science, and technology. Just like a few other countries in this region, they are facing migration problems. Many of their high-qualified individuals have left the country in pursuit of better job opportunities. That’s probably one of the factors that have contributed to the lowering of income and other taxes in this country.
4. Bahamas
Continent: North America
GDP: $12.6 billion
Currency: Bahamian dollar
Income tax rate: 0%
Talking about countries with the lowest income tax rates without mentioning the Bahamas would be a big mistake. The famous North American islands have an income tax of 0%. This is definitely great news for residents of this country.
As for the economy of this country, the Bahamas have one of the best GDP scores in this region. Of course, their strong tourism sector generates incredible economic activity, but what makes the economy in this island nation even livelier is the presence of many offshore entities and companies. Opening an offshore company here is easy. It’s also not very difficult to become a resident of this country.
With an excellent tax regime, the Bahamas have become one of the most attractive places on our planet when it comes to business. The government of this country encourages foreign investors (both individual investors and companies) to come and invest in this country.
5. Andorra
Continent: Europe
GDP: $3.2 billion
Currency: Euro
Income tax rate: 10%
The tiny European country located in the middle of the border between France and Spain is another excellent place for those looking for countries with the lowest income tax rates. This country has just 77.000 residents, but it’s quite popular among people who want to stay away from high income tax rates.
Tourism is the main sector of the economy of this country. The main reason for that is the duty-free status of Andorra, but this country also has nice winter and summer resorts. For many years, Andorra was known as a tax haven, but in the recent period, the government was forced to make a few changes in their tax legislation. Yet, this small country is still one of the best places in Europe when it comes to taxes.
The income tax in Andorra is 10% and you can expect the same percentage when it comes to corporate tax. Even their VAT rates are relatively low – 4.5% (a standard rate). Keep in mind that even though Andorra is not part of the EU, it has a special status in this union. This is the reason why the national currency here is the Euro.
6. The British Virgin Islands
Continent: North America
GDP: $500 million
Currency: US dollars
Income tax rate: 0%
Let us say that the British Virgin Islands don’t represent an independent country. They are a British Overseas Territory, but they have a certain degree of economic and financial independence. The people who live there are British citizens too.
This is yet another Caribbean tax haven known among investors and business people for a long time. They have included a simple and effective taxation system. There are many types of taxes that are present in other countries, but the tax rates here are equal to zero. So, the income tax here is set at zero. In addition to this, there are no gift taxes, capital gains taxes, corporation taxes, profit taxes, etc.
Almost half of the national income of this country comes from tourism. Of course, the financial services are strong too. About two decades ago, a few financial analytics companies have confirmed that almost 50% of the offshore entities in the world are registered in the British Virgin Islands. This is still an excellent option for offshore ventures especially if you are a British citizen.
7. Hong Kong
Continent: Asia
GDP: $484 billion
Currency: Hong Kong dollar
Income tax rate: 0-15%
Back in 1898, Britain got a 99-year lease of a city on the coast of China. That city, of course, was Hong Kong. In this century while the British were governing this city, the economy of the region has thrived making Hong Kong one of the most powerful financial spots in the Far East. The good news is that this trend continues even when Hong Kong was returned to China.
Despite the fact that Hong Kong is now part of China, this city has an independent financial system including a specific taxation system which is quite liberal. The income tax rates in Hong Kong vary – from 0% to 15%. It all depends on the source of income. In addition, most people can ask for deductions when they meet certain criteria.
It’s also good to know that Hong Kong follows the basics of the Common Law System which is prevalent in Anglo-Saxon countries. So, individuals that come from these countries won’t have problems understanding the laws and procedures that are used there.
8. Cayman Islands
Continent: North America
GDP: $3.5 billion
Currency: Cayman Islands dollar
Income tax rate: 0%
When it comes to the lowest income tax rates in the world, it’s very difficult to beat the Cayman Islands. Before we go into details, it’s a good idea to mention that this is not an independent country, but an autonomous territory that belongs to British Overseas Territories. It seems that a few islands like this have a favorable taxation system that some foreigners might find attractive.
This group of islands has some of the most beautiful tourist spots in the world. It has amazing sandy beaches and crystal clear waters that attract thousands of tourists from every corner of the world. That’s why the government of this autonomous territory doesn’t collect income tax.
But, becoming a resident of this country and enjoying the benefits of their taxation system and natural beauties is not for free. To become a permanent resident of the Cayman Islands, you must make at least 130.000 Euro a year and invest 540.000 Euro or more in local businesses or real estate. So, if you have a big budget and you want to avoid taxes, the Cayman Islands might be the ideal destination for you. The beaches and scenic views alone should be a good motivation to take this country into consideration.
9. UAE (United Arab Emirates)
Continent: Asia
GDP: $732 billion
Currency: Dirham
Income tax rate: 0%
The United Arab Emirates is an independent country located on the Arabian Peninsula in Asia. This small country has a very strong economy thanks to the exploitation of their oil reserves. But, due to the fact that the oil reserves are limited, their authorities have decided to invest in other sectors in order to achieve long-term economic growth.
Dubai and Abu Dhabi are two cities which are part of this country act as influential financial centers. In recent years, they are investing a lot in tourism. Due to the specific location, the UAE serves as a meeting point for many European and Asian business owners.
What makes the United Arab Emirates attractive is the fact that they are one of the freest economies on the planet. They have good incomes from oil and that’s why they are not asking their residents for income tax. There is no corporate tax either and the VAT rate is one of the lowest in the world – just 5%. Telecommunication and transport are two other important sectors in this area.
If you take a close look at their laws, you will notice that becoming a permanent resident and a national of this country is not very easy. However, you can get long-term residence visas which you can use to live there for as long as ten years before asking for renewal. The UAE is a very safe place to live in. The country is welcoming foreign investors from all countries.
10. Kuwait
Continent: Asia
GDP: $303 billion
Currency: Dinar
Income tax rate: 0%
A few countries in the Gulf region have the lowest income tax rates not just in Asia, but also in the world. Needless to say, Kuwait is one of the main exporters of oil in the world. In the last 30 years, they were part of a few war conflicts with Iraq, but the situation in this country is stable for a long time now.
Kuwait is a country where you can meet many foreigners. As a matter of fact, the majority of people who live there are born in foreign countries. The best part, of course, is that you don’t have to pay any income tax in this country. In addition, business owners should know that there is no corporate tax and no VAT either. The downside here is that you can’t become a resident of Kuwait easily. You must be employed in Kuwait or have relatives there to start this type of procedure. So, if you are looking for a short-term solution without becoming employed there, Kuwait might be an option.
11. Monaco
Continent: Europe
GDP: $6.5 billion
Currency: Euro
Income tax rate: 0%
Monaco is an independent city-state located in one of the most beautiful parts of the French Riviera. The only way to get to this country by land is through France, but you can also go there by sea. Italy is very close to Monaco too.
People around the world know Monaco as one of the bases used by rich people from different parts of our planet. This is known for luxury and casinos. In recent years, it has also become popular as one of the countries with lowest income tax rate. As a matter of fact, there is no income tax here. But, you should be aware that opening a company here is not the best idea because the corporate tax is relatively high – 33.33%.
Another positive thing about Monaco is that it’s not very complicated to start and finish a procedure for obtaining citizenship. All it takes is a few million Euros and you will become a citizen or at least a permanent resident. So, this is one of those countries where investors can become citizens.
12. Paraguay
Continent: South America
GDP: $101 billion
Currency: Guarani
Income tax rate: 8-10%
Paraguay is the only landlocked country in South America. But, if access to the sea is not that important to you, then you might give Paraguay a try especially if you are looking for a place to live with lowest income tax rates. There are many interesting things about Paraguay’s economy that we can talk about. For example, this is one of the countries that have a strong power sector. All the electricity in this country is generated with the help of hydropower plants.
At the same time, Paraguay is one of the countries in South America which have a steady and high economic growth for over three decades now. Yet, poverty levels are still very high and it will take time for people to enjoy equality in this country. With income tax rates of 8% (10% in some cases), Paraguay has grabbed the attention of many people from foreign countries. They are especially interested in living in Asuncion, the capital city which has excellent infrastructure.
Citizens of any country in the world can ask for permanent residency in Paraguay. In order to start this procedure, you will have to deposit a sum worth around 3500 Euro. You can also create a company there with a minimum capital that matches the same sum. In addition, there’s an option to get permanent residency by buying agricultural land (at least 10 hectares).
13. Montenegro
Continent: Europe
GDP: $12.3 billion
Currency: Euro
Income tax rate: 9-12%
Montenegro might not familiar to many people, but this makes sense because this small European country located in Southeast Europe was established in the 1990s after the breakup of Yugoslavia. After the fall of the socialist regime, Montenegro became a progressive, pro-western country.
The majority of their economy is service-based. In the recent period, many Russian tycoons and investors from other countries are buying properties on the coast of this country because the number of tourists that are visiting this country is increasing. Montenegro is situated on an attractive location which allows people to visit other countries like Serbia, Croatia, Albania, and even Italy.
The truth is that Montenegro still has to invest a lot in infrastructure, but the attractive, low income taxes and corporate taxes are the main reasons why it is becoming more interesting to foreigners. According to some experts, Montenegro can become Monaco on the Balkans.
14. Isle of Man
Continent: Europe
GDP: $4.1 billion
Currency: Pound sterling, Manx pound
Income tax rate: 10-20%
It’s good to know that there are many places in Europe that have low and acceptable income tax rates. One of these places is the Isle of Man. Officially the Isle of Man is a British Crown dependency with a local government. This island is located between Ireland and Great Britain.
This is a place with a relatively low number of residents – around 83.000. However, it became famous thanks to the liberal laws they have related to finance and economics. The Isle of Man is known as a place where you can find the headquarters of a few online gambling companies and insurance companies. This is also a famous offshore banking destination.
The Isle of Man has a very low unemployment rate and excellent infrastructure. It has a low-tax economy where the top rate of income tax is set at 20%. In addition, while we are talking about taxes, we should mention that there is no wealth tax, capital gains tax, inheritance tax or stamp duty. There is no corporation tax for residents of this island and for non-residents.
15. Moldova
Continent: Europe
GDP: $30 billion
Currency: Leu
Income tax rate: 12%
Truth be told, Moldova is one of the least known European countries. They don’t have a very strong economy and it seems that they still in some sort of a transitioning period after a long reign of socialism in this country. Moldova is an ex-Soviet republic with strong ties to Romania.
One of the main reasons why some investors would like to invest in this specific country is that this is still a young market with huge potential. For instance, they have a few industries which are still developing and growing like a wine industry, energy, transport, and agriculture.
The income tax rate in this country is set at 12% and it’s a flat rate. Employees have to pay an additional 25% for social security. All these things sound great, but foreign national might be facing problems if they are looking for permanent residency or citizenship in this country. The laws and regulations are still not very liberal when it comes to these things, but obtaining a visa is easy.
16. Bermuda
Continent: North America
GDP: $5.8 billion
Currency: Bermudian dollar
Income tax rate: 0%
Did you know that one of the favorite holiday destinations of many Americans is also a tax-free country? To be more precise, Bermuda is a British Overseas Territory, not an independent nation. According to many financial experts, Bermuda is a relatively big player in the offshore finance sector. More than 5% of offshore funds are kept in this region. Even though their economy is not very strong, they have a reputation of a stable economy.
At this moment, there are more than 12,000 registered foreign companies here. Most of them are owned by US citizens. In addition to the financial sector, the tourism sector plays a vital role in the progress of this country. But, the latest numbers have shown that the authorities will have to do more in the promotion of these islands because the number of visitors is dropping in the last two decades.
If you want to become a resident of this country, you can purchase a residence permit which is renewed every year. In addition, you can also buy real estate and get the status of a permanent resident in this way. The main disadvantage of living there is the relatively high cost of utilities, food, and real estate. Yet, we should mention again that the income tax rates are 0% and the same goes for corporate income taxes.
17. Oman
Continent: Asia
GDP: $198 billion
Currency: Rial
Income tax rate: 0%
Just like a few other Gulf countries, Oman has proven to be a decent destination for people looking for living a tax-free life. With no income tax, Oman definitely deserves to be on this list of countries with lowest income tax rates. Of course, the most important thing for the budget of this country is oil exploitation.
They are a small country, but an important oil exporter. As a result of these oil reserves, they can afford to give up on income tax. Since they are aware that the country can’t live solely on oil, they have decided to invest in tourism too. This sector has expanded significantly in the last 5 years. From deserts and unique urban areas (including the capital city – Muscat) to beautiful beaches, this is a promising sector in this country.
We should mention that the quality of life here is good, but becoming a permanent resident of this country is not very easy. There are actually two ways in which you can obtain this status. First of all, you can get such a status if you have relatives there. Second, you can become a permanent resident if you are employed by an Oman-based company.
18. St. Barthelemy
Continent: North America
GDP: –
Currency: Euro
Income tax rate: 0%
The fact that as a resident you won’t have to pay a dime for income taxes, is not the only reason why St. Barthelemy is on this list of places with lowest income tax. This is an overseas collectivity of France located in the West Indies. There are almost 10,000 people that live on this island at the moment.
The economy of this place relies primarily on tourism and handicrafts. There are numerous international investments in the tourism sector in the recent period which is why the standard of living in this area is high. St. Barthelemy is blessed with incredible natural beauties and if you love nature then this place provides endless possibilities for exploration.
It’s quite easy to immigrate to this island if you are an EU citizen, but non-EU citizens will find it a little bit difficult to complete this procedure. In addition, the cost of living there is a little bit high.
19. Vanuatu
Continent: Oceania
GDP: $820 million
Currency: Vatu
Income tax rate: 0%
The Republic of Vanuatu is an island nation located in the South Pacific Ocean which was established in 1980. With a population of just 272.000, this is a small country with a small GDP. When it comes to the economy, it’s all about agriculture, tourism, and offshore financial services.
Until 2008, the government of this country refused to share any information with other countries about the legal entities and individuals from other countries that had accounts there. This secrecy was eased in the recent period, but it’s still safe to look for bank secrecy there. Another good thing is that there is no income tax, capital gains tax, withholding tax or inheritance tax in Vanuatu.
Needless to say, this a very beautiful island country with amazing beaches and nature in general. If you want to become a resident of this country, you should meet the monthly income criteria and buy land worth at least 90.000 Euro. A significant investment in the economy of this country can also provide access to permanent residency or even citizenship.
